By  on December 28, 2011

As Kellwood Co. resets its strategic priorities for the post-Michael Kramer era, its new mall-based, denim-heavy specialty store concept Lamb & Flag will be a crucial test of whether the apparel firm can successfully develop a retail chain in-house.

Lamb & Flag launched earlier this month with a store at the Brea Mall in Brea, Calif. Kramer green-lit the concept about 18 months ago, long before he left his chief executive officer post at Kellwood to become chief operating officer at J.C. Penney Co. Inc. Sun Capital Partners-owned Kellwood has developed stores for its apparel brands such as Vince and Rebecca Taylor, but the 3,100-square-foot Lamb & Flag location marks the company’s entrance into the retail business without an existing brand.

“Creating a [retail] brand from the bottom up is new for Kellwood, and we cut our teeth on it with this,” said Gary Winston, vice president of Lamb & Flag, who emphasized the retailer has continued to receive Kellwood’s support even with Kramer gone. “Kellwood and Sun Capital are behind this 100 percent. They believe in the concept,” he said.

Winston honed his merchandising skills at Pacific Sunwear of California Inc. and Abercrombie & Fitch Co. prior to becoming Kellwood’s first hire last year dedicated to Lamb & Flag. Since then, he has built the Lamb & Flag team to nine people, notably Kiernan Lambeth, the design director of bottoms and accessories whose background includes stretches at Seven For All Mankind and Quiksilver, and Hethe Breuer, design director of tops and outerwear, who has held design positions at American Eagle Outfitters and Ralph Lauren.

The team detected an opportunity for a retailer priced in between cheap fast-fashion emporiums like Forever 21 and contemporary designer resources like American Rag. Lamb & Flag’s denim runs from $58 to $78 and its T-shirts are $28 to $48. The house brand constitutes 60 percent of Lamb & Flag’s merchandise, while the other 40 percent is made up of 11 third-party men’s apparel brands and nine third-party women’s apparel brands to start. Among the third-party brands, which sell jeans from $60 to $198, are WeSC, RVCA, Nudie, Kill City, Insight, A.P.C., Comune, Cheap Monday, Lucca and Blank.

The store’s merchandise is around 60 percent women’s and 40 percent men’s. Winston estimates tops and outerwear will account for roughly 60 percent of Lamb & Flag’s sales, and bottoms 40 percent. There are six denim fits for men and eight for women in the Lamb & Flag brand. Winston singled out the slim fit as likely being the top pick for men, and the skinny being the top pick for women. Other key Lamb & Flag pieces are graphic Ts at $28 and military jackets at $78. There are minor floor set updates every two weeks, and store merchandise is largely refreshed monthly.

The Lamb & Flag team was also convinced a group of 18- to 25-year-olds were unenthusiastic about and even alienated from the choices at traditional malls. Lamb & Flag’s brand tagline, “beautiful rebellion,” speaks to this group’s nonconformist side. The laid-back, rocker aesthetic of Lamb & Flag is encapsulated in a brand video that plays on a wall seen just as customers walk into the store, with a male and female model filmed in Malibu and Santa Monica riding motorcycles, frolicking in the hills and lounging on the beach fully clothed.

“No one has broken through in the mall space since Hollister, and we feel the customer is longing for something different,” said Winston. “It’s been such a stale environment, and Kellwood has the appetite to step out and build a concept when no one else has.” He went on to describe Lamb & Flag’s customer as “not the college football player. It’s not the cheerleader. It’s the musician, the artist, the entrepreneur.”

Surrounded by Pottery Barn, Janie and Jack, Kors Michael Kors, Cotton On, Sunglass Hut and Williams-Sonoma at the Brea Mall, Lamb & Flag’s dark storefront stands out. Named for a pub in Oxford, England, Lamb & Flag’s store design is inspired by classic pubs. The exterior could be on a street in Oxford, with menus detailing the store’s contents and tempered glass windows to give it an older feel, but no mannequins dressed in the latest duds behind them. Inside, salvaged wood is used for the flooring, and the cash wrap has the feel of a worn bar. To foster a sense of discovery for shoppers, behind the cash wrap there are small so-called library rooms with shelves full of men’s and women’s denim. Kellwood worked with brand strategy consultancy Graj + Gustavsen and architectural service provider Menemsha on the store.

Winston highlighted Lamb & Flag’s attempts to tweak merchandising norms. The denim is presented on hangers or, less conventionally, is rolled. Jeans are displayed on two vintage dry-cleaning racks as well. Clothes are often mixed with books on tables. Inside the dressing rooms, which have morning, daytime and evening light settings, a video plays of a woman who cheekily acknowledges the customer while she herself tries on Lamb & Flag outfits. “The whole idea of this brand is to be disruptive and to come up with new ways of doing things,” said Winston.

When Lamb & Flag is a mature concept, it could grow to 700 to 800 doors, with as many as 500 to 600 of these abroad, but its future will depend on the success of its initial three Southern California stores at the Brea Mall, The Shops at Mission Viejo in Mission Viejo and Los Cerritos Center in Cerritos. After Brea — which was chosen to get the first store because it attracts a broad cross-section of shoppers with its wide-ranging anchors Nordstrom, J.C. Penney, Sears and Macy’s — the next two openings are scheduled for February. No firm number of store openings is set for next year beyond February, although 20 to 30 additional units could bow in 2013.

“The plan is to get these stores open and see the sales to determine how quickly we roll out the rest of the stores,” said Winston. He declined to forecast sales for Lamb & Flag, but did suggest Hollister is an apt comparison. In fiscal year 2010, Abercrombie & Fitch Co.-owned Hollister generated $384 in sales per square foot. With similar productivity, the Brea store would generate sales of about $1.2 million a year.

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