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The World, According to Tory Burch

With 72 international stores under her belt, the designer is further expanding her retail fleet.

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Tory Burch has come a very long way from her original Elizabeth Street store in New York’s NoLIta.

Now with 72 international stores under her belt, Burch is expanding her retail fleet with openings in São Paulo, Bahrain, Beirut, Dubai, Kuwait, Rio de Janeiro, Munich, Istanbul, Boston, Mexico City and Shanghai, as well as doubling the size of her Beijing boutique. While this may seem like a lot of brick-and-mortar activity for the fast-growing firm — whose Internet site is its number-one store — Burch said the growth is actually conservative.

“I think it’s very measured. There’s a lot of strategy and thoughtful planning that goes into where we open and how we go about going into each new territory,” said Burch, chief executive officer and designer, at her colorful West 19th Street offices. “We really look at who’s shopping at our current stores.”

For example, the lifestyle company chose to open three stores in Brazil because of the influx of Brazilian customers who shop her Miami and New York stores. “We have a big Brazilian customer [base]. We thought that might be a great place for us to go,” said Burch. A Tory Burch boutique opened in May in São Paulo at Iguatemi, a second opened Friday at JK Iguatemi and a third is planned to open later this year in Rio. With Brazil’s flourishing economy and the launch of many new brands, the country is viewed as an important market for Burch, as well as global fashion retail as a whole.

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Brigitte Kleine, president of the company, added that it takes about 18 months to get a location ready for a retail introduction. “We want to make sure we have the right talent and the right infrastructure,” said Kleine. When Burch enters a new region — often after wholesaling at stores within the territory — the company will open several stores at a time. “If you’re investing in infrastructure and the time, you want to make sure the market is viable for several stores,” said Kleine, who joined Burch a year after the company was launched at the designer’s kitchen table in 2004. The growth has been dramatic: Market sources estimate the lifestyle brand will generate retail sales exceeding $800 million in 2012, which includes retail and wholesale sales and sales of licensed products.

Using a controlled approach, Burch explained that a lot of the retail activity — some 25 new stores will open this year — has to do with being patient and waiting for the right location to open up. The executives said they design each Burch store differently and take into account the local culture, customs and customers. “Once we learn the business, we think about product specifically for them. For instance, swim in Brazil will be a little bit of a different cut,” said Burch. For the Brazilian customer, she’ll use a little less fabric and produce a sexier cut.

Burch started designing swimwear in 2004 for the own boutique (and eventually, boutiques), and, for resort 2011, expanded it to wholesale accounts. Swimwear is manufactured in-house and is now available at Tory Burch’s stores, its wholesale accounts and at toryburch.com, where the bulk of the swim business is done.

Burch approaches each international market differently. Sometimes the brand will enter a market with a partner, and other times it will go on its own. “It depends on the territory. We like to do it on our own if we can. But certain countries we feel it’s better to do with a partner,” Burch said. For example, in Japan, the brand has had a partner since 2009 (Look Inc.), and it’s been going very well. For China, the firm flying solo.

“It’s a learning curve,” Burch said. “China is a massive opportunity,” added Kleine. “That’s where patience really pays off. We have a massive plan. China is tough. It takes time to find the right real estate and the right team. Finding talent locally is a challenge.” Lydia Forstmann oversees international expansion in Asia and emerging markets as senior vice president, international and licensing. At present, 80 percent of Burch’s business is generated in the U.S., and 20 percent is international.

Over the past few years, Burch has developed its presence in Asia, starting with Japan, the Philippines and Korea, and then Hong Kong, China, Taiwan and Thailand. This spring, the firm opened a flagship on Orchard Road in Singapore, its first major entry into Southeast Asia.

The 2,500-square-foot Singapore unit features a series of rooms that evoke a residential feel. The interior is a modern take on Burch’s colors and styles, and the store’s sleek furniture and cubelike fixtures — orange lacquer square tables and linear brass shelves against clean white walls, concrete and light oak floors — were inspired by artist Donald Judd.

Since entering Greater China in late 2010, with a store at Hong Kong’s IFC Mall, Burch has opened three additional stores in the region: Shin Kong Place in Beijing and Harbour City and Times Square in Hong Kong. It is doubling the space of its Beijing store to 2,100 square feet by taking over the space next door. It also plans to open a store in Shanghai by the end of the year. Asked how many stores they’d like to open in China over the next several years, the executives didn’t have an exact number. “We want to learn it and figure out how it works before we just expand. We want to understand the customer there and the local traditions as well are important,” said Burch.

For the most part, she has found that the ready-to-wear line, footwear and accessories generate similar responses across different regions. “What we’ve learned is that each place is very different, although bestsellers are very similar,” said Burch. She said the Reva ballerina flat sells well around the globe. Kleine added that there are a dozen footwear styles that are international bestsellers, while handbags have been picking up momentum around the world, too.

The Middle East presents another significant opportunity for the Tory Burch brand, where it has partnered with the Chalhoub Group. After opening in the Dubai Mall in October, the company will roll out stores in Beirut, Kuwait and Bahrain later this summer, and in Turkey at the end of next year. Burch said she’ll design some special items for the Middle Eastern customer, where longer lengths are prevalent. “A lot of our things translate. She likes color, she likes decorative and embellishments and is not scared of prints. For us, prints are such a big part of our DNA,” said Burch.

Daniel Romualdez, architect and interior designer, has collaborated with Burch on all the boutiques globally since the company’s inception.

