Anemic consumer spending, jittery retailers and uncertainty about near-term sales have put a chill on the licensing business.
“It’s a difficult time for the industry and a difficult time for licensing,” said attorney Charles Klein, who heads up the fashion practice at Davidoff, Malito & Hutcher, where he specializes in corporate licensing. He said the yearlong recession has altered his business significantly. “New business has slowed and the parties working on deals are being much more careful. It’s a ‘buyer beware’ market.”
In times where capital is at a premium and organic growth is hard to secure, companies such as Liz Claiborne Inc. are looking to licensing.
“Our brands are identifying capital-light ways to grow through strategic partnerships,” said Claiborne chief executive officer William L. McComb during its fourth-quarter earnings call Wednesday. “Our U.S.-based direct brands have significant untapped opportunity in markets all over the world. In some cases, we have partners in place, and in other areas, we don’t. Juicy, for example, will now be partnering in Greece, in Mexico and developing a very aggressive travel retail program.
“We’re looking at where product licensing makes sense,” McComb continued. “Lucky Brand, for instance, will be launching footwear at wholesale with the Camuto Group this fall, and we’re looking at similar deals on other brands.”
Retail sales from fashion licensing contracted last year in the U.S. and Canada to $8.5 billion, down 8 percent from 2007, according to The Licensing Letter. According to Ira Mayer, the publication’s editor in chief, that number should drop again in 2009 as the recession continues to retard launches and slow sales of existing licensed products.
It’s a far cry from the late Nineties when retail sales from licensed fashion products topped $13.5 billion as the apparel business rapidly moved to a lifestyle model that prompted niche brands to expand into multiple classifications, tiers of distribution and international markets. In the last few years, celebrities ranging from Reba McEntire to Jennifer Lopez have been busy lining up licenses, and well-known designers such as Calvin Klein and Betsey Johnson have successfully augmented their businesses with licensed categories ranging from fragrances and swimwear to costume jewelry and eyewear.
But today, brands — even ones in expansion mode — are cooling their heels as consumers cut spending and retailers become allergic to untested merchandise.
JA Apparel, the company that owns Joseph Abboud, has experienced rapid growth over the past five years through a raft of licensing deals that brought the men’s wear brand overseas and into myriad new classifications. Marty Staff, president and ceo, said the company is still looking to push into additional markets — most notably women’s wear — but isn’t eager to rush into a deal in the current market.
Licensing agreements at the Beanstalk Group, the agency that manages licenses for the Andy Warhol Foundation, Samsonite, and L.L. Bean, were down 50 percent for the fourth quarter, according to president and ceo Michael Stone. “Licensees are reluctant,” he said. “The whole manufacturing community is experiencing great caution.”
Last summer, Neema Clothing, a men’s suit manufacturer, unveiled plans to turn Haspel, once a major player in the men’s clothing business, into a lifestyle brand. But company president Jim Ammeen said he’s being more careful in vetting potential licensees, which is slowing the process.
Licensors and licensees are scrutinizing potential partners more thoroughly these days.
“Due diligence has historically not been the hallmark of the fashion industry,” said Klein. “But it’s happening now.”
In this environment, licensors are getting extensive business plans upfront and confirming the licensee’s cash position before moving forward. Licensees are doing their part by ensuring the prospective licensor’s brand is performing; that the company’s balance sheet is in good order, and that retailers support the product and want more of it.
Executives said licensing deals in the apparel segment — especially the once ubiquitous partnerships between celebrities and retailers — have been hardest hit. As an example, Stone cited Sarah Jessica Parker’s line Bitten, which is still tied up in bankruptcy proceedings after the line’s exclusive retail partner, Steve & Barry’s, liquidated late last year. Celebrity licensing arrangements with Amanda Bynes and Venus Williams were also affected at Steve & Barry’s.
Meanwhile, top-tier brands are finding it easier to ink deals than their lower-profile competitors. Andrew Jassin, partner in consulting firm Jassin-O’Rourke, said luxury brands with strong consumer connections are still finding licensing easy, but not so with secondary brands. “In the past if someone came up with a good idea and a decent name, there was a market you could go to, a retailer that would take a chance on instinct,” he said. “Today, unless there’s a retailer on board at signing, it won’t happen.”
The market for accessories, young men’s and international licenses has also held up.
Geoffrey Beene, whose wide range of products is completely made under license, continues to rack up new deals, especially for international markets, as in its recent agreements for master licenses in Mexico and Indonesia. The brand’s president of licensing, Merle Sloss, sees the slow economy as a good opportunity to sign competitive licensing contracts.
“In the short term, there’s less competition for new partners,” she said, adding the moderately priced brand will ink three to five new deals this year. “Globally, there’s lots of opportunity for the brand.”
One of the flourishing areas of licensing these days is taking the brand overseas. For example, in January Tibi, the women’s contemporary firm, signed a licensing agreement with the Japanese Marubeni Fashion Planning Corp. to produce and distribute in Japan, which could more than double Tibi’s volume.
While the pace of signing new licenses in the women’s business appears to have slowed in recent months, there are still deals to be made. Tory Burch struck its first licensing deal for eyewear with Luxottica Group, although no new licensing deals are in the works. VF Corp. licensed its women’s Nautica outerwear to the Levy Group, which has successfully grown with its stable of licensed outerwear labels such as A.B.S. by Allen Schwartz, Laundry, Betsey Johnson, Esprit, Liz Claiborne, Claiborne men’s, Joseph Abboud and Perry Ellis. Children’s lines are another popular extension, with firms such as Skechers USA Inc. and Jean Paul Gaultier inking licensing deals in the last few months.
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye