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Federated to Roll Out Rag

Federated Department Stores and Tarrant Apparel Group have forged a distribution agreement to distribute American Rag CIE sportswear.

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NEW YORK — Federated Department Stores Inc. is adding American Rag to its stable of private brands sold nationally.

The plan is to push the brand’s casual sportswear, outerwear, jeans and vintage looks hard right out of the gate, since it’s really only recognized by the most fashion savvy of consumers, not the general population. According to officials, American Rag will be in 100 Federated doors starting in August and it could bring $100 million in retail sales within two years. It will be sold inside juniors and young men’s departments at Macy’s, The Bon Marche, Burdines, Goldsmith’s, Lazarus and Rich’s-Macy’s, but not at the Bloomingdale’s division, which does not emphasize juniors.

On Wednesday, Federated and Tarrant Apparel Group announced a multiyear distribution agreement, whereby Federated has the rights to sell American Rag CIE casual sportswear exclusively in the U.S. and Canada, confirming a WWD report that day.

“This is a big one for us,” said Terry Lundgren, Federated’s president and chief executive officer, in an interview. “Usually when we launch a new branded resource, it’s not that aggressive out of the box. But our divisions feel so good about American Rag that they’ve been quick to jump on it.”

As reported Wednesday, Tarrant has just become American Rag’s new co-owner, obtaining 50 percent of the voting rights and slightly less in equity. Tarrant, a manufacturer of private and branded goods, formed a wholly owned subsidiary called Private Brands Inc. for its acquisition. American Rag operates two stores in California — in Los Angeles and San Francisco. Three more U.S. stores will open in two to three years, possibly in New York and South Beach, Fla., and in Japan, there are currently nine stores, with five more seen opening by the end of this year. American Rag currently does about $50 million in sales in Japan.

For Federated, the decision to sell American Rag is another step in its “reinvent” strategy, molded by Lundgren. It involves building exclusive assortments, new in-store technologies, in-store shops, amenities and merchandise adjacencies to make shopping easier and faster, with the overall goal to differentiate Federated’s department stores and to be less dependent on national brands shared by many retail companies.

This story first appeared in the April 3, 2003 issue of WWD.  Subscribe Today.

Private brands at Federated, which include the successful INC, Charter Club and Alfani collections, account for $2.4 billion of Federated’s $15.4 billion in total annual sales.

“I think American Rag is known by the fashion consumer, but we clearly intend to do a lot more to market the brand,” Lundgren said. He said that INC “is one of the best-known brands among department stores today. Many people don’t realize it’s a Federated private brand, which is good. It took about three years to build the INC brand to the level it’s reached. We continue to create direct-mail catalogs, advertise the brand in magazines and in newspapers. With American Rag, it will be the same. It will take time.”

After the Federated rollout, “we will be introducing the line worldwide, probably starting in Europe and Japan — we’re thinking spring ’04,” said Gerard Guez, chairman and ceo of Tarrant. Abroad, “we will try to mirror what we’re doing with Federated by offering it as a private brand, maybe slightly tailored to local tastes,” Guez added. “It could be sold at Printemps or Harrods or El Cortes Ingles. Our intent is to develop it as a private exclusive brand with only one retailer in a country.”

Guez also said that the collection most likely will grow first with kids’ merchandise for the fall of 2004, and then with other products that are being developed, such as shoes and perfume. “We are going to be trying to create a whole lifestyle around American Rag,” Guez said.

“If you look back at ’02, especially in the department store space, one of the biggest criticisms was the state of sameness throughout. I think Federated’s desire to differentiate is one of their biggest goals.”

The American Rag collection will be grounded in a denim-based collection with vintage styling. Tops, T-shirts and woven shirts, as well as related outerwear will complete the collection. Some Federated stores will feature one-of-a-kind vintage items to enhance the brand. According to Lundgren, the juniors business is making a comeback and young men’s is among the best-selling categories now.

Federated, which signed a 10-year exclusivity pact with Private Brands, with three 10-year options, plans to put a lot of marketing muscle behind American Rag through in-store displays and a national marketing campaign, as it does with other private brands.

In juniors, prices will range from $39 to $59 for denim jeans and nondenim pants; $20 to $35 for fashion knit and logo T-shirts; $69 to $79 for outerwear and jackets, and $39 to $49 for woven shirts, fashion sweaters and active “hookups.”

In young men’s, prices will range from $39 to $59 for denim jeans and nondenim-cargo twill pants; $25 to $34 for graphic and garment dyed T-shirts; $59 to $79 for outerwear and jackets, and $45 to $49 for woven shirts and fashion sweaters.

Lundgren said Tarrant, a private label and branded manufacturer, will be the designers of the product: “We’ll leverage their design strength with our capabilities in production and obviously, the distribution.”

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