TIME: Geography Lessons

TIME | KATE BETTS

The sidewalk surrounding Manhattan's Bryant Park is lined with posters promoting a new image of Lord & Taylor, the U.S.'s oldest department-store chain. In the pictures, members of some mythical extended suburban family smile as they frolic in their vintage Mercedes convertible or slide into a wooden canoe.

Despite their beauty, the photos and the inference that they epitomize American style seem jarringly anachronistic. At a time when fashion has become global thanks to the Internet and the access it provides to ideas, resources and products, American style is becoming increasingly difficult to define. At New York City's Fashion Week there were 259 designers of different nationalities--including Chinese, Thai, Brazilian, Japanese and Turkish--showing their spring 2008 collections.

"Fashion is no longer regional, and the notion of American sportswear is no longer valid, nor does it look current," says Robert Burke, a luxury consultant. "I've seen shows this week that could easily have taken place in Paris or Milan." More and more, it is the itinerant lifestyles of multinational designers--many of whom frequently travel around the world to visit factories, stores and suppliers--and the global reach of the Internet that inspire the clothes they send down the runway.

Take Tia Cibani, the Canadian-born designer of Ports 1961, a line that is produced in southern China and shown in New York. While Cibani commutes between New York City and Xiamen, inspiration can come from as far away as East Africa, as it did this season. Her collection, called Safiri, pays homage to African women's spontaneous sense of style and their imaginative fabric treatments such as tie-dyeing, rolling and wrapping.

Other popular destinations for spring included Rome, with Vera Wang excavating ideas from the city's ancient polycultural society and translating them into toga-like dresses, and Bali, where Diane von Furstenberg found bold floral prints. Japan--specifically its traditional folded-and-dyed fabric-printing technique, shibori--turned up on the runways of designers like Narciso Rodriguez, Proenza Schouler and Thakoon Panichgul.

"We grew up in a time of complete globalization," says Lazaro Hernandez, 28, who, along with Jack McCollough, designs the label Proenza Schouler, "so the boundaries are not as strict. We're young, and we don't have the money to travel that much, but we travel in our heads. We go online. With technology, you can go anywhere on the Internet." This season they found a trove of vintage kimonos in McCollough's parents' attic, and the trapezoidal sleeve shape became a major motif of their collection.

One of the reasons designers look so far afield for ideas is to stay one step ahead of the mass-market manufacturers that copy trendy fashions and sell them for much less. Designers like Hernandez and Panichgul say craftsmanship is what sets their clothing apart. "I don't think we could have survived in the late 1990s because minimalism, which was so popular then, is so easy to copy," says Hernandez. Indeed, consumers who want to buy a black sweater or a pair of black pants are inclined to go directly to H&M for the best price. As a result, Hernandez and McCollough feel the pressure to make their clothing even more ornate. This season, for example, they employed the French haute couture supplier Lemarie to embellish their clothing with rows and rows of tiny feathers.

"You have to develop a cult customer," says Panichgul, "someone who is looking for this kind of elaborate work every season." And someone who can afford it.

TIME: Fashion's Final Cuts

TIME | KATE BETTS

It's not every day that the Orangerie at Versailles is transformed into a bal des artistes complete with flamenco dancers, a gospel choir and a guest list that includes supermodel Gisele Bündchen, Spanish director Pedro Almodóvar and hedge-fund billionaire Steve Schwarzman. But this was the 60th anniversary of the house of Dior, and the resident designer, John Galliano, was putting on the glitz, while his boss, LVMH CEO Bernard Arnault, ensured that the fabled French house's high-end image was telegraphed around the world with all the rat-a-tat-tat of a flamenco beat.

Although Galliano, 47, was celebrating only his 10th anniversary at Dior, there were other, more poignant and symbolic anniversaries at the fall 2007 haute couture shows in Paris and Rome this past week, including Valentino's 45th, where, it had been rumored, he would announce his retirement. Like Giorgio Armani and Karl Lagerfeld, Valentino, 75, is part of a generation of designers in or nearing their 70s. And the questions hovering over the runways concern not trends or silhouettes but rather the end of a golden era in fashion that has been defined by a handful of visionary designers.

