If American men only know of Kathy Ireland doused in sunshine and water, and wearing a tiny yellow bikini on the 1989 cover of Sports Illustrated, they don’t talk to their wives and girlfriends enough.
This story first appeared in the May 7, 2012 issue of WWD. Subscribe Today.
In perhaps what is one of the industry’s most unlikely career trajectories, Ireland has gone from being the California girl of men’s fantasies to building a $2 billion brand with her name attached to more than 15,000 stockkeeping units, ranging from windows to panties, carried at more than 50,000 stores — all with the promise of simplifying women’s lives.
Quietly, for a company of its size and scope, Kathy Ireland Worldwide has become a licensing juggernaut, reaping profits from sales of products it doesn’t make. Roughly 30 licensees do that job.
Forbes estimated the company, which it valued at $300 million, pulls in $35 million to $50 million annually in royalties.
In five to seven years, KIWW president and chief operating officer Stephen Roseberry believes goods bearing the brand’s name could generate $10 billion in retail sales.
“At that point, you are talking about a company that looks very different from how it looks today,” he said.
The future firm will certainly more closely resemble the current company than its predecessors. When Ireland struck the seated pose for photographer Paolo Curto in Mexico that would become the cover of Sports Illustrated — which is still the magazine’s bestselling swimsuit issue — she was four years from launching her brand and five years from having the first of her three children. But the seeds of her formidable business success were already sewn. Spotted by an Elite Model Management agent at the age of 17, Ireland never felt she was born to be a model. From Day One in front of the camera, she was concerned that the lens soon would be turning elsewhere.
“I knew it was temporary. I knew that the look was always changing,” said Ireland, chief executive officer and chief designer of KIWW, about modeling. “I saw beautiful young people who didn’t make it in that industry just because their look didn’t happen to be the look of the moment. I knew this wasn’t going to be a lasting, secure place to earn my income. I always knew I belonged on the other side of the camera.”
Her modeling career was most notable for appearances in 13 consecutive Sports Illustrated swimsuit issues, between 1984 and 1996, with three times on the cover. That spawned a brief acting stint, in which she appeared in TV shows such as “Suddenly Susan,” “Melrose Place,” “Boy Meets World,” “The Larry Sanders Show” and others.
She didn’t exactly know what to do after modeling — a foray into brewing beer was short-lived — but she had an entrepreneurial zeal evident from a young age (at four, she sold painted rocks for nickels in her hometown of Santa Barbara, and at 11 she had a newspaper route). She wasn’t afraid of failing in pursuit of professional longevity.
More than two decades ago, long before it was commonplace for models and actresses to leverage their celebrity to make money with merchandise, she began assembling a team (Roseberry and Jon Carrasco, currently executive vice president and creative director, were two of the early hires) to support a Kathy Ireland enterprise that then largely consisted of exercise videos and spots with fitness tips syndicated to ESPN. She had a vision for it to become much more.
When he was brought on board at KIWW after being an executive assistant at Sterling/Winters Co., a management firm Ireland bought in 2001, Carrasco said Ireland had already set lofty goals to develop a prominent brand, and he was absolutely convinced she could meet them.
“She was modeling, but it was not something she wanted to do,” Roseberry recalled. “She definitely wanted to build a brand. She wanted to build something sustainable so she could address families.”
To underscore her commitment to families, Ireland in 1994 concocted a somewhat clunky mission statement: “Finding solutions for families, especially busy moms.” Subsequent mission statements — (“Finding solutions for people in business” and “Finding solutions for people in love”) — were etched into the company code in 2000 and 2006, respectively, to suit its broadening customer base.
Socks began to turn Ireland’s grand vision into a reality. John Moretz, chairman and chief innovation officer of sock maker Gold Toe Moretz Holdings Corp., which was acquired by Gildan Activewear Inc. last year for $350 million, contacted Ireland with the idea of modeling socks for his company (Moretz Mills at the time). Ireland no longer wanted to be just a pretty face and determined socks were the perfect product to prove that she could prosper beyond an obvious tie-in like swimwear.
“My modeling description was basically ‘Shut up and pose,’ and that wasn’t what I was interested in moving forward. I thought, If they’d be open to working with our team, we would be involved every step of the way, from design to marketing to distribution,” she said. “If they would embrace that, we might be on to something.”
Not everybody thought Ireland had hit on something special. “We hit the streets, knocked on doors. Doors slammed in our faces. Everything from ‘You’re not good enough, not smart enough, love the socks, but who needs you?’” recalled Ireland. “I didn’t realize it at the time, but one of the greatest gifts from that modeling career was all the rejection.”
Sporting-goods stores like Big 5 did eventually bring in the socks, where they found an audience. Soon, the socks’ solid performance was repeated at retailers outside of the sporting-goods arena as well. The socks had done the hard work of validating that Ireland could carry a brand.
