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Birkhold Readies Diesel USA for Growth Push

Renzo Rosso is the chief visionary driving Diesel's transformation into a global lifestyle brand, but the task of executing that vision in the U.S. now rests with Steve Birkhold.

NEW YORK — Renzo Rosso is the chief visionary driving Diesel’s transformation into a global lifestyle brand, but the task of executing that vision in the U.S. now rests with Steve Birkhold.

Diesel said in November that Birkhold would take over as chief executive officer of Diesel USA after the departure of Panicko Philippou, a 12-year Diesel veteran who had been ceo since 2004. Sources said Philippou vacated the post for personal reasons and returned to his home in London.

As a company outsider with a career built at May Department Stores Co. and apparel giant VF Corp., Birkhold could be regarded as a somewhat unlikely fit with Diesel’s often edgy and provocative image. However, his management background and breadth of experience with large denim-based brands resonated with Diesel’s management, which is pushing hard on its mission to expand into fresh product categories and reach new consumer markets.

“I’ve always been really into product,” Birkhold said in an interview at the Diesel offices above the brand’s first flagship on Lexington Avenue here. “So, for me, one of the major reasons I came to Diesel was because of the focus on the consumer and absolutely the focus on the product. That focus, that’s the first thing that everybody talks about.”

Attaining a better balance between Diesel’s wholesale and its company-owned retail businesses will be a continuing effort over the next three to four years. There are 40 Diesel stores in the U.S., including outlets, a unit for the higher-end Diesel Denim Gallery and a Diesel kids’ store, and the plan is to open five to eight new stores this year. The biggest will be a three-story flagship on Fifth Avenue that was previously home to Gucci. The store, scheduled to open late this year, is being touted by management as Diesel’s most important flagship.

“It’s going to be distinctively Diesel, but done in a way that communicates Renzo’s future vision,” Birkhold said. “It’s basically the prototype of what our stores will look like going forward.”

The location will have Diesel rubbing shoulders with titans such as Tiffany & Co., Prada, Bergdorf Goodman and Louis Vuitton, reflecting what Birkhold described as an effort to go after quality rather than quantity. He said Diesel considered a space in Rockefeller Center across from Saks Fifth Avenue that could have drawn far greater foot traffic.

“The question is, are those the quality footsteps, do those consumers have shopping bags in their hands?” he said.

Birkhold said the company felt the Gucci location represented the “perfect crossroads of foot traffic and quality of consumer.”

He began his career with May Co., where he worked for 11 years. From May, Birkhold moved to VF Corp. to take up a position in sales. At VF, he served stints running first the East Coast and then the West Coast Lee Jeans businesses before being promoted to general manager of women’s brands for Lee.

After VF acquired Nautica in 2003, Birkhold moved to New York to head the Earl Jeans premium denim business, which was part of the acquisition. Within two years, Earl Jeans was sold.

“We basically assessed the business, the viability of the business in the channel and made the decision that since [Earl] was one of the original brands, it was too far gone to be commercially viable to VF standards, which as you know, is a substantial business,” he said.

Following the sale, Birkhold served as general manager of the Nautica Jeans business for two years before taking the job with Diesel.

VF’s distinctive style of management, which puts almost as much emphasis on the science behind building brands as it does on product development, is evident in Birkhold’s approach.

“I think understanding how to blend the brand by looking back to the consumer and back to the channel of distribution, you’ll find most VF people think that way as they develop a business or strategic plan,” Birkhold said.

The huge size of VF’s business and its nature as a publicly traded company inevitably means that in some cases meeting performance measurements win out over aesthetic choices. Not so at Diesel.

“At the end of the day, Diesel doesn’t make sacrifices to hit the numbers,” he said. “It’s [because of] Renzo’s passion about maintaining the position of Diesel and the image of the brand. To me, that was probably one of the biggest changes from VF.”

VF’s commitment to building efficient back office operations to serve as the springboard for growth is another management element Birkhold is bringing to Diesel.

“Even though the organization structure was solid, I think in order to grow the business to the next level there were some additional tools and processes that needed to be implemented within Diesel,” he said, citing changes being made in the way the U.S. operation handles planning and buying.

Birkhold and Diesel are likely to face challenges in the U.S. market on several fronts. Economic uncertainties have already taken a toll on the apparel and fashion industry. So far, Birkhold believes Diesel has fared better than its competitors.

“Everybody is feeling the crunch from an economic perspective, but our same-store sales are up substantially over where we have been, driven off of great product and new product extensions,” Birkhold said. “We know we’re outperforming the overall marketplace.”

Diesel’s competitors are also bulking up. VF acquired Seven For All Mankind in July and has set a goal of opening some 100 stores over the next five years. The company also has been expanding into footwear and accessories. In addition, True Religion has prioritized retail and product expansion.

Birkhold welcomes the competition, acknowledging that Seven For All Mankind has a “stranglehold” on the premium denim segment. Nonetheless, he believes Diesel is better positioned because of its diversity. Denim represents 40 percent of the business, with the rest coming from an increasing array of products ranging from intimates to fragrance to its most recent home goods collection.

“It will take these brands a long time to get to what Diesel already has, which is the full lifestyle,” he said. “You can’t go from being a flat denim brand with a huge wholesale distribution to being a lifestyle denim brand with a niche retail distribution unless you have the product engine to fuel it. That’s where I think Diesel is differentiated.”

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