To supervise some of the international business, Evelyse Britto was hired as São Paulo-based managing director for Brazil, and SanYan Ng was tapped as Hong Kong-based managing director for Greater China. Elisa Dal Pos serves as vice president, general manager of Europe and Middle East.

As for its European business, the company sells to 250 accounts, including Harrods, Harvey Nichols and Net-a-porter. It also has freestanding stores in Rome (Via del Babuino) and London (New Bond Street), and plans to open a boutique in Munich in 2013. Right now, there are no stores in Paris, although Burch would love to have a store there if the right location opens up. The company recently opened a 6,480-square-foot showroom in Milan, but doesn’t have a store there yet.

Kleine added that despite the serious economic problems that are impacting Europe, “we’re pleased with our performance. We’re very cautious about Europe.” “And everywhere,” added Burch. “We’re always cautious.”

In January, Burch launched an accessories-only shop, which is smaller than the typical Burch store. Those stores feature handbags, footwear, costume jewelry, eyewear, scarves and small leather goods. “It’s an interesting concept. The footprint is smaller. It’s in Times Square in Hong Kong,” said Burch. The stores measure around 900 square feet and are “carefully curated,” she said. The company has a pilot store in San Francisco. One city Burch is looking at for an accessories-only boutique is Georgetown in Washington.

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Burch has 49 boutiques in the U.S. and 23 shops internationally. Sixty of the 72 shops are owned by Burch, and the others are partnered. All the stores in the U.S. are owned by Burch. At present, the best-performing stores are in Ala Moana, Honolulu, and Waikiki, Hawaii, as well as the 8,135-square-foot flagship at 797 Madison Avenue. The company has more than 1,000 points of distribution worldwide. Slightly more than 50 percent of the business is generated by its freestanding stores and Web site, and the balance is its wholesale distribution. Burch said she’d like to open another store in New York, where there are presently three units, and is eyeing locations in Vancouver and Calgary, after opening a store in Toronto this spring, which is doing well. The company is also opening stores in Indonesia and Malaysia.

The ownership issue at Burch continues to provide market intrigue. Burch said she’s happy with her Mexican business partners, Tresalia Capital, a Mexico City-based, family-owned and -operated investment company, which bought a minority interest in her company in 2009. “They’ve been great partners. They trust our management. They’ve been a great fit for us. They have faith in our team. We all share a vision that is similar,” said Burch, whose company employs 1,800 people. But the bigger question concerns her ex-husband, Christopher Burch, who, along with Tory Burch, are majority owners in the firm. Tory Burch said there is no news on the sale of her ex-husband’s stake. As reported, Barclays Capital was hired to sell off the portion of the company still held by Christopher Burch.

While the company is well positioned in multiple categories, there are still a few businesses Burch would like to pursue. “I would love to do a Sport concept,” said the designer, a sports enthusiast. She said the line would be for active participation in running, yoga, tennis and golf. While “there’s nothing in the works,” she hinted that she’d like to open a freestanding store aligned with the Tory Burch model. Eventually she’d like to do a home collection, but acknowledges it’s a tough business. “We’ve tried some home for gift-giving, but not as a collection,” she said. Burch said she would eventually like to do costume jewelry and is looking into watches.

“From Day One, we’ve covered all the categories, but now we’re looking back and putting more emphasis on each one,” said Burch, noting that she prefers to produce the categories in-house, with the exception of eyewear, which is licensed to Luxottica, and fragrance, which is licensed to Estée Lauder. “Being that we have a long-term view of the brand, it’s best to do it on our own to protect the brand,” said Kleine. The company manufactures primarily in Asia, as well as Brazil, the Dominican Republic, Peru, Europe and the U.S.

Interestingly, Burch has built a major business without doing any actual advertising. But that is about to change. When it launches its “Tory Burch” fragrance in fall 2013, it will have an ad campaign produced by Laird + Partners.

Burch launched her business in February 2004 with a 2,000-square-foot store at 257 Elizabeth Street and an online boutique — clearly an unusual way, at the time, to launch an apparel brand. At the end of June, the company will expand its e-commerce operation to 30 countries, as reported.

Discussing the overall state of Burch’s business, the designer said, “We feel business is good. We’re a very lean company.” She explained that in 2008, when the recession hit, their goal was not to lay anyone off, a point of pride when realized. “That was an exercise in restraint, “ she said.

Social media continues to be a key vehicle to build the brand. Facebook, Twitter, Pinterest, Four Square, Weibo (a hybrid of Facebook and Twitter in China) and the Tory blog are a few of their social-networking initiatives. “It’s direct-market feedback. For Twitter, you’re really hearing what the consumer is saying,” said Burch. “I do Twitter and our team does Facebook. I get a little help on Twitter.

“If there’s any complaint, generally, we want to hear it because we want to fix it,” she said. There’s also a lot of positives, too. “If they have a positive experience, we can congratulate the store and the employees and give them the recognition,” said Kleine. “It’s a great tool for us.”

Burch said she’s happy with the current breakdown of accessories to rtw at the firm and in their stores, and would like to keep it at the same ratio. Accessories and footwear account for 75 percent of the business and rtw is 25 percent. “Accessories is stronger, and is more widely distributed and has more categories: handbags, shoes, tech accessories, scarves, belts, jewelry,” said Burch. “The accessories have grown in the past two years significantly because of our handbags.”

With all this growth, the inevitable question is whether Burch expects to go public anytime soon, following in the footsteps of Michael Kors.

“Not that I don’t love what Michael is doing — and what that company has done is extraordinary,” the designer noted. “But for us, going public is not on our horizon.”

 

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