"When all these grands mâitres disappear, this world of hypersophistication will disappear too," says Jean-Jacques Picart, a Paris-based consultant who for many years helped Christian Lacroix build his business. "It will become a niche business. The world is changing, and appearance is less important than before." Certainly the kind of appearance that requires deep pockets and two or three fittings in a Paris haute couture salon will eventually disappear. Indeed, much of the pageantry at places like Versailles is for image and also, to a certain extent, to influence more accessible markets like ready-to-wear and even the fast-fashion labels. The pale blue of Galliano's Renoir-inspired Dior couture dress might inspire a trend for blue in the house's ready-to-wear collection next season or a dress that will show up on the racks at H&M next summer or even an eye shadow on the cosmetics counter at Macy's.

But, in many ways, the same marketing machine that has taken fashion global and made luxury titans like Arnault rich has also made it impossible for a younger generation of designers to build their reputations and brands the way their predecessors did. Galliano, for example, has had to rely on the name recognition that comes with working for an international powerhouse like Dior to bolster his eponymous label, which is also backed by Arnault.

"Today it's a very different way of creating businesses than 30 or 40 years ago," says Robert Burke, a luxury consultant. "Back then designers were able to take their time and to focus on the high end, but today it's increasingly difficult to make money on the high end. You have to diversify and license your product very quickly."

And yet the business model needs star power to drive the marketing machine and inspire the creativity that influences fashion at every price point. There would be fewer eye-catching options at the local mall without the high end to inform them. And the high end in turn demands the vision of a personality or a point of view. "Miuccia Prada's personality permeates every bit of that brand," says Tom Ford. Unlike the brands of most other new-generation designers, his menswear line is funded entirely with his own money. "It helps to have a personality to latch onto as a brand. It absolutely matters not only as a public face of the brand but also for the creation of the product."

But not everyone agrees with Ford. Gucci Group CEO Robert Polet has long insisted that the brands are the stars now, and his strategy of hiring lesser-known designers, including a few of Ford's former design assistants, seems to have paid off: sales at Gucci have soared to $2.1 billion. "Brands can survive without the namesake designer if you have a team and staff who understand the DNA of the brand," says Dana Telsey of the New York City--based retail-research firm Telsey Advisory Group . "Most of these brands that are global now could never have gotten to where they are with just one person anyway."

Ultimately, fashion is a keen reflection of the times. And if the golden era of couture ends with this generation, perhaps that is inevitable. Says Lagerfeld, who, like Valentino, started as an assistant in Paris' couture houses 50 years ago: "Times are what they are, and you have to find your niche in the moment and not dwell on the good old days."

TIME: The Third Season

TIME | KATE BETTS

Back in the late 60s and early 1970s, fashion designers created warm-weather clothes for affluent women who were heading south to the tropics, where they would wait out winter's chill in more temperate climes. They called it resort or cruise wear, and the tags stuck even when many of those women started staying home and going to work.

Today resort, that élitist-sounding fashion niche, has exploded into a full-blown category complete with runway shows, designer appearances and lots and lots of very salable merchandise. Originally conceived of as clothes to wear on a vacation--casual separates, swimwear, maybe a few simple cocktail dresses--these days resort includes evening gowns for the red carpet, accessories and suiting in lightweight fabrics like cool wool or cotton, something that could be worn to the office in mid-fall or early spring. As a business, it has become as important to big-name designers as the more high-profile clothes they create for their spring and fall seasons, not only for the long shelf life--merchandise sold under the resort label can sell at full price from late October all the way through to early April--but also as a fashion testing ground. Many European designers use their resort lines to try out ideas for upcoming spring collections. A color like last spring's grass green and a shape like the skinny pant first emerged in resort collections. For its 2007 resort line, Prada is introducing a new fuller shape, floral prints and a brightly colored soft leather bag. Chances are a variation on these looks will show up again on the label's spring runway. Prints are also an important trend at Louis Vuitton, where designer Marc Jacobs worked with English artist Pippa Cunningham to create travel-themed prints that playfully feature airplanes, anchors and motorboats.

Resort collections also provide an opportunity for press attention at a time when the market is quiet. In May, both Dior and Chanel invested in full-scale runway shows in New York City and Los Angeles, respectively. Chanel's elaborate presentation at a private hangar at the Santa Monica airport included a host of camera-friendly celebrities like a pre--Memorial Day rehab Lindsay Lohan, Victoria Beckham and Demi Moore, plus two Challenger 601 jets that carried the models right onto the "runway."

