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NEW YORK — “Now I’m able to look at the company from a distance, and I can see better.”
This story first appeared in the June 23, 2003 issue of WWD. Subscribe Today.
If hindsight is truly 20/20, then the person who has the best vantage on the recent events in the life and times of Calvin Klein is none other than the designer himself — and he’s ready to talk about it.
After months of speculation about his future, further obscured by Klein’s admission in April he was again seeking treatment for substance abuse, the designer sat down last week to clarify the situation in his first interview since the sale of his company in February to Phillips-Van Heusen. Discussing the changes in store for Calvin Klein Inc., Klein also acknowledged for the first time a significant change in his role as designer of the collections that bear his name, confirming that design directors Francisco Costa and Italo Zucchelli are now responsible for the women’s and men’s collections, respectively.
However, the 60-year-old Klein is not retiring. He described his future role as consulting creative director, and his expected involvement in design and business strategy as “fluid.” He will consult on collections, potential lines and deals. But when it comes to the runway, Klein will be sitting in the front row, next to Bruce Klatsky, chairman and chief executive officer of PVH, while Costa and Zucchelli will take the bows.
Klein and Klatsky plan to attend Zucchelli’s first men’s show on his own this Wednesday in Milan.
“I like to think of it in terms that you can compare my role at Calvin Klein to what Alexander Liberman’s role was at Condé Nast,” referring to the late editorial director who was a conduit for the artistic growth of such publications as Vogue, Vanity Fair, GQ, Self and Allure. “He worked closely with [chairman] S.I. Newhouse, and in a sense, that’s the role I plan on taking on. I am stepping back from day-to-day responsibilities, but I am involved. I have been involved in seeing the work that the two designers are doing, both women’s and men’s, but I’m not involved in the way I once was.”
Could it be that Calvin, the eternal protagonist, has become Calvin, the elder statesman? Is the cutthroat world of Seventh Avenue ready for a kinder, gentler and wiser Calvin Klein?
Stranger things have happened in the history of the most famous designer in the world, whose notoriety continues to make him the most recognizable designer brand in fashion in countless surveys, including the 2003 edition of the WWD100, published today. Klein has lived in the public eye for years, and for all the times he appeared to be down and out, he has returned with an unexpected triumph, turning what appeared to be the most difficult of business circumstances into catalysts for new growth. While some saw the sale of his company as possibly a bittersweet end of a fascinating career, it could prove to be yet another new beginning for Klein.
The elements that have ultimately stood to define Calvin Klein are the same as those that define the brand in the consumer’s eye — glamorous, cool, provocative and pioneering — the heir apparent to the mantle of American modernity that once belonged to Halston. Klein, credited with creating the designer jeans market, was also the first to build a brand that combined luxury fashion apparel with mass products like underwear and fragrance. He made a case for successful growth without impugning his credibility, creating a licensing empire that didn’t cheapen his name, which is a strategy PVH hopes to continue. Given the price the company paid, and the brand’s potential, with the global sweep and reach of the Calvin Klein name, the acquisition could also come to be known as one of the shrewdest deals in years.
Along with the countless innovations have come challenges and controversies — the most recent being the image of the disheveled designer being escorted from the sidelines of a New York Knicks basketball game last March, but also including his recent legal battle with a licensee, The Warnaco Group, in which Klein claimed unauthorized product distribution was a “cancer” on his brand; a Justice Department investigation over the use of underage models in advertisements, and Klein’s previous battles with addiction.
During the interview, conducted in the designer’s West 39th Street offices with Klatsky, Klein directly, but delicately, addressed much of the controversy that has surrounded his personal life in recent months and how that has impacted the perception of the PVH deal. He anticipated questions on substance abuse, and the resulting media frenzy, with a sly grin, answering most of them.
“I feel that what’s happened is natural,” Klein said. “I expect to get press when things happen to me. I think people in general, and the press in particular, have been really supportive, understanding that this is a problem I have had for many years and that 15 years ago or so I went to a place to deal with substance abuse. This isn’t the first time. It’s a life-long problem, something that one has to deal with on a daily basis. I did say that for me, these last few years, I did stop going to meetings. I wasn’t as involved in dealing with my problem the way I needed to be. Now I am and it feels very good. I’m getting the kind of treatment and the help that I need and I’m addressing it. This is part of my life that I will always have to deal with.”
Sunburned from driving around the Hamptons, where he is looking for a new beach house, and wearing glasses, Klein was relaxed and appeared comfortable with Klatsky and his own new role as an employee of PVH. At industry events in recent weeks, including as a co-chair of the Council of Fashion Designers of America Fashion Awards, he has similarly appeared confident and happy, albeit the subject of much curiosity from his designer colleagues and the press since he returned from a month of rehab counseling at The Meadows in Wickenburg, Ariz.
