By and  on September 19, 2006

NEW YORK — Federated is taking home the Oscar.

Federated Department Stores Inc., Oscar de la Renta and Kellwood Co., which makes the licensed O Oscar sportswear collection, will today unveil an exclusive deal to relaunch O Oscar de la Renta, this time as a better line, for exclusive distribution in Macy's.

This is de la Renta's second attempt to make it with O Oscar, after the designer abruptly pulled the plug on the then-moderate sportswear collection last year. O Oscar, the better incarnation, will be sold exclusively at Macy's nationwide come February. The spring 2007 launch will reach about 150 doors across Macy's seven divisions, as well as macys.com. Senior Federated executives project expanding the collection to 350 to 450 doors — about half of Macy's units.

And de la Renta's commitment to Federated comes with a sweet payback — preferential floor treatment with special shop-in-shops. The terms of the agreement were not disclosed, though the exclusive is expected to be long-term.

"I have always been reluctant with exclusives," de la Renta told WWD at the O Oscar showroom Monday. "But with the amount of stores [Federated] has, it makes total sense."

Since Federated bought May Department Stores in a $17 billion deal last year, the transformed Macy's is large enough to coax such exclusive relationships. Earlier this month, Federated transformed about 400 May-owned stores, including Marshall Field's, into Macy's, bringing the number of Macy's units to more than 800.

Terry Lundgren, Federated's chairman, president and chief executive officer, said the O Oscar agreement is part of the retail giant's larger strategy to give Macy's shoppers destination brands they cannot find at the competition.

"We will have more exclusivity coming across the board," he said at the O Oscar showroom. "With the size that we have today, we can be the unique supplier and all three of us can have a financially successful business. Think about it — 450 stores is as much distribution as many brands ever have."

While Federated and de la Renta executives declined to project sales volumes, one industry source estimated that when O Oscar reaches 400 doors, it could easily rake in $100 million a year.In his 40-plus year career, de la Renta has often expressed a desire to widen his customer base, but he maintained now could be the best time to reach that goal. "Today's woman shops everywhere," he said. "You see a woman with a $5,000 jacket with $20 jeans."

Kellwood and de la Renta launched the O Oscar line for fall 2004 as a moderate line targeting 600 to 700 doors at such retail conglomerates as Federated, May Co., Belk and Saks Inc. At that time, the designer said the better market was just too saturated.

"There is a consumer in moderate who wants to buy designer product as well, and I want to be the first to do it," he said in February 2004. But the line was pulled from department stores last year after disappointing results, with plans to relaunch it as a better line.

According to an industry observer, the problem with O Oscar's first attempt was that it had little connection to the designer's aesthetic and wasn't marketed that well.

"I am not a minimalist designer and there's only so much you can do in terms of ornamentation," said de la Renta of his choice to up the ante from moderate to better. "We had explored the moderate idea, and realized that we could not do so many of the great details and you would lose the identity. Here, we can afford to offer the great product at a great price."

Robert C. Skinner, Kellwood chairman, president and ceo, conceded that, "We had a very high-minded goal of bringing Oscar's aesthetic to the moderate floor. We needed to be in the better arena."

Kellwood, whose portfolio largely consists of moderate brands, plans to recruit more designers to do secondary lines, bring additional better lines to its largely moderate portfolio, and perhaps even join in more exclusive agreements. Deals such as the O Oscar one with Federated could lift the image of the apparel manufacturer, which may have a $2 billion business but is largely viewed as lacking exciting brands to generate growth.

"Our association with Oscar is as important as anything we do as a company," Skinner said. "We have a number of initiatives that will meaningfully increase the profitability of Kellwood, and this is one of them."Initially, Kellwood's plan to relaunch O Oscar was slated for spring 2006, but was pushed back by a year. "The delay was because we wanted to get it right," Skinner said. "It's always better to be right than to be fast."

O Oscar sportswear will retail from $199 to $229 for jackets, $79 to $99 for pants, $99 to $139 for skirts, $99 to $129 for sweaters, and about $169 for skirts, $49 for knit underpinnings, and $79 for shirts. By contrast, the initial moderate O launch had price points from $36 to $86 at retail.

The collection is as pretty and feminine as the main designer line, with much attention to detail, from ruffled blouses to eyelet and embroidered dresses. Looks include a cotton voile ruffle blouse with a contrast trim, a daisy embroidered shirtdress, a black-and-white cotton voile dress with lace insets, and a ruffle neck sweater jacket.

De la Renta said he designs with one mind and similar threads will often run through his designer and better lines. "I think I cannot design in two ways," he said. "There's always a reflection of everything we do. It is just a question of price range. This I consider for an aspirational customer, who knows the brand and who in the future might be able to afford Oscar [the main collection]."

Lundgren said the line fills a void on better floors, explaining its offerings are more feminine. "It is fashion. It's not just basic clothing and it's not a jeans line."

In fact, Lundgren called the better area the fastest-growing division at Federated.

"Our better business is getting stronger and stronger," he said. "It's getting stronger because we have more choices today."

When de la Renta was dabbling in moderate sportswear, other designers were charging onto better floors, with mixed results. Calvin Klein white label and Michael Michael Kors had challenging beginnings, and both have since tinkered with their formulas to infuse the lines with more of the designers' fashion aesthetic. Last year, Federated and Tommy Hilfiger decided to drop their exclusive H better collection.

O Oscar will be another designer line vying for success in this difficult environment. O Oscar will now sit with T Tahari, also exclusive to Federated; Lauren by Ralph Lauren; Michael Michael Kors, and Calvin Klein white label, also made by Kellwood and just relaunched.De la Renta said he picked up the phone and called Lundgren, his friend from the retail magnate's Neiman Marcus days. Lundgren didn't miss a beat and suggested the exclusive relationship.

"This was a real collaboration among Kellwood, Federated and Oscar's team," Lundgren said. "Everybody came together to make sure the product looks like Oscar, helps us fill a void on our floor, and Kellwood figuring out how we are going to do this with the fabrics and detailing at the right price point.

"We are starting with 150 doors, which is no small commitment," he added. "You have to be able to commit to volume to get the pricing."

De la Renta's main business has grown immensely in the past few years. The designer has been able to widen his recognition by opening Collection units on Madison Avenue; at the Americana in Manhasset, N.Y.; in Bal Harbour, Fla., and in Las Vegas. His company also launched a bridal collection in-house in May, and entered the e-commerce business earlier this month.

O Oscar already has licenses for sunglasses, handbags, shoes and bedding. Alex Bolen, Oscar de la Renta's president and ceo, said O Oscar could lend itself to a fragrance, and he even dropped a hint that men's wear was on the horizon.

Skinner said Kellwood and Federated are still working out the marketing details, though they are planning to stage special events to draw attention to O Oscar. De la Renta's first appearance will be at Macy's Herald Square in late February.

"Oscar agreed to go to 150 Macy's stores," Lundgren joked.

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