Resort wear is typically high-priced, and according to designer Michael Kors, the resort season represents the biggest sales opportunity for his signature line. In response to the demand for these clothes, Kors will, for the first time in 26 years, schedule trunk shows this fall to presell the collection to clients in his own stores.

"The idea that people are only buying these clothes to go to the Caribbean or on a weekend in Palm Beach is a complete misnomer," says Robert Burke, a luxury fashion consultant at Robert Burke Associates. "For retailers, it's about having fresh product on the floor. The luxury shopper is shopping now multiple times during the year. They're not just going into stores in March or September to buy their spring or fall wardrobes."

And they're not just shopping in the U.S., either. Many of the products designers offer--whether they be a floaty chiffon Dior cocktail dress or a printed Gucci skirt--are also in demand in new and expanding luxury markets, such as Dubai, India and parts of China. They're perfectly in keeping with another trend: global warming and the desire for lighter clothes. "From the Sun Belt to the global-warming issue, [resort wear] has evolved to reach a very broad audience," says Gucci CEO Mark Lee. "If you look at the items offered in the collection, there is a complete spectrum, from summer-weight suits to leather pieces."

For businesses like Versace S.p.A., the resort collection has provided an opportunity not only to presell most of the collection (as much as 70%, according to Donatella Versace) before it hit the runway but also to create clothing that is ultimately more accessible than the usual runway theatrics. "The customer feels more comfortable with this collection," says Versace, who made a special trip to New York City this month to present 24 resort looks to the press and buyers. "There's an easiness that is hard to do on the runway because the expectations are so much higher for fashion shows."

Indeed, a simple white piqué A-line Versace coat or a classic Chanel tweed jacket might not make the headline news that fashion houses are seeking for their big spring and fall presentations. But then again, as Versace reflected, "maybe the time of fashion shows as major events is over. This is a time of reality now."

TIME: Fashionably Late

TIME | ADAM SMITH

With its dark furniture, high-tech gadgets and model jet plane, Philip Green's London office feels a lot like the work area of an investment banker or hedge fund manager. On the wall behind his enormous desk, there's even a photograph of Wall Street antihero Gordon Gekko. But on this May morning, a daytime-TV segment flickering on his sleek, flat-screened television betrays his role as a master of an entirely different universe: women's fashion.

Green, the billionaire owner of the Arcadia Group, which controls a clutch of U.K. clothing chains like Miss Selfridge and Wallis, is watching a spot about the latest fashion collection to hit Topshop, the jewel in Arcadia's crown. The much-ballyhooed line inspired by Kate Moss — the supermodel's own wardrobe formed the basis of the designs — went on sale the previous night at the chain's flagship store in London. Basking in the nonstop Moss-fueled coverage, Green can't help but smile: "You couldn't dream for a better start," he says. And on May 9, the hype hopped the Atlantic when Barneys, one of New York City's toniest department stores, opened a boutique selling Moss's striped blazers, skinny jeans and hot pants. After four hours, the boutique sold out; even the mannequins were stripped of their dresses.

Moss's new line is only the latest in Topshop's recent successes among "fast-fashion" retailers, which specialize in almost constantly updating collections of cool clothing at prices so low the clothes are almost disposable. Over the past nine years, Topshop has carved an enviable niche atop this hypercompetitive sector in Britain by appealing to a broader demographic than its competitors, by getting its new designs quickly to market and — in a category where inexpensive too often equals cheap — by emphasizing quality. Topshop's combination of fashion and value has "changed the way we dress," says Lauretta Roberts, editor of Drapers, the British fashion-business bible. That mix has also made it a hit not just with the masses but with celebrities and fashion bigwigs as well. No American fashion editor's trip to the U.K. is complete, for example, without a pilgrimage to Topshop.

The Topshop formula is proving not just popular, but profitable, too. The chain made around $200 million in pretax earnings last year on revenues of approximately $1.14 billion. That's about half the total profits and a third of sales at the privately owned Arcadia Group. It wasn't always this way. As recently as the late 1990s, says Nick Bubb, a retail analyst at Pali International in London, profits were as little as one-tenth last year's haul.

How did Topshop turn it around? By heading (relatively) upscale. Tired of its reputation for tackiness and losing out to budget chains in the '90s, Topshop's managers decided to stop competing just on price. "The decision was made to create a fashion authority," says Mary Homer, a joint managing director of Topshop who's been at the retailer for 20 years. (Green, a retail entrepreneur with years of experience in various types of businesses, acquired Arcadia in 2002, and helped execute the strategy already under way.) The company now employs 22 of its own designers, up from around a dozen in 2002, and they aim to create new looks just as deftly as they copy those from the catwalks.

Getting new fashions into stores even faster than before also became a central part of Topshop's revival. While traditional clothing retailers might take six weeks to get a design to sales floors, Topshop's trucks are delivering new duds to its outlets usually just two weeks after suppliers have received the order. The result: Topshop debuts hundreds of new pieces in its London flagship outlet every week. And if the emphasis on speed and stylishness means Topshop's togs are a bit more expensive, then so be it. That's a premium the chain's customers have come to expect and are willing to pay for. "If we can get it in four weeks in the U.K., we'll buy it at four weeks in the U.K. rather than buying it cheaper" elsewhere over a longer time frame, says Karyn Fenn, Topshop's other joint managing director.

With 300 stores in the U.K and 100 international outlets (all of them franchises) in Asia, Europe and Latin America, Topshop is looking to expand its reach further overseas. "There's no lack of demand," Green says. Even after opening its biggest international store in Stockholm, he says, Scandinavia still holds tremendous potential. But to grow much larger, Topshop will have to make some radical changes. Today, no matter where its smock dresses or miniskirts are stitched together — or where they're destined — everything passes through the U.K. "The existing franchising model and supply chain would not work for significant global expansion and will need to be adapted," Green says. To construct an efficient, decentralized distribution system is a logistics puzzle management is now attempting to solve.

Caution also defines Topshop's approach to the U.S. There's no denying the lure of the American market: while fast fashion accounts for around 12% of the British clothing market, that figure drops to just 1% in the U.S., according to Bain, a consulting firm. Spying massive opportunities, Topshop's European rivals have been quick to pile in. Spain's Zara has two dozen stores in the U.S.; Swedish chain H&M boasts more than 100.

Not Topshop. Though it is content to market individual collections in America — alongside Barneys' agreement to flog the Moss range, Topshop's Unique line already sells in the Opening Ceremony boutique in New York City — it has not yet followed with any stand-alone stores. The track record of British clothing retailers in the U.S. is not particularly auspicious. A number of retailers, including the ubiquitous U.K. chain Next, have retreated after failing to find their feet in the competitive U.S. market.

While it looks into diversifying its supply chain, Topshop's go-slow approach to the American market is especially prudent. And glitzy department stores are an ideal venue to test market the Topshop brand. Moss's 50-piece collection might seem cheap compared to most else Barneys has to offer — prices range from around $24 for a strappy tank top to $300 for a leather jacket — but these days, says Robert Burke, a retail consultant in New York, fashion retail's territorial lines are blurring. "Traditional categories no longer exist, he says, "There's almost a reverse snobbery today: people really like the idea of mixing a variety of price points." In other words, few fashionistas think twice about pairing a $1,000 jacket with a $20 T shirt anymore. Launching Moss's opening collection in Barneys, Burke says, makes "perfect sense."

Even so, opening stand-alone stores in the U.S. is clearly one of Green's ultimate goals. "I'm not going to get enough scale out of Barneys," he says, adding that he set up a series of real estate meetings in the U.S. to coincide with the Barneys launch. But with competitors like H&M and Zara already flourishing in the U.S., is there room for Topshop? "H&M and Zara are hitting the ball out of the park," reckons Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consultancy. But thanks to its broader customer appeal, Davidowitz says, the potential for Topshop "is better than either of these."

Not that there isn't plenty of opportunity to occupy Topshop at home. The company is looking at ways of expanding its brand into new areas in the U.K., too, from confectionery to luggage to footwear. With Topshop stores already selling 35,000 pairs of shoes each week, says Green, "We've got a very good shoe business. Is there a Topshop shoe business in its own right?"

With a brand this strong, it's difficult to see why not. Earlier this month, 21-year-old student Caroline Dickinson joined thousands of shoppers for the launch of Moss's collection in London. She waited in line for four hours to buy a $100 white cotton dress to wear at her university ball. By the time she got inside the store, however, she was told that item wasn't available. Unperturbed, Dickinson emerged a quarter of an hour later and a few hundred dollars lighter with two other dresses and a couple of vests. And she vowed to track down the white frock another day. That is the kind of loyalty any retailer would envy.