Both the designer and Klatsky feel Klein’s new role is for the better of the company. It has been apparent in recent weeks that Klein is more of a presence in the offices than during the period immediately after his fall show on Feb. 14, when he unexpectedly told friends, employees and a few retailers that it would be his last runway collection. His recent return has tempered the question of just how much trouble Klein was really in, in terms of substance abuse or the future of his career — but the designer acknowledged that the uncertainty could not come to an end until he personally faced both issues head-on.
Interestingly, he denied there was any connection between the timing of his personal problems and the difficult negotiations that led to the sale of CKI, despite the obvious speculation. Klein insisted that the professional obsessions that have fueled his ambitions and his personal addictions over the years remain distinct entities.
“That has nothing to do with it,” he said. “I’ve had this problem for many years, and it has nothing to do with any of this. It is no different than it was 15 years ago. It’s the same problem and the solutions are the same. I just work on that.”
He would not discuss the specific experience of his recovery, other than to say he continues to attend meetings and to work directly with a counselor. He did not express any bitterness or embarrassment that one might expect to come from a famous person who has been the subject of such intense commentary related to the incident with the Knicks. Klein’s actions, though individual, led to discussions of a return of serious drug abuse along Seventh Avenue, and even the introduction this May of a so-called “Calvin” bill in the New York City Council that would raise fines for unruly behavior at professional sporting events.
“What seems personal for me becomes public and I understand that and I accept that,” Klein said. “Addiction is a problem that exists all over the world in every walk of life. We’re talking about anorexia, overeaters, gambling. There’s all kinds of addiction and it is a serious problem. It’s not just in this industry. I don’t believe it has anything to do with work, but you know I’m no expert about it. As you can imagine, I’m trying to deal with it, so I’m not one who should be speaking on the subject, but I don’t believe it has anything to do with work or the industry that you’re in.”
But then, few designers are as closely connected to the lifestyle they sell. Calvin Klein, the person, and Calvin Klein, the company, have become two embodiments of the cool, distant, controversial, untouchable aesthetic of his designs. Separating the two, in a transition from the total control that was empowered to Klein and his founding business partner, Barry Schwartz, to one where Klein not only answers to Klatsky, but also the new scrutiny of stockholders, analysts and moneymen, hasn’t gone off quite as anyone had expected.
In fact, there were the makings of a culture clash from the beginning. PVH, with its squeaky-clean image that dates back to 1881, is now looking to capitalize on the Calvin Klein look and the 35-year history of the brand, with its alternating controversies and successes. Moving forward has initially proven to be a more difficult maneuver without digging up all the references to Klein’s well-documented past, but Klein said that PVH’s public status should hardly be a concern that the company will not continue to push the envelope. Both the manufacturers of its fragrance (Unilever) and jeans (Warnaco), were public when Klein was producing his most famously provocative advertisements, he pointed out.
Since the deal to sell the company was announced in December, much of the internal talk focused on whether Klein’s embrace of PVH — a company that specialized in making shirts for the main-floor market — was as enthusiastic as it might have been if the firm had been sold to a luxury conglomerate like Gucci Group or LVMH Moët Hennessy Louis Vuitton, which looked at Klein’s books in early 2000. The acquisition price, $438 million according to recent SEC filings, was also less than half of what Klein was asking just a couple of years before, when he saw a competitor like Donna Karan command a deal that was personally worth much more. And he had to split the proceeds with Schwartz — although Klein is eligible for future, potentially lucrative, volume-based incentive payments.
The main question among the staff, concerned with the security of their own jobs, was how Calvin Klein could live in the tactile world of mass apparel after creating the illusion of isolated modernity.
Also, connecting to a business partner in the same manner in which he could trust Schwartz was once a proposition that Klein, throughout his career, said would be impossible. He even said he would stop designing if Schwartz ever resigned from the company, which Schwartz did in February to focus on his role as chairman of the New York Racing Association.
Asked about those sentiments and his feelings today, Klein said, “To a certain degree I’ve just changed my role. I’ve not stopped, but I’ve changed. I always saw one of the greatest challenges was how to build a brand — how to build an image and a lifestyle — so that it could carry on long after I’m involved in the day-to-day operation.
“To me, that challenge was in trying to find the kind of people who understand the things we love and the kind of things the consumer likes from us,” he continued. “So I feel that I’ve done that. Now I’m able to look at the company from a distance, and I can see better. I now can have a new perspective which hopefully can be of greater value to this company and to Bruce, and I really believe that it will be. I’m not going to walk out and take the bow. These design directors have been given the responsibility, for both men’s and women’s, to do the collection, and I don’t feel it would be appropriate if I’m not here, involved on a daily basis, for me to be taking the bows. This is their turn, and I’ll be sitting there next to Bruce rooting them on, with the greatest pleasure.”
