Kitson, Others Seek Capital for Growth

Expansion is the name of the game for many firms presenting at the Next Great Consumer Brands Conference.

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NEW YORK — Fashion retailer Kitson is seeking investors and strategic partners; so, too, is streetwear e-tailer Karmaloop.

This story first appeared in the May 2, 2013 issue of WWD.  Subscribe Today.

The two firms presented Wednesday at the third annual Next Great Consumer Brands Conference, copresented by boutique investment banking firm Consensus Advisors and The Nasdaq OMX Group, at Nasdaq’s MarketSite location in Times Square.

Other firms presenting included Xcel Brands/Isaac Mizrahi, men’s custom clothier J. Hilburn, fragrance and personal care firm Thymes and kids retailer Ruum, formerly the 77 Kids operation acquired by the founders of The Children’s Place from American Eagle Outfitters Inc.

Christopher Lee, Kitson’s chief executive officer, told attendees, “We need capital to grow exponentially.”

Kitson is currently a 25-unit chain. There are 13 stores in Southern California; five in South Korea; five in Japan, and one in Taiwan. One store operated under license with Hudson News Co. is at Los Angeles International Airport. A second airport store will open this summer at the Tom Bradley International Terminal, also at LAX.

Kitson stores range in size from 2,000 square feet to 7,300 square feet. Sales average $1,000 a square foot, Lee said. Brands such as True Religion and Hudson Jeans were launched at Kitson before being picked up by Barneys New York and Nordstrom. If a brand has good sell-throughs, Kitson will push for greater exclusivity of merchandise in its stores, or even make an investment in the branded firm. Lee added that the goal of the company is to “go public or be taken by a public firm.” The company has annual volume of $30 million.

Lee said after his presentation that since the retail model has been proven, it’s now the right time to strategically expand the business. Hence, the desire for more capital and/or strategic partners.

First up is the expansion of its retail presence, Lee said. Plans include new stores in San Diego, Las Vegas and San Francisco, to be followed by a store presence in the A-malls in the U.S. Kitson also plans to expand its Kitson private label merchandise to capture better margins, and has created company-owned fashion brands that it will expand through licensing. “God Save LA and LA Cabana are the two most popular among our customers,” Lee said. Both brands are in the apparel categories, and LA Cabana also is in accessories.

Also prowling for funding is Karmaloop.

Vinny Nesi, chief revenue officer, said, “We are hoping for $500 million in 36 months.” Karmaloop, launched 12 years ago, targets the verge consumer, whose sweet spot is between ages 18 and 25 years old.

“The customer is brand loyal.…There are 6.5 million on our e-mail list and four million are very active,” Nesi said. About 70 percent of its customers are male and 30 percent female. The firm ships $400,000 of merchandise each day. Karmaloop inked a distribution deal with Xiu.com in China last year, but wants to expand into Japan and Russia. It makes money on shipping charges, and that enables the firm to break even, Nesi said, noting that it also imposes logistical charges on vendors to train them to comply. That form of chargeback also adds to the bottom line.

Robert D’Loren is ceo and chairman at Xcel Brands, which owns the Isaac Mizrahi brand. The company isn’t seeking any funding immediately. That could change once it completes its current stage of building out the business.

Isaac Mizrahi New York has 45 licensees and is in 120 product categories. Positioned between Michael Kors, Anne Klein and Vince, the company is still building out its reach, both in product categories and in the direct-to-consumer channel. The first Isaac Mizrahi store will open this summer in Southampton as a pop-up site, a potential precursor to a series of store sites down the road.

In the interactive channel, Isaac Mizrahi Live sells exclusively to QVC, and the selling metric is $7,000 to $12,000 in sales a minute when on air.

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