TIME: Stealth Style

TIME | MARION HUME

IT COULD BE A RECIPE for how to go broke in the fashion business: establish yourself somewhere far off the style map, target women over 35, ignore the current accessory-driven business trend, and insist on using luxurious fabrics so that your clothes become prohibitively expensive. And don't forget to make sure your heritage is as unhip as possible, something along the lines of your grandmother's founding the family company with an apron business.

Despite all these odds, Akris (an acronym from the name of the above-mentioned grandmother, Alice Kriemler-Schoch), based in the Swiss town of St. Gallen, has elegant women across North America praising its elusive balance of style, fit and quality. Women tend to discover Akris for themselves. Nicole Kidman spotted a coat in a store window on a Sunday evening and ordered it the following morning. Other fans include Susan Sarandon and Secretary of State Condoleezza Rice.

Not surprisingly this Swiss family company, now helmed by Alice's grandsons Albert and Peter Kriemler—the designer and the president, respectively—is lauded by retailers for its precise deliveries and perfect execution (at the factory, each garment is accompanied by a dossier explaining what needs to be done and what can go wrong) as well as for actually listening to what stores want. When Joseph Boitano, a senior vice president of Saks Fifth Avenue, explained the importance of offering a cruise collection (a concept less established in Europe), Albert headed to Florida, where he spent weeks studying what chic women want on vacation.

"Akris is in the top 15 brands in all areas of Saks," says Boitano, noting that Saks carries the main line in 20 stores and the bridge line, called Akris punto, in 47 stores across the U.S. "When you consider Akris does not have shoes, handbags, fragrance, and its sales are driven entirely by ready-to-wear, that is a major feat."

Robert Burke, who heads his own consulting business in New York City and was previously with Bergdorf Goodman, says a single salesperson there writes several million dollars' worth of orders for the label each season. Burke even mentions Albert Kriemler, whose name is still far from well known, within the designer superleague: "Albert is unwavering in who he is appealing to. You look at the great designers—Ralph Lauren, Chanel, Giorgio Armani—and what links them is they stick to their own aesthetic, they stick with their customer."

St. Gallen is not where you would expect to find the next Armani. Yet being based not only in Switzerland—which has one of the most expensive labor forces in the world—but in a little town bordering the Appenzell region is an advantage, insists Albert Kriemler. He is not what you would expect of a fashion designer, given that he is rather serious and erudite (his references can include modern art and Russian philosophy). Being isolated means that the tailors and technicians he collaborates with, all of them full time and many with the company for years, think Akris from morning to evening. "That's why I don't work with freelance people," he says. "It's not right for us that someone leaves and misses the evolution in our overall process."

Albert's vision is simple: to create clothes that enhance the personality, never hide it. "I think it is inappropriate if the first thing you notice is a woman's dress, when you should see the woman first," he says. "Also, we have other senses besides eyes. We feel clothes on our body, and this is as important as looking right. And I have the conviction women should have the same rights as a man: if she loves a jacket, a pant, she should continue to wear it next season."

David Asher, vice president and general merchandise manager of womenswear at Holt Renfrew, the Canadian department store, says the savviest of shoppers get Akris because these fashion purists "aren't motivated by splashy ad campaigns but by fresh femininity, superior construction and focus on each piece of clothing, rather than on an overextended megabrand with its name on every manner of product category."

Pretty views, an equable climate and the fact that because St. Gallen is not a fashion mecca, the designer is not distracted by what he sees around him mean higher productivity for Albert Kriemler, who works either in his attic studio atop the old school that houses the Akris ateliers or at his desk at home, looking out onto a meadow of wildflowers and an installation he commissioned from the artist Ian Hamilton Finlay.

In 1922, Alice Kriemler-Schoch could never have imagined that her grandson would one day show on the official Paris fashion-week schedule (the first Swiss designer invited to do so) or that in starting her little apron business for something to do while she raised two sons, she was founding a dynasty. After the death of her husband in 1944, the business passed to their eldest son Max Kriemler. In 1980, Max's eldest son Albert, then 20, was about to move to Paris when his father's right-hand man died suddenly, and Albert stepped in. Seven years later, after completing studies in law and business management, Peter joined the family firm. (Albert and Peter have a sister who is a doctor.)

