What's Her Recipe For French Dressing?

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VITAL STATISTICS

NAME VALERIE HERMANN

CURRENT JOB CEO, YSL

FIRST JOB SUPERVISED SPECIAL PROJECTS AT THE COMITE COLBERT

INSIDE TRACK WENT TO BUSINESS SCHOOL WITH PPR CHAIRMAN FRANÇOIS-HENRI PINAULT

CLAIM TO FAME GUIDING JOHN GALLIANO THROUGH TOUGH TIMES

Salvation, not surprisingly, started with a handbag. "We need a bag," Valerie Hermann announced two weeks after taking over as CEO of Yves Saint Laurent. "We need a good bag, something that will sell."

Carine Roitfeld, editor in chief of French Vogue, told her not to bother. "The Saint Laurent girl doesn't carry a bag," Roitfeld said. "She puts her hands in her pockets." Hermann listened politely to Roitfeld's lecture about that iconic Saint Laurent woman, who wore tuxedos and accessorized with more attitude than jewelry.

But true to character, Hermann stuck with her own vision.

A few weeks later, a pricey half-moon of supple leather named the Muse bag was born. That was June 2005. By the end of summer, it was dangling from the arms of actresses and It girls like Demi Moore and Kate Moss, and by fall the mythic house of Yves Saint Laurent had itself a best seller.

"She didn't follow my advice," Roitfeld chortles, "and at the magazine, my girls still carry her bag. I see it a lot on the street."

Hermann, 44, the mother of three daughters, admits maybe it was just a stroke of luck. "We pushed, pushed, pushed, because for me it was an emergency," explains the French executive, speaking in fluent English. "We could have said, 'Let's wait a year and come back to accessories.' What I learned in fashion is you can't wait for tomorrow."

The house of Saint Laurent has no time to waste. It has been hemorrhaging cash for almost a decade, eroding its fashion credibility for perhaps longer and awaiting, if not salvation, the kind of high-end genius that was there at the creation of the Paris couturier in 1961 and that endured for four decades.

Yves Saint Laurent, along with Pierre Bergé, his business partner, dressed a generation of women inventively in pantsuits, peacoats and jewel-colored evening dresses that not only were beautiful but also allowed women to express their sexuality and power.

The founders are retired (although very much looming on Paris' Left Bank), and since 1999 the company has been owned by the Gucci Group, a division of one of France's largest conglomerates, Pinault-Printemps-Redoute (PPR). Managers and designers have come and gone, yet none of them have been able to take on the YSL legacy and create something new—and lucrative.

It is now up to Hermann, and to save the brand, she has decided to change it. Hence the handbag.

Since Hermann's arrival, there have been more handbags and other creative successes: a chunky-heeled shoe, a cropped pant, a much copied tunic. They are all inventions of Stefano Pilati, an Italian designer whom Hermann inherited as a partner and immediately embraced.

Hermann also built her own team, including a new CFO and a specialist in accessories. YSL stores had almost none of those high-margin items in 1999 but are now filled with shoes, bags and jewelry. Accessories bring in about half of the company's revenue. In addition, there are less expensive clothes, which Hermann insists are not a second line, layered into the stores. The friendlier-priced "capsule" collection includes basic pieces like jersey evening dresses and safari jackets that won't crease in the latest YSL bag.

Hermann appears to be spending money to make money. Next year the company plans to begin redesigning its 63 Rive Gauche boutiques, which are deemed too dark. At the same time, she is attempting to raise the company's competitive metabolism by tracking customer reaction. She has experts post-testing YSL advertising campaigns. She frequently calls boutiques herself to check if a YSL spread in the local paper is bringing in shoppers. She also pushes Pilati's latest designs in conversations with fashion journalists.

Marie-Pierre Lannelongue, until recently a senior editor at French Elle, admires Hermann's informal but frank style. "She'll ask, 'Have you seen our new Downtown bag? Could you put the Downtown in Elle? And how are your kids?'" Lannelongue says. "It's part natural and part calculated—and so efficient."

In 2006, Hermann's first full year at YSL, revenues rose 19%, to € 194 million, and operating losses fell 24.9%. In the first quarter of this year, revenues are again up—35%—and stock analysts are predicting profitability sooner than was expected.

But profitability is one measure of success. Greatness is another.

Two years after Hermann declared to the trade press that she relished the "challenge" of running a wounded YSL, it remains unclear whether she and Pilati have the magic formula to modernize the fashion house and elevate it to its former glory alongside idolized French brands like Chanel, now a multibillion-euro business. The ascension to such heights is a complex mission. It takes believing that Pilati has the talent and range to give women what they need and think they want and that Hermann has the gift to translate his talent into commercial success.

Hermann and Pilati shy away from the notion that Hermann—a relentless listmaker with a family life in an exclusive Parisian suburb, a country home in Normandy and a job that has her traveling the world—just might be the target customer. "I am not the muse of YSL," she insists. "When Stefano shows me the clothes, I never say, 'I like it, I don't like it.' I say, 'I can sell it, or I can't sell it.'"

But PPR chairman François-Henri Pinault, who was a classmate of Hermann's in business school, insists she personifies the brand. He snatched her away from PPR rival LVMH Moët Hennessy Louis Vuitton, where she was running ready-to-wear at Dior, as much for her winning record as for her provenance. "Not only does Valerie have all the professional skills," Pinault says, "but she is the YSL woman. She is French, and YSL is the most French of brands. And being an active woman and by her feminine instincts, she will have ideas come to her."

That said, the charming billionaire is clear about why he gave Hermann full autonomy to run a business as if she, not he, owned it: "She is one of the toughest men of our group."