By  on September 4, 2003

NEW YORK — Michael Kors has been rumored for several months to be among the designers rushing headlong into the better market for 2004 — yet another label among the herd — but his true ambitions are much greater: He wants to become a $1 billion department store player.

The designer confirmed in an interview on Wednesday that Michael Kors Inc. will launch a new, lower-priced collection called Michael for fall 2004 retailing that exceeds the typical better-range concept both in terms of its scope — launching women’s, men’s and a host of accessories at the same time — and in terms of price point, which is closer to the entry level of bridge.

At the same time, the company is closing its existing bridge business called Kors by ending its license with Onward Kashiyama USA following holiday deliveries.

Although several companies had approached Michael Kors about bringing the brand into the mainstream, including recent reports of discussions with Jones Apparel Group, Kors is instead making a substantial investment in infrastructure and personnel to develop the line internally with funding by its new parent company, Sportswear Holdings Ltd. Lawrence Stroll, co-chairman of Michael Kors with his partner, Silas Chou, as they are in Sportswear Holdings, said the company was spending “several hundred million dollars” on the development of Michael, but he would not give a specific figure.

Already, Kors has brought on board a team of well-known executives to manage the launch and opened an office in Hong Kong to facilitate some production, working there with Magdalena Lee, the owner of Magashoni Apparel Group. Anne Gorfinkle, a former Kors designer who was vice president of design for DKNY women’s jeans and active at Liz Claiborne Inc., has rejoined the company as senior vice president of women’s design, and Dean Micklewhite, who was senior vice president of DKNY men’s design, joined as senior vice president of men’s design.

Stephen DiGeronimo, another Michael Kors collection veteran who left to design a signature collection in the Nineties, also has rejoined as women’s design director, and Melanie Reichler left Tommy Hilfiger to become vice president of production for the new lines.

With the flurry of activity that has surrounded the better market since Jones and Polo Ralph Lauren Corp. went to battle over the licensed Lauren collection, plus the companies’ respective plans to make their own ways in better sportswear next spring, virtually all of Seventh Avenue is attempting to elbow in on what designers and executives consider to be a vast void for inexpensive clothes with a little more style in a market where basics from Liz Claiborne and Jones hold much real estate. Tommy Hilfiger is bringing his H collection to Federated Department Stores, Calvin Klein Inc. is launching a better concept for women with Kellwood Co., Nicole Miller and Marc Jacobs want in on the game and even Claiborne is pushing its own version of Realities.“Let’s cut to the chase,” Kors said. “It doesn’t matter what your pocketbook is, everyone wants to look thin and rich.”

The thinking behind Michael, which is officially referred to as Michael Michael Kors, is that Lauren’s problems and Jones’ claim that it had become a mature business are only the beginning of the story, perhaps just a footnote in the so-called “rush to better.” The reality, according to Stroll and Kors, is that the justification behind such a broad investment lies in the evolving nature of consumer shopping habits, where demands are higher for quality and lower for price, and the expected response of department stores, which is to differentiate themselves from the mass merchants with better product and design.

Looking back at the introduction of DKNY and its effect on the bridge category more than a decade ago, and then the launches of Lauren and Tommy Hilfiger in better career departments over the past seven years and their impact on Claiborne and Jones, Stroll pointed to these steps as indications of the next evolution for department stores, where a more educated consumer, acutely aware of fashion through magazines and the Internet, is now looking for a new generation of brands that can offer something more relevant to the runways at affordable prices.

“Department stores have to stop competing with the low-end business because there is no low end too low,” Stroll said. “They have to start catering to a more affluent customer by offering something new. It requires some thinking outside of the box, but they need to go a bit more upscale themselves. They need to distance themselves from the Targets, Kohl’s and Penney’s of the world, and there are not that many American designers who are not in those channels right now.”

Kors’ concept of “affordable luxury,” as he called it, is not vastly different than the philosophy behind his 22-year-old signature collection, with its polished American sportswear look. The bridge line, Kors, which was developed with Kashiyama, extended his reach into department stores over the past decade with a business that reached about $50 million, but its prices tended to approach the realm of designer and often threatened to compete with looks from the signature line. The company opted not to renew its license following the resort collection, although Stroll pointed out that its long-standing relationship with Onward Kashiyama will continue for its Japanese business and stores.Stroll said he did not know Kashiyama’s plans for a Kors bridge store that opened in 2001 at 159 Mercer Street, but that it would not continue as a Kors store. A spokesman for Kashiyama, which has been paring its other American businesses this year, did not return calls on Wednesday and messages left at the company’s New York office were not returned.

The line also was discontinued partially in concern that the Michael line might be too close in concept and price to Kors. The new line is similarly described as based in sportswear with prices expected to retail in women’s wear from $195 to $395 for a jacket, $95 to $195 for a dress, $69 to $149 for pants and $59 to $159 for knitwear. It’s a bit higher than most better concepts in the works, and lower than bridge, which makes Michael somewhat difficult to define — also part of the point, according to Kors and Stroll, since they are looking to break new retail ground with the collection.

“Ten years ago, I don’t think you could have gone to a broader audience with a taste level as sophisticated as this and have them understand it,” Kors said. “Now we can break the rules, and instead of dealing with gold range, designer or bridge, etc., it’s simply the best clothes that a customer can get at this price. I never understood the semantics of it.”

Michael is “not fast fashion,” as Kors said, nor will it be “stone-washed chinos,” according to Stroll. “It will be khaki pants you can wear with stilettos,” Kors said.

“The real reality is that it is not about the price, it’s about the best thing for each category,” Kors said. “I wear everything from a Savile Row suit to Old Navy. The customer today wants the best product at the best prices and I certainly have no snobbery about that reality. It’ll be nice to see those people outside of 10021 [Manhattan’s upscale Upper East Side]. There are women around the country, around the world, who have that sophistication. We have a population of people who, as they are getting older, are staying young. A 50-year-old mom today wants to look like Rene Russo, not a matron. You can tell when Nan Kempner is buying suede catsuits.”The company will develop its men’s and women’s sportswear in-house, while it plans to secure several licenses or partnerships in the coming months in categories like watches, dress shirts, swimwear, belts, shoes, coats and neckwear, so that all of the product will launch for fall 2004 retailing, pegged to the development of its own in-store shop concept and an extensive advertising campaign, Stroll said. The point is to launch with critical mass in an initial rollout of about 250 department and specialty store doors, giving Michael an all-encompassing presence on the scale of Polo in men’s wear or DKNY in women’s.

“I strongly feel this is a $1 billion business, if not more, in the near future,” said Stroll, adding that the company chose to make a full-scale invasion with such a broad range of product categories as part of its mission to fight for the best retail floor space available.

Kors has always had visions of bringing his product to a wider audience, considering his signature collection also is estimated to generate about $50 million in annual sales, but was never able to pursue such a goal without a significant investment from his numerous backers in the past. Since Stroll and Chou acquired the minority stakes held by Kashiyama and LVMH Moët Hennessy Louis Vuitton for roughly $100 million, their majority ownership has set off a chain of events for the company, including the introduction of new top management and investment in retail plans for new collection stores.

Describing the Michael launch, Kors and Stroll talk on the same wavelength about its design and the future of the brand, both with a respect for the other’s expertise, product and business.

“I’m not freaked out about a size 12,” Kors said, “and he knows a beautiful sweater.”

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