"We always felt responsible for what we inherited from our parents and for the loyal people of this company," says Albert. When the brothers took over, their target was to dress the customer seven days a week from morning into evening. "I said to Peter, We must do what we feel, without listening to what others are doing," says Albert. The brothers still agree. "When you get along within the family, it is the most beautiful thing that can happen in your life," Albert says. "Two people mean two opinions, and when there is a disagreement, you must be able to talk this through."

Albert Kriemler may be more reserved than your typical designer, but he recognizes that part of the role of the designer is to be the front man, and he shields his businessman brother from media attention. The businessman gives the designer something rare in return: time. Albert can work at his own pace to ensure the perfection for which Akris is now celebrated.

The structure of this private company is also unique. "The moment you get into classical management structures where you do budgets for the next five years, it's so insecure. We do not do that," says Albert. "What we do is dependent on how each collection performs. We don't have accessories, we don't have licenses; we need to do fashion well."

A downside of any family firm is that it prompts the question about the next generation. Albert understands that interest, "for there was already a pressure in our case because our parents and our grandparents had run a successful business. My brother and my sister have children, but it's premature to discuss their futures."

What seems certain is that the two brothers will continue together in their quest to turn a company based in rural Switzerland into an international powerhouse. Albert recently refused an offer from a major design house because, he says, "you cannot have two souls." His is clearly in such a quiet place that when he strokes a fabric and falls into silent contemplation, you can hear the tinkle of cowbells from the nearby hills.

TIME: Art of the Deal: Green is the New Black

TIME | DEIRDRE VAN DYK

IN DECEMBER 2003, Robert Burke, then fashion director of Bergdorf Goodman, was in Paris giving a talk on the booming business of fur accessories when he looked around the ballroom at the Hotel George V and noticed that a quarter of the seats were filled with men in business suits. During dinner and coffee breaks at the two-day luxury conference, the suits from places like Bear, Stearns cornered Burke and bombarded him with questions about luxury businesses—which ones had potential to add secondary lines and which ones could expand with worldwide licensing.

For years the luxury sector, now a $140 billion business growing at approximately 7% a year, according to the Telsey Advisory Group (TAG), an independent research firm based in Manhattan, has been populated by a handful of familiar faces: Bernard Arnault of LVMH, François-Henri Pinault of PPR and the odd manager of Gucci or president of Chanel. But cash-rich private-equity firms have taken note of the impressive numbers those companies are posting. Gross profit margins for apparel are 50%, and for leather goods they can be as high as 77%, according to TAG. So it's not surprising that in the past two years dealmaking in this sector has shifted into overdrive. Since February alone, Jil Sander was snapped up by London-based Change Capital Partners, English luxury retailer Asprey was bought by New York City--based Sciens Capital Management and a U.S. hedge fund, and the Italian apparel brand Piazza Sempione was acquired by Paris- and Milan-based L Capital. More deals are rumored to be in the works.

"I get calls every day," says Robert Bensoussan, CEO of Jimmy Choo, who, with funding from private equity, took the brand from $20 million to $140 million in sales in five years. "Whether they are managers asking for advice on how to speak to private equity, family-owned companies asking what working with private equity is like or private-equity people saying, We're interested in your success story."

Bensoussan, who had orchestrated the sale of British apparel firm Joseph to a Belgian investment group and before that had been president of Christian Lacroix at LVMH, ultimately sold Jimmy Choo in 2004 to Lion Capital for five times what he and his partners at Phoenix Equity Partners originally paid in 2001. "It gave a lot of people a wake-up call," he says.

Most analysts say the attraction of luxury these days is the growth opportunity. TAG's Dana Telsey, who has tracked retail for 21 years, attributes the increased interest to "how profitable these businesses can be when run well." Companies like L Capital have earned five times their investment in firms like retail clothier Gant and three to four times their investment with Antichi Pellettieri SpA, an Italian apparel and accessories company—in just over three years.

Investors see the possibility of expanding the brands in China, India and Russia, adding secondary lines and product extensions. "All companies we get involved with have attractive growth characteristics," says John Megrue, a co- CEO of Apax Partners, which just bought Tommy Hilfiger. "Well-run consumer companies ought to grow way north of the GDP."