Klein’s role will be to “help Bruce with the businesses — the businesses we have where he thinks he needs me, to step in, give advice and help,” he said. “This is a fluid situation, but I would think that would be the easiest way to explain it.”
He has been involved in a number of corporate decisions, including the selection of a licensee for a women’s better-priced sportswear collection last week. But Klein admitted it has been difficult, after so many years, to suddenly slow down. He has still held discussions about ad campaigns with Fabien Baron and Steven Klein, as recently as two weeks ago. As part of the sale, Klein also signed a contract to serve for nine years as a consultant, which he can terminate after three years, and under which PVH will pay him an annual salary of $1 million. He is under no obligation after the three years to continue his role as the public face of the brand.
“That is far in the future, but hopefully, we’ll see how they’ll need me and how I’m needed,” Klein said. “This will evolve over the next few years. I still love what I’m doing. I’m involved, but I’m just involved in a different way.”
Klein remains publicly supportive of PVH’s volume plans for the brand that were made clear from the day a deal was signed last December to develop the brand within its bread-and-butter specialty of better-priced sportswear for men, plus a women’s version under license. Financial incentives tied to the acquisition guarantee Klein an annual payment of 1.15 percent of worldwide wholesale sales of all merchandise bearing his label for the next 15 years, according to SEC filings, which replaced an existing clause in Klein’s contract to work for his own company that gave him a 1 percent royalty in perpetuity.
Whether or not it was a mechanism to ease the sting of the lower purchase price for Klein, the royalty agreement helped clinch the deal. And both PVH and Klein have proceeded to publicly laud the merger.
“It has gone better than expected,” Klatsky said. “My relationship with Calvin is better than I thought it would be. I have tremendous respect for him and his right to privacy, and his right to function as an individual. He’s been available to me. I’m not intimidated by him. It’s gone much better than expected.” He recalled the comments of Mark Weber, president and chief operating officer of PVH, who said during the company’s annual meeting this month that “we keep looking for warts, and we haven’t found them yet.”
Klatsky is clearly fond of the designer’s aesthetic and decorated his home with Calvin Klein products well before the acquisition became a realistic opportunity for one of the most unlikely suitors of a designer luxury brand. But the goal was to acquire the institution of Calvin Klein.
“That institution it just bleeds, it drips off the walls, the Klein aesthetic,” Klatsky said. “What the house of Klein stands for in terms of design, in terms of communication, marketing and advertising, you walk around here and everybody believes it. They understand it. They represent it down to what they wear.”
He looked down at his own ensemble. “I feel guilty wearing a red tie today,” he said.
As has been previously noted, Klatsky again stressed that PVH plans to maintain the Calvin Klein organization as a “living, breathing institution” with its own design, advertising, communications and marketing operations. The production and sales of the women’s collection business are in the process of being transferred under license to Vestimenta, which also produces Giorgio Armani and Emanuel Ungaro collections. That deal turned over responsibilities for profit and loss to the Italian manufacturer, but Klatsky and Klein believe it will enable the collection to regain profitability and prestige, through the achievement of “critical mass” — with the combined sales power of Vestimenta’s three trophy labels.
Analysts have noted Klein will have its challenges. PVH’s recent SEC reports detailed a dramatic fluctuation in CKI’s performance over the past three calendar years that was previously unknown, from a $24.4 million profit in 2000 to a $19.5 million loss in 2001 to a $1.1 million loss in 2002. The $43.9 million negative swing from 2000 to 2001 was largely attributed to the costs of eliminating the company’s domestic bridge sportswear business, which might some day be replaced. But a bigger surprise was the downturn in Klein’s wholesale business over the past three years, dropping to $26.4 million in 2002 from $45.2 million in 2000, while retail sales stayed relatively flat over that time period, ending at $19.5 million last year. PVH believes that can turn around.
“The house of Klein is undeveloped in many areas,” Klatsky said. “The trick is going to be to simultaneously develop all these businesses. The collection business will become, I would guess, four times the size or five times the size it is today. The bridge business doesn’t exist in Europe or the United States. Jeans wear, while very successful in Europe, is still infinitesimal compared to what it could be. There is no footwear business to speak of. We are going to nurture and incubate each of those businesses and bring them up to balance so that there’s nothing in the house of Klein that isn’t up to a growth mode.”
Still, Klatsky is among the fashion executive class that subscribes to the theory that speed to market is important, “but speed to market with the right product and the right communication is more important.” The company intends to tread cautiously into brand extensions, while investigating the possibilities aggressively. For example, through Unilever, there are plans for a subbrand extension for Eternity and even talks of a new launch within a year, Klatsky said, noting that constructive dealings have resumed since Unilever indicated to Klein it has taken the designers’ brands off the selling block.
“Based on everything I’ve been hearing, Bruce has been talking about the balance between expanding into new businesses and growing the ones where we’ve just scratched the surface,” Klein said, which is where the better collection comes into the plan.
