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Lucky On A Retail Streak

VERNON, Calif. — Lucky Brand Dungarees isn’t gearing up to be the next Gap. But the 13-year-old denim manufacturer, with its heavy dose of rock ’n’ roll Americana and Liz Claiborne’s deep pockets, is ramping up its retail...

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VERNON, Calif. — Lucky Brand Dungarees isn’t gearing up to be the next Gap. But the 13-year-old denim manufacturer, with its heavy dose of rock ’n’ roll Americana and Liz Claiborne’s deep pockets, is ramping up its retail team, updating the look of its stores and keeping up a brisk pace of expansion that will bring its current 68-store total to 100 by the end of 2004.

“It’s about us being able to survive in a business that we’re very different from,” said Gene Montesano, chief executive officer, in an interview at the company’s headquarters here. He noted the brand shies away from the latest fads in favor of classic jeans and westernwear.

Montesano said retail expansion is the company’s primary focus right now. It’s also a key move in diversifying the business. Its own stores currently account for a third of the total business, a level that generally allows Lucky to easily weather dips in the wholesale business. It also ensures that a retail base exists should more consolidations occur at the department store level, a segment that currently accounts for 25 percent of total sales.

“We’re not looking to be the biggest,” Montesano noted. “There’s longevity in being low-key.”

Low-key perfectly describes Montesano, the prematurely gray-tressed founder, as well as his longtime partner and friend, Barry Perlman, both of whom set out to create a brand in 1990 based on well-fitting jeans, superior customer service and a sense of humor — evident in slogans such as the “Lucky You” label sewn on every fly.

Since 1999, when 85 percent of the then-$60 million company was sold to Liz Claiborne Inc. for an undisclosed sum (Montesano and Perlman retained an 80-20 split, respectively, of the remaining 15 percent), Lucky’s retail business has mushroomed from nine stores to a planned 70 by year’s end.

Over the next two years, another 30 stores will bow, mostly clustered in and around Miami, New York and Chicago.

Analysts call the rate of growth “aggressive” and estimate that the company’s combined retail and wholesale businesses, including about 500 accounts, now notches sales between $150 million and $200 million per year.

This story first appeared in the October 2, 2002 issue of WWD.  Subscribe Today.

Montesano and Perlman would not confirm the figure.

Specifically, the founders have strived to make every store less like “cookie-cutter” mall units and more like unique “neighborhood” hangouts. Lucky stores today are pop-culture time capsules. Oversized American flags fly alongside Beatles and Bob Dylan posters, Jethro Tull and Jackson Browne album covers hang from display cases and rock fans can check out autographed electric guitars.

Dozens of shadow boxes decorate the store. One collage offsets faded jeans against bright-pink tie-dyed fabric that is woven with an obi-style belt and stamped with a fuchsia peace sign. Another displays a denim jacket emblazoned with red flowers against a Mexican serape backdrop.

The shadow boxes are also the stars of the company’s new print ad campaign. Single-page ads are set to run in November and December in Lucky magazine, Elle, W and In Style, among others. The ads mark Lucky’s return to print after two years of TV (on VH1 and Comedy Central) and outdoor (bus benches and buses).

Store fixtures have also been updated. Basic white shelves have been replaced by mahogany-edged cabinets. “We want it to feel like a neighborhood jeans store,” said Perlman. “Like some guy owns the thing and runs it.”

About 15 core denim fits in eight different washes and three fabrics retail from $68 to $100. Cut-off T-shirts are $48; sweaters are $68; and cargos, on new brushed-steel displays, are $68.

“Lucky Brand has done a really good job of knowing who they are and staying consistent with that,” observed Richard Giss, partner of the retail services group Deloitte & Touche. “They have remained faithful to their followers.”

Some analysts surmise Lucky’s retail push comes as the brand is hitting maximum growth in department store channels. “Department stores are consistently losing market share to specialty retailers and discounters,” noted Mitch Kummetz of Wedbush Morgan Securities.

Yet others point out Lucky has found several new ways to grow at wholesale. A distribution deal penned in April with Itochu Fashion Systems in Tokyo will bring the brand to 30 department and specialty retailers in Japan. Besides the already established leather, swimwear, kids and fragrance licenses, Lucky is stepping into socks for fall, currently wrapping up an accessories deal. Up next is shoes.

Ellen Schlossberg, an analyst at William Blair & Co., said a strong retail chain will only enhance the category expansion. “With respect to retail, it’s a great place for them to market the brand and generate more awareness and educate customers,” she said.

Although analysts could not speculate on sales estimates for the retail division, they do agree on one thing: The stores have been, well, lucky. Said Jennifer Black of Wells Fargo: “The stores have been on fire in this otherwise lackluster environment.”

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