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Margolis Cuts a New Pattern at Pepe

NEW YORK -- Jay Margolis is ready to get out the old and get in the new.<BR><BR>Touring the split-level showroom of Pepe Group, the London-based denim company whose fortunes he is guiding in the U.S., Margolis waved his hand, dismissing the product...

NEW YORK — Jay Margolis is ready to get out the old and get in the new.

Touring the split-level showroom of Pepe Group, the London-based denim company whose fortunes he is guiding in the U.S., Margolis waved his hand, dismissing the product that was created before he arrived.

“This is how we’ll merchandise it,” he said, pointing to the natural wood and dark metal fixtures. “But don’t look at the clothes.”

There is a lot that’s new at Pepe, from the 30,000-square-foot showroom at 485 Fifth Ave., decorated with red velvet drapes, a large aquarium and chandeliers made from bits of glass, to an ad campaign, a design direction and the merchandising.

Margolis left his post as vice chairman of Liz Claiborne Inc. in July to become chairman and chief executive officer of Pepe Jeans U.S.A. It happened following a shift in control of Pepe Group, which was taken over a year ago by apparel company investors Silas Chou and Lawrence Stroll, after the firm posted significant losses.

Margolis said he’s not concerned that Pepe is out to strengthen its identity at a time when the denim market is depressed. He feels that this is the perfect time to make a strong impact on the consumer.

“We believe strongly that the denim business here and in Europe has gotten stale,” said Margolis. “But I see it as an opportunity. We think a lot can be done from the fashion side, with different packaging and detailing. I think fabric and wash is where we’ll make denim different. There’s also a sportswear element, a fashion element, that’s going to drive the business.”

But consumers waiting to see the new Pepe look will have to wait until the summer line, in the showroom now, hits the stores. That’s the first collection that will reflect the overall approach of LeAnn Nealz, recently appointed director of design and merchandise for Pepe worldwide.

“Back-to-school is where we’re really putting the majority of our energy,” Margolis said. “There will be all new labeling, packaging and fits, new denim in different weights and treatments.”

“Basically, all we had here before were some jeans and shirts,” said Nealz, who travels to Europe and England frequently to keep ahead of trends. Now, she said, she’s using different fabrics.

“We use 14-ounce denim, but you can do a lot more in styling with the lighter weights, and it feels better on,” she said. In the denims, she said, the key weights for Pepe have been 10- and 12-ounce, as well as some blends such as cotton and rayon.

While looser-fit jeans, which have been the dominant style in the market for a few years, will continue to be important, Nealz said she’s seeing revived interest in tighter silhouettes. Under her direction, the line has integrated more coordinated sportswear pieces, such as bandanna-print cotton shirts, fitted denim dresses and knit tops. At retail, Margolis said he’d like to see in-store shops that have about 40 percent “replenishable” denim — core styles and treatments — and about 60 percent fashion. “We don’t want to overload the floor with a sea of perfectly folded jeans, with a screenprint here and there,” he said.

But Margolis isn’t totally against the “wall of denim” look — he just believes it should include a good amount of other merchandise.

“Even on that wall there should be a colored short,” he said. “We think the skirt business is important, and the dress business is important. We’re doing great rompers.”

There is indeed some perfectly folded denim on display in the prototype Pepe shop in the showroom, displayed on canvas-draped tables. But there are also new knits, T-shirts, shirts, skirts and dresses, in denim and various cotton fabrics. They hang from display stands made from antiqued metal. Margolis said the company is aiming to have 400 in-store shops with existing accounts, mostly in department stores, by the end of 1994.

Wholesale prices range from $28 to $34 for jeans, with an overall at $44, while shorts are $23 to $24.50, T-shirts are about $9.50, woven tops are about $24, and dresses are around $38.

Margolis said Pepe’s business with department stores has grown from its one major account with Dillard’s a year ago to include May Department Stores Co., the department store division of Dayton Hudson Corp. and Bloomingdale’s. It has also maintained its denim specialty store accounts.

The new ad campaign, which will break for back-to-school, will be a mix of print and outdoor advertising — but it won’t be using its former personality, Jason Priestley, star of the TV series “Beverly Hills 90210.” And unlike some denim companies, it won’t use sex to sell, either.

“The new campaign uses men and women,” said Nealz. “Of course, we hope that there’s an aspect to denim that is sexy, but to use sex is very Eighties. It’s the Nineties, it’s time to do something else.”

Margolis said Pepe’s volume in the U.S. reached $100 million in 1993, with “even more” in Europe. But he said he’s not looking to make that number much bigger this year. Instead, he plans to fine-tune.

“We’ve made a lot of moves. Now we want to get the consumer response,” he said. “We want to get the sell-throughs, but we also want to be around for a long time.”