But not every deal hits the ball out of the park; fashion remains a risky go-with-your-gut business. Every six months the creative cycle has to rev up again, and God forbid the brand doesn't hit the right trend one season. The result can be costly, with stores filled with unsold merchandise. The potential for failure is great, "but the upside opportunity is also that great," says James Hurley, who follows the luxury market at TAG.

One of the reasons Change Capital viewed Jil Sander as an attractive investment was that it doesn't rely on up-to-the-minute trends to the degree that a brand like Dolce & Gabbana does. "You would not expect a collection to come out and lose 50% of your sales because you didn't hit the right button," says Stephan Lobmeyr, a managing director at Change Capital. "I'm not saying it's not innovative. You need innovation or you don't have a place in high fashion, but it's more stable."

Bensoussan helped limit his risk potential at Jimmy Choo by building a classic collection. "There were these fabulous styles that they used to throw away every season," he says. "Now 10% of our collection is made up of classic styles, and that group has become 25% of the business." Bensoussan made other changes too, streamlining production, opening more stores and adding handbags and eventually fragrances to the line. "We had a Ferrari, but we had to put a bigger engine in."

Good management like that, something relatively new to the fashion business, is what draws investors in. "That's probably the No. 1 criterion for any private-equity investment," says Philippe Franchet, a partner at L Capital, explaining why they invested in the low-profile Piazza Sempione brand. "The management team is brilliant." Translation: it has a manager with a good production record and a solid business plan. When Enrico Morra, managing director of Piazza Sempione, and the company's founders met with L Capital's partners, they outlined exactly what they wanted to do, including opening more stand-alone stores and expanding into categories like handbags and shoes. In short, they had an estimated $60 million business and wanted to take it global.

"Entrepreneurs can grow a business to about $50 million," says William Smith of Global Reach Capital, a new private-equity firm that specializes in consumer brands and just invested in Tory Burch, a New York City--based apparel and accessories brand. "That's where we come in. We can take it to $250 million." Says Burke, who now works as a consultant to private-equity firms, including Global Reach Capital: "There are a lot of great fashion brands that don't have the capital or the business acumen to grow." That's where a private-equity firm can provide them with the money and the right kind of management."

Private-equity cash allows a small company to expand worldwide quickly and strategically. "It's not just an injection of money," says Morra. "They're a sparring partner, someone to sit down to discuss, 'Do we have to open on Madison Avenue or in the meatpacking district?'" He partnered with L Capital because its advisers knew how to get handbag and shoe lines up and running, something that could help Piazza Sempione avoid missteps.

For family-owned companies like Piazza Sempione eager to maintain some sort of control, private equity is a plus. "Before, the only chance for a family company was to sell themselves to a big conglomerate or luxury group," says Bensoussan. "And then they would lose all their power." And it's good for managers; it gives them something they like. "Freedom!" says Bensoussan, laughing. "If you deliver what you promise, it's a dream world." Working for a conglomerate like Gucci or LVMH has its advantages—access to real estate, saving on advertising. But there are downsides. "Sometimes the smaller companies don't get all the money, all the care, all the love that is needed," he says.

But unlike Gucci Group or any other conglomerate, private-equity firms aren't in the investment for the long haul. Brands bought today will undoubtedly be on the market again in five or so years, sold to another private-equity firm or a luxury conglomerate—or they are taken public. "It's a different approach," says William Cody, a professor in retail and marketing at University of Pennsylvania's Wharton School. "Gucci is looking to build a brand to fold into its business. Private equity is looking to build a brand to sell. They always have an exit strategy." So if things aren't working out, the owners or managers may be moved aside. But, adds Cody, "private equity can give them the capital to move them from the runway to the street." Which is good not only for fashion but also for consumers. "We may get access to designers who may not be able to get into the stores on their own. It all adds up to more choice."

In the end there needs to be a balance between the showroom and the boardroom. Designers may know how to make a gorgeous frock, but "sometimes they do more for the image than the profitability of the company," says Lobmeyr. "If the two parties respect each other—when the financial people do not try to influence the creative process and the creative people understand there are basics that must be followed in order to run a company profitably—it's actually a winning formula."

But will that formula change the face of luxury? "If they change something in fashion, it will be in how they manage companies, but it will never be the product, the style, the design," says Bensoussan. "They don't know anything about it. After all, the next day they are looking into fruit smoothies."