NEW YORK -- Arnold Cohen, London Fog Corp.'s chairman and chief executive officer, is stirring up a storm in the outerwear business.

Cohen, who stepped into his new job eight months ago after leaving as president of J. Crew, is taking the bold but risky stance of trying to reverse the promotional frenzy that has dominated coat retailing over the past decade.

Cohen is spearheading what he calls a "full-price every day campaign" with the firm's signature label, demanding that retailers not run price-cutting promotions on the label until Dec. 8.

"The raincoat industry has been in a malaise, and we are looking to inject some discipline into it," said Cohen, noting that he is restricting his promotional business to the less-expensive Towne brand. "And because of who we are, we can take a stand."

Cohen said his aim is to revitalize the brand -- which he says garners a 60 percent market share of women's raincoats at department stores -- as well as to change the course of coat retailing.

Not surprisingly, Cohen is facing an uphill battle with many retailers, particularly buyers at major department store chains, who claim that the full-price strategy won't work with the promotion-conditioned consumer, and fear they'll be stuck with inventory. Retailers say they use promotions to increase coat sales and to boost store traffic.

The only major exception to this established promotional stance appears to be Dillard Department Stores, Little Rock, Ark., which in recent years has turned away from promotions and has concentrated on what it calls an "everyday value" price, with the idea that in the long run the customer will realize the value.

"It's a heavily charged issue," observed one industry source, speaking anonymously. "It pits one of the most powerful, dominant outerwear makers against the major retail forces and their way of doing business. In a broader sense, it challenges retailing in the Nineties."

The strategy has received the backing of some top-level executives in the industry, though, who agree with Cohen that the discounting scenario has created an unhealthy environment that cuts into potential profits.

"It's a very gutsy strategy. If I were running the brand, I wouldn't let it be discounted the way it has been. You have to develop an integrity with your customer," noted Allen I. Questrom, chairman of Federated Department Stores. "Is it going to be successful? I don't know, but it will take time, at least two years."Andrew Jassin, a retail/apparel consultant, said: "London Fog needs to take a stand on this issue. In the short term, they may lose some ground, but in the long run, they will probably gain it."

Cohen and other sources said Dillard's top officials are also backing the plan. Company officials did not return phone calls.

But plenty of other people, particularly buyers, are staunchly against it, with some describing Cohen's tactics as "intimidating." As part of his repositioning strategy, Cohen is also telling retailers how they should buy the line, including color and assortment of styles.

"It used to be a partnership between retailers and coat makers, and Arnold Cohen is changing all that," complained one coat buyer. "I just think the London Fog coats are just going to sit and not sell. What is going to make the consumer buy that coat when other lines are being promoted?"

"To try to do a regular business and convert consumers is impossible," bemoaned another coat buyer from a Midwest department store chain. "As of Thanksgiving Day, there are no sacred cows. Even designer coats go on sale then."

By Dec. 8, he said, most of the coats are already reduced by 40 percent.

Since joining London Fog, Cohen has worked at a frenzied pace to revitalize the company, which has struggled with a heavy debt load stemming from its 1988 leveraged buyout from Interco Inc., St. Louis, as its key department stores sales of London Fog brand remained flat.

In the nine months ending Nov. 27, London Fog had earnings of $3.9 million, including a restructuring charge, against $4.9 million a year earlier. Sales moved up 14.4 percent, to $285.4 million.

Cohen's revitalization plan, which aims to double sales at the 39-year-old outwear maker to $700 million by 1997, has included the reduction of company personnel by about 5 percent and the elimination of its $20 million knitwear division. In January, it acquired Pacific Trail, Seattle, to bolster its position in all outerwear.

Cohen has also hired a new crop of executives, including John Varvatos, vice chairman and executive vice president, who had been the president for men's wear at Calvin Klein. Varvatos heads design and merchandising of products and brands sold under the London Fog name and is developing a bridge sportswear line under the Fog label. Sportswear is sold only at the company's 115 outlet stores nationwide.Other new hires include Sara Morris, formerly the fashion director at Carole Little, who is corporate fashion director, and Christopher Fiore, formerly senior vice president and general manager for The Gap Shoes division of The Gap, who is now senior vice president of London Fog's retail division, overseeing the company's factory stores. He will also spearhead the development of freestanding London Fog concept shops, which are still in the initial planning stage.

Another new hire is John Fisher, a former Wall Street bond trader, who is vice president of strategic planning and director of Pacific Trail.

Douglas Hillman was promoted from executive vice president of sales and marketing to chief operating officer when Cohen joined the firm.

As part of the brand's repositioning, Cohen has been combing though the company's 3,100 active accounts, eliminating those that don't fit into London Fog's new image and pushing them toward Towne. It's all part of what he calls his "good, better and best strategy," with Towne, targeted toward a younger, fashion-forward customer, at the bottom, the more classic London Fog in the middle and Fog at the top. The Fog label has taken a hiatus for the fall season, but will be relaunched for fall 1995. Cohen acknowledged that getting that message out to the retailing community has been a little difficult.

"The meetings with lower-level buyers have been a little testy," he admitted, saying the educational process will probably take about two years. "But I haven't sat with a general merchandising manager, president or ceo who isn't applauding."

Overall, Cohen said fall bookings have been up a bit, with men's business trending ahead, while the women's business, which is more competitive, has been slightly down.

One new account is Merchant of Tennis, an upscale women's and men's clothing shop in Los Angeles.

"We hadn't carried London Fog because we felt it had been a little tainted," said Jeff Green, president of the store. "But, with this new strategy, we are very optimistic, and that's why we bought the merchandise."

However, a major concern among many others is that the customer who is loyal to London Fog will only buy it on sale and will not trade down to the Towne label."My biggest concern is the acceptance of the Towne label," said the buyer from an upscale Midwest chain.As a result, he said, he is shifting dollars from London Fog to Towne to "limit risk."

Questrom noted that Federated has reduced its buy on the London Fog label for fall to reduce risk, and said he still expects to take some short-term decline in volume. But he noted that "if the company prices the coat well, and keeps quality high, the customer will [eventually] perceive the coat as a good value and will buy it."

Sandra Jones, coat and suit buyer for Jacobson's, Jackson, Miss., said the chain, partly because of the new strategy, is "dramatically reducing" its offering of London Fog.

"This is a tremendous undertaking, and it will be very interesting to see how it all plays out," Jones said.

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