NEW YORK — Sitting in the front row at Calvin Klein’s women’s wear show in February, Bruce Klatsky, chairman and chief executive officer of Phillips-Van Heusen, could barely disguise his glee at sewing up the deal to buy the design house for $430 million.
But the news last weekend that Klein has sought professional help once again for substance abuse most likely wiped the smile right off of Klatsky’s face.
Brand experts, analysts and retailers on Monday played down the actual impact of the designer’s recent exploits at a New York Knicks basketball game and his decision to seek treatment. But privately, they admitted it couldn’t have come at a worse time, especially for Klatsky.
Since PVH closed its deal to acquire Calvin Klein Inc., Klatsky has acted quickly on his plans to expand the high-end designer’s name into PVH’s home turf — the better-priced sportswear arena — with ongoing negotiations to launch a women’s collection through a license under the cK Calvin Klein label. But just as PVH is targeting a Calvin Klein for the masses, the designer has found himself becoming the center of a less attractive kind of mass public attention.
Responding to widespread inquiries, Klatsky expanded in a statement on the transition of CKI into its fold, saying, "Simply put, these two months together with Calvin Klein Inc. and with Calvin have gone precisely as I had hoped, and I’m extremely pleased with the direction in which the business is going."
Klatsky did not directly address Klein’s decision to seek treatment, or his recent behavior.
Klein’s on-court approach to Knicks player Latrell Sprewell on March 24 has drawn worldwide attention, with stories appearing in publications from England to Australia, but also closer to home with unflattering photographs taken during the incident showing up in U.S. magazines including People, In Touch and even supermarket fodder like The Globe. It has led to a public relations nightmare for the company that bears his name, although many observers say it is unlikely to have any lasting impact on the integrity of the Calvin Klein brand. On Monday, it had no impact on PVH’s stock, which stayed stable throughout the day.Most of Klein’s associates are counting on the event to simply blow over. They doubt there will be any noticeable decline in sales, citing the numerous controversies that Klein has instigated in the past that have only served to propagate the designer’s celebrity. But even Klein himself has made claim that designer brands are not invincible, since the denigration of the value of his trademarks was his central argument when he sued his longtime jeans licensee, The Warnaco Group, and its former chairman, Linda Wachner, three years ago over perceived damages to his business.
"There’s no question this changes the way customers will look at the designer collection," said one prominent retail fashion director, who spoke on condition of anonymity. "Designers used to be just names on a label, but today, it’s their personality that sells product. This could be like what happened at Martha Stewart."
Conversely, Allan Ellinger, senior managing director of MMG, a consulting firm, said despite the worldwide exposure, "There’s a very small percentage of consumers who’ve even seen it. Consumers have short memories. This is just another piece of p.r. Look at Steve Madden. He’s in jail, and consumers have already forgotten about it."
Of course, Klein’s behavior at the basketball game was widely viewed as harmless and his admission to seeking counseling is seen as a positive step in terms of repairing any damage to his image. Yet the recent images of Klein make a much more lasting impression due to the increasingly competitive field of celebrity-oriented publications and television programs. Now, as part of a publicly-traded company, Klein’s problems are bound to get more scrutiny.
To put the incident in context, an altercation under similarly unusual circumstances last June, when Klein verbally insulted Joan and Melissa Rivers at a benefit in Cannes and then fell on the floor, received substantially less attention. Klein has acknowledged in the past that he has been battling an alcohol and drug problem for more than 30 years. In a statement released Friday, Klein said he had recently stopped attending meetings regularly to deal with his substance abuse issues and that he had recognized the problem.
Klein’s current situation has recalled to many people the circumstances of Yves Saint Laurent, whose career was widely marked by incidents of drug abuse, but with no noticeable impact on sales."Even if Yves Saint Laurent’s drug abuse was regrettable, and even if I’m violently opposed to all drug use, it never had an impact on the business or the brand," said Pierre Berge, Saint Laurent’s business partner of 40 years, on Monday. "It remained a private problem. On the other hand, if a drug problem manifests itself in public, that can have a serious impact on the brand."
As a private company, CKI was for the most part able to keep Klein’s personal problems separate from the business. But as part of PVH, his ongoing role there has been the subject of mounting speculation. As reported, Klein told several friends and retail supporters immediately after his fall runway collection that it would be his last one, scaling back his role at the company much further than was expected.
PVH has since said that Klein will continue to serve as the consulting creative designer with as much influence on the collections as he likes. Klatsky said in a statement following the designer’s announcement last week that he would "look forward to continuing our very productive working relationship.
"We have been moving forward rapidly to develop and implement key strategic business directives with the Calvin Klein business, and Calvin himself has been centrally involved in this process in our first two months together," Klatsky said in his statement Monday. "He has played a particularly important role, for example, in ensuring that the transfer of the men’s and women’s collection production to Vestimenta doesn’t skip a beat, including how we effectively manage this business internally."
Klein also has been involved in the decision-making process in what Klatsky described as "a very intense competition among those companies seeking to become our women’s better sportswear licensee," which remains on target to have product developed for fall 2004.
"We are also on track with several other initiatives," Klatsky said. "These include our plan for opening jeans stores in Europe, where we had successful openings in Rome and last week in Moscow, with Amsterdam coming on Wednesday and freestanding stores coming soon in China and other Asian markets; increasing our CK distribution plan in Asia with our partner, Club 21; and working closely with our licensing partners on a unified, energetic effort to support our unparalleled brands."It is believed that Klein has a three-year consulting agreementwith Phillips-Van Heusen where he’s required to spend a minimal number of days per year working at CKI. As part of the agreement, Klein can give design direction, make appearances at special events and give any and all the input that he wants.
Analysts who cover PVH said the existing management at PVH and CKI should enable the company to weather the adverse publicity.
Lee Backus, an analyst at Buckingham Research, observed, "Basically, I don’t see Calvin going to rehab will have any impact on the CKI business because there is a very strong management team and design team at CKI."
Ironically, the analysts also felt the company could fare fine without Klein’s daily input, as long as he continues to provide some inspiration to keep the line in-tune with the Calvin Klein "voice and focus." Some analysts were even under the impression that Klein had been winding down his role for some time.
"I don’t think [Klein’s alcohol problems] will hurt the business," added Marc Gobé, president and creative director of DG Worldwide, a brand identity consultancy. "I think everyone knows Calvin is a creative genius and a very sensitive person and like any creative person, you have a dependence in your life. That’s part of the equation. The brand is one of the most powerful in the world, and people are forgiving, particularly with designers and creative people. It’s an expected part of the lifestyle."
Peter Arnold, executive director of the Council of Fashion Designers of America, said Klein is still expected to serve as a co-host for the organization’s annual awards night on June 2.
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