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The Kellwood Shakeout: Search Said to Be On For New CEO at Vendor

Another major vendor might be in line for a management change.

NEW YORK — Another major vendor might be in line for a management change.

This story first appeared in the May 8, 2008 issue of WWD.  Subscribe Today.

According to sources, Sun Capital Securities Group LLC, which acquired Kellwood Co. in an embattled takeover in February, has hired Russell Reynolds Associates Inc. to search for a replacement for Kellwood chairman, chief executive officer and president Robert C. Skinner Jr.

A spokeswoman for Russell Reynolds said the firm does not comment on searches, and neither Jason Bernzweig, vice president of Sun Capital Partners, nor Skinner returned a phone call Wednesday seeking comment.

Kellwood would be the fourth major apparel conglomerate to change its ceo in the last 16 months: William L. McComb succeeded Paul Charron at Liz Claiborne Inc. in January 2007, Wes Card took over for Peter Boneparth at Jones Apparel Group Inc. in July and Mackey McDonald was succeeded by Eric Wiseman at VF Corp. this past January.

It’s no surprise Sun Capital, which acquired Kellwood in February for $762 million, would want to select its own ceo to turn around the troubled $1.6 billion vendor.

Since assuming the ceo role in 2004, Skinner, 52, has attempted to recast St. Louis-based Kellwood from a moderate manufacturer to a brand-focused marketing enterprise. During his tenure to date, Kellwood has exited several non-strategic businesses and purchased companies such as Vince, Hollywould, Hanna Andersson and Royal Robbins — firms with retail expansion potential, but little synergy. Further, Kellwood’s attempts at launching better-price lines such as O Oscar and Calvin Klein have met with disappointing results in a dramatically consolidating industry.

Kellwood faltered with its initial moderate launch of O Oscar in fall 2004 and then pulled the plug in 2005. The brand relaunched for fall 2007 as an exclusive better-priced line with Macy’s Inc., but sales underperformed and the collection was terminated last month. Sources have indicated Kellwood’s licenses with Phillips-Van Heusen Corp. for the Calvin Klein better and bridge lines could be the next casualty when they expire in 2012. PVH has admitted it’s not pleased with the performance of the collections.

Also last month, Kellwood shuttered its Liz Claiborne brand suits and dresses line, and on Monday, it was learned that Kellwood closed its moderate dress business. Sources anticipate that once Sun reviews the company’s operations more critically, additional closures may occur.

Kellwood isn’t the only major company that has had difficulties in the better zone of department stores. In recent months, Liz Claiborne shuttered its Sigrid Olsen division and VF closed its women’s Nautica line.

During the five months that Sun was in hot pursuit of Kellwood, Skinner proposed a five-year strategy to stave off shareholder and Wall Street pressure. Under the plan, Kellwood sought to dramatically change the complexion of its business model. In addition to decreasing private brands to only 10 percent of the business (from 28 percent) and having 15 to 20 percent of its revenues come from direct-to-consumer sales (from 8 percent today), Kellwood intended to increase its better-price and above business (currently 30 percent) to match its traditional non-branded moderate offerings.

As a step in that direction, Kellwood in the fall sold off its successful dress shirts manufacturing division Smart Shirts in a $162 million deal. That division generated about $450 million in annual sales.

Faced with a $66.3 million second-quarter loss in September, Kellwood streamlined its women’s sportswear business, which went from seven to three divisions: Lifestyle Alliance for moderate brands, including Sag Harbor, Koret and Briggs New York; Designer Alliance for most of Kellwood’s better-and-above price point brands, including Calvin Klein women’s better sportswear, ck Calvin Klein women’s bridge sportswear, O Oscar (now dropped), David Meister and Hollywould, and Modern Alliance for junior and contemporary lines, including XOXO, My Michelle and Vince.

The restructuring over the last few months led to the exits of several executives, namely Stephen L. Ruzow, president of Kellwood’s Calvin Klein division; Paul A. Robb, ceo of Kellwood’s Lifestyle Design Group, which included O Oscar and Sag Harbor, and Russell Simmons, ceo of Phat Fashions, which Kellwood acquired in 2004 for $140 million in cash.

Despite some challenging times for the company, Gerber Childrenswear and Baby Phat remain strong performers. Last month, J.C. Penney Co. Inc. said it was partnering with Kellwood to launch an exclusive junior sportswear collection designed by Kimora Lee Simmons, creative director of Phat Fashions, called Fabulosity, which will hit stores for back-to-school selling.

Skinner, who succeeded Hal J. Upbin as Kellwood chairman in February 2006, has been ceo and a board member since June 2004. He was named president and chief operating officer in December 2003. Earlier, he was Kellwood’s corporate vice president with responsibility for men’s wear, intimate apparel and children’s wear, having joined the company as president of the men’s wear division in 2000.