“This has to be answered in the context of the fact that growth is not the end all, but preserving the Klein focus and the Klein aesthetic is the end-all,” Klatsky said. “I believe the more accurate number for the better business between men’s and women’s is $1 billion, not $1 billion each. Globally it could reach $1 billion to $1.5 billion, and in the United States, based on the models out there, we think it will approach $1 billion, and only after five or six years, only after we carefully distribute it to the doors that can sell it properly. We’re in no rush to get there. All of our financial models that justified the acquisition don’t rely on the growth of these businesses cavalierly. It’s very cautious and very careful….The Klein franchise, the Klein aesthetic, will carry the day whenever we introduce it.”
The company is wasting no time. On Thursday, CKI and PVH announced an unusual partnership in which Kellwood will produce a better-priced collection in collaboration with a new company formed by industry veterans Andrew Grossman, Alexander Vreeland and Jay Schottenstein. The new company, GAV, will handle design and marketing functions for the new launch, planned to hit retailers by March. Several companies were vying for the license, so analysts were upbeat about PVH’s strategy to pair the assets of two companies, based on the upscale experience of Vreeland and Grossman (who worked together at Giorgio Armani) and Kellwood’s impressive development of its infrastructure.
From the design and marketing perspective, both Klein and Klatsky brushed off any questions of the viability of a Calvin Klein label for the better market, which will be the lowest price point the line has targeted in its history. Klein pointed to the company’s past success with volume collections, from the CK Calvin Klein Jeans brand and a bridge sportswear collection to its massive presence in underwear and fragrance categories.
“The aesthetic and the creation of the product is not really that difficult,” Klein said. “Everyone knows what we stand for and it’s not that difficult to put together a good design team that can create product at those prices, but to see that it’s distributed properly, to see that it’s produced properly, and that it’s the right quality is a monumental job. Bruce and PVH have demonstrated they have the ability to work with large manufacturers, and in the field they’re in, they’ve already taken a huge market share.”
Asked what he personally envisioned a better-priced collection for women would look like, Klein pointed to his signature collection.
“The idea is to interpret those looks, those same kinds of looks, because we have such a range of day to evening, clothes that women wear to work, or casual weekend clothes that you can take any of it and then just think of that at better prices,” he said. “The way we achieve that is through less expensive fabrics and labor that is clearly less expensive as well, but the look and the attitude is very much the same. It is quite amazing what can be done with fabric and production when you’re producing a lot as opposed to very few. It’s amazing what you can source around the world. That’s part of the fun and part of the excitement, and then you translate the aesthetic and you will see clothes in the same mood as what we do for the collection.”
“My whole life has been calling up the ceo’s of major department stores and pleading with them,” Klatsky added. “I’ve been showing them that our brands — Izod, Van Heusen, Bass or Geoffrey Beene — would perform in their stores, and then our financial performance would justify our existence. But for the first time in my life, they are knocking down the walls to get at this brand. They understand the potential it has and the consumer demand. It is so far away from being mature. And the aesthetic is so much different than what is out there. It will be such a dramatic contradiction to the red, white and blue product that dominates all channels of distribution, married together with one of the great franchises of the world.”
PVH’s greatest challenge will be to prove Calvin Klein is a franchise that can survive beyond the direct daily involvement of its namesake designer, a feat that has proven more difficult for American designers than their European counterparts, as seen in the cases of Halston, Perry Ellis and Anne Klein, all of which have gone increasingly downmarket over the years. PVH has the market research to back up its case, having studied the brand’s potential not only in America, but throughout the world.
As for Klein, even 20 years ago he understood the public’s fascination with him. “I understand why I may be a target,” Klein told WWD in 1983. “I’m young, I’m successful, I’m not so bad looking and I enjoy living life in the fast lane. It’s good gossip.”
As for now, “I am young enough that there are other things in life,” Klein said last week, pointing to his search for a new beach house and the design of the apartment he bought several years ago in the Richard Meier building still under construction on Perry Street. “One thing I want to focus on is my apartment in the city. I do want to pay some attention to that. I’m so tired of people asking me when I am going to be in this place, that hopefully I can pay some attention to what it’s going to look like, and how I will live.
“I can still get a table at a restaurant, so I guess things must still be OK.”
But will Calvin Klein, the man, still be famous enough to whip up the media the way he does today with a simple, although very public, breach of basketball etiquette?
“I don’t think about it in terms of being known,” he said. “I think about the work. Even when I’m not working, I think about the work. I mean, I still do; you cannot turn that off. And if I don’t think about it when I’m awake, I dream about it.
“For me, the work is about coming up with new ideas, and new businesses, new ways that we can express ourselves in new creative ways. That’s what I’d love to focus on. I love starting things.”