Denim has been more than a good fit for Calvin Klein.
The fashion house entered the jeans business in 1978 through a licensing agreement with Puritan Fashions Corp. But it was a series of ads launched in 1979 that would create a frenzy around the company’s denim business and establish a distinctive Calvin Klein DNA when it came to advertising that has carried through to today. TV spots of a then-15-year-old Brooke Shields contorting herself and famously declaring “Nothing comes between me and my Calvins” served as a stark counterpoint to the nation’s growing embrace of conservatism, expressed by the election of Ronald Reagan one year later.
Suggestive ads may have gotten people talking, but it was the Calvin Klein name that drove customers to stores to shell out at that time a hefty $38 for the jeans. A new category, designer denim, had been born. In 1983, Calvin Klein and Barry Schwartz, then-chairman of Calvin Klein Inc., acquired Puritan for $68 million. According to Schwartz, Calvin Klein Inc. made $1 a pair for the first five years of the denim venture. By the end of the third year of the Puritan deal, Schwartz said Puritan was shipping 500,000 pairs a week. By 1983, the business had reached a retail volume of $220 million. However, a year later that number had fallen to approximately $130 million. Schwartz said the acquisition had required the company to take on Puritan’s considerable debt.
“Puritan was on its last legs, and we were trying to protect the trademark,” Schwartz told WWD in an article in February 2003. “Had the company faltered and gone into bankruptcy, which it would have likely done, we most likely wouldn’t have acquired all its debt.…We could have gotten the license back [had Puritan gone into bankruptcy]. It was a decision we made, but it was not the right decision.”
For the next 10 years, the jeans business remained inhouse and sales continued to taper off. This didn’t lessen interest from other parties in the apparel industry keen to get their hands on the Calvin Klein Jeans business, however. When Calvin Klein Inc. began looking for a new licensing partner in 1994, there were many suitors. The process of reaching an agreement, though, was anything but smooth.
In February 1994, Rio Sportswear Inc. signed a letter of intent with CKI to purchase the Calvin Klein men’s and women’s jeans division for $35 million plus ongoing royalty payments. But by March reports surfaced that the negotiations were on shaky ground, and come April a deal had yet to be reached. Talks between Klein and Rio were said to have collapsed due to personality differences between the designer and Arnold Simon, president of Rio. In mid-April, other names cropped up as interested parties, including Pepe Jeans USA and Fruit of the Loom.
Soon after the Rio deal went bust, Klein began negotiating with Fruit of the Loom. By May 1994, the Federal Trade Commission had given FTL the green light to buy Calvin Klein Jeans. But a month later, FTL terminated its negotiations with CKI. Interviews with executives from both companies indicated the negotiations had been contentious.
“The major reason was we just couldn’t reach an agreement on what we felt were some fundamental issues, including a definition of the product line,” said William Farley, then-chairman and chief executive officer of FTL, told WWD, adding, “We felt the definition should be more inclusive than exclusive. Is it just denim? Or is it more into knits and wovens? We wanted the definition broader. For months we had an agreement it was to be a broad definition. But just recently the definition changed, and they wanted it exclusive.”
Klein himself was said to have had concerns about the fact that most of FTL’s business was conducted with mass merchandisers, leaving him to question whether FTL had the necessary relationships with department store executives to make the venture a success. Klein declined to address those reports directly.
“We both agreed this is not going to happen,” the designer told WWD. “There was some misunderstanding about product categories in the jeanswear collection.”
Farley said FTL offered between $40 million and $50 million to pick up the ck Calvin Klein Jeans men’s and women’s jeans business, which would have included long-term royalty payments.
Apparently, Klein and Rio president Simon were able to put their personality differences aside by August and entered into a licensing agreement. The partnership proved highly profitable. Within two years, Rio had grown ck Calvin Klein Jeans sixfold. In March 1996, Rio, which had changed its name to Designer Holdings Ltd., filed to take the company public. Again, edgy ads featuring a scantily clad Kate Moss fueled sales and buzz around the brand.
According to government filings associated with the public offering, the ck Calvin Klein Jeans businesses generated revenues of $361.4 million in 1995, compared with revenues of $59 million in 1993, the last year CKI controlled the label.
Designer Holdings had taken several steps to fuel growth. It reengineered garments to fit and flatter more potential customers; lowered prices on “designer-quality products” to better price points from designer price points; developed specific marketing and merchandising strategies for the junior, petite and children’s lines; enlarged the offerings of core basics in each line, and established an inventory replenishment plan with retailers.
The jeans were so popular they even became irresistible to criminals. In July 1996, a truck loaded with 25,000 pairs of jeans estimated to be worth $500,000 was hijacked in Los Angeles. The truck’s driver was held at gunpoint, beaten and tied up. Designer Holdings responded by running a full-page ad in USA Today alerting potential buyers to the robbery and offering a $5,000 reward for information.
Designer Holdings’ success garnered the attention of Warnaco Group Inc. in 1997. Warnaco already had a piece of the Calvin Klein business with men’s underwear and accessories and women’s innerwear. In October 1997, Warnaco took a controlling interest in Designer Holdings and picked up a ck Calvin Klein Jeans business that had grown to $472 million.
Warnaco’s acquisition came at a time of increasing competition in the status denim category. DKNY Jeans, Polo Jeans and Tommy Jeans all entered the market between 1997 and 1998 and sales of ck Calvin Klein Jeans began to decline. When Warnaco declared bankruptcy in 2001, the Calvin Klein Jeans business was once again an acquisition target. Revenues for the label fell more than 16 percent to $265.8 million in 2004 from $317.6 million in 2002. Things have turned around since then, and in 2007 Calvin Klein Jeans posted revenues of $541.7 million
Kevin Carrigan, creative director of ck Calvin Klein and Calvin Klein Jeans, credits the rebound to a willingness to evolve with the customer while maintaining the brand’s identity.
“There’s been a huge shift over the last couple of years,” said Carrigan. “The consumer has traded up and we traded up with her.…We have such a legacy and heritage with denim and we’ve kept our consistency and vision of who we are.”
Carrigan believes the impact of the premium denim craze several years ago helped the overall denim business, but that consumers’ appetite for only the priciest brands has faded.
“Jeans as luxury was the idea two or three years ago,” he said. “Now people just want a cool jean that fits them well.”
Calvin Klein Jeans will be moving toward more authentic and lived-in looks for spring. “We’re not talking about holes, but jeans that have been loved,” Carrigan said. Prices range from $45 to $90.
Carrigan has also seen a significant shift over the last five years toward lighter-weight fabrics. Weights once traditionally hovered between 14 and 15 oz., but are now down to 9 oz.
Janice Sullivan, president of Calvin Klein Jeans, said the line’s denim offerings have been among its strongest performers, even as department stores struggle to make sales in a difficult economy.
“I feel that denim within the brand has been a little bit immune to what’s going on,” said Sullivan. “We haven’t seen the slowdown as impactful in the denim zone in our brand.”
For Sullivan, denim offers “the foundation for what we call a lifestyle dressing.” In the U.S., efforts are now being focused on shifting the line toward higher price points, which would bring it in line with the brand’s positioning in Europe and Asia.
“We feel we definitely have room to grow here in the U.S.,” she said.
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