Kmart and Wal-Mart came calling. The mass-market giants wanted Ireland’s brand exclusively. Ireland took to the Kmart executives, including former ceo’s Joe Antonini and Floyd Hall, and merchandise manager Rocco Ingemi, who later joined Ireland’s company as executive vice president of retail and brand management. She was also satisfied with how Kmart operated.
“We started by conducting factory surprise inspections. You learn a lot when you show up unexpectedly. My dad worked in labor relations with farm workers. I grew up attending Cesar Chavez rallies, and how people are treated is always far more important than any profit margin,” said Ireland.
In 1994, Kmart exclusively introduced Kathy Ireland swimwear and body collections. Ireland would go on to have merchandise in almost every Kmart apparel department, from maternity to fitness. At its height, her Kmart clothing lines registered an estimated $250 million to $300 million in annual sales.
The ride with Kmart was sweet, but it wasn’t always smooth. The retailer filed for bankruptcy in 2002, and its troubles made Ireland wonder whether her brand should link itself with a single store.
In 2003, the year Kmart emerged from bankruptcy, she decided to end her relationship with the retailer. The decision didn’t meet with universal approval. Executives at her company — even the vice chairman and chief financial officer — weren’t sure leaving Kmart was the right move.
“She called a meeting and said she wasn’t going to go forward, and people said, ‘You are earning millions and millions of dollars a year, and they have come out of bankruptcy, so you should do it,’” Roseberry remembered. “She was very clear about the fact that she had to go and prove herself in another area.”
That new area was home. Kmart had the exclusive on her apparel, but she hadn’t touched the home category there. Ireland had dabbled in some home goods and was eager — as she had done with socks — to once again establish her brand chops beyond the obvious. “She said, ‘We need to go into a sector that is not associated with the discount channel, so we can start all over again,’ ” said Roseberry.
In separating from Kmart, Ireland was forced to rely on independent retailers, but she relished the change.
“Something that Warren Buffett said, and I believe it to be true, is that big boxes will never be able to compete with independent retailers when it comes to customer service,” said Ireland.
Ingemi added, “With independent retailers, it is true brand building. You are guiding and directing what the brand stands for. When you become important through independent retailers, you are building a grassroots association with the customer, who begins to trust your brand.”
Ireland’s venture into home had an audacious inauguration. Around four years before she exited Kmart, at her first High Point Market, the North Carolina expo for home furnishing makers and retailers, she ran into Irvin Blumkin, chairman and ceo of Berkshire Hathaway-owned Nebraska Furniture Mart. He instructed Ireland to walk him through her furniture assortment solo, without being propped up by her support staff.
“‘If she doesn’t know her stuff, I’m not buying,’” said Ireland, recounting Blumkin’s demand. Well, he bought her stuff.
“Today, we have a great relationship,” said Ireland.
That relationship helped lay the foundation for what’s become an extensive home repertoire that spans carpets and flooring with Shaw Industries, interior lighting with Pacific Coast Lighting, bedding with Hallmart Collectibles, bedroom and dining-room furniture with Vaughan Furniture, window coverings by Alta, windows with Window World (alone worth a reported $400 million in sales), and much more.
The majority of Ireland’s $2 billion at retail last year came from home items. But she has been steadily increasing her strength in other categories. Brides are key targets to drive diversification. Her connection to them often kicks off with their weddings. With three properties in California and two in Hawaii, her Oasis World Estates hosts hundreds of Kathy Ireland weddings a year. For their weddings, brides can get their Ireland-branded wedding rings from Elan Luxury Collections, feed their guests with catering services from Acafe by Chef Andre, and outfit themselves, their bridesmaids and their mothers in branded wedding and special-occasion dresses by Mon Cheri Bridals.
After that trip down the aisle, Ireland foresees the bride sticking with her brand throughout her life.
“If we’ve earned her trust on her wedding day, then we’ve earned it when she’s thinking about design in other areas,” said Ireland.
Steve Lang, chief executive officer of Mon Cheri Bridals, put it this way: “If a young lady gets engaged and wears a Kathy Ireland product, you have her name, you have her anniversary date, you can hit her with messages about carpeting and honeymoons, and this and that.”
Ireland asserts her possible solutions for customers are endless. She’s considering opening branded retail stores abroad. Both at home and internationally — Ireland’s products are available in about 50 countries — cosmetics, shoes, activewear, hats and swimsuits (no longer a liability for being “too obvious”) are among the many possible product extensions she’s contemplating.
“Everything that our customer needs, we’re working to bring it to her, and to bring it in a beautiful way. The diversification of our brand and retail partners allows us to serve her where she is, how she is,” said Ireland.
Roseberry elaborated, “We are not close to the goal of our ceo in terms of where we want to be. We still have so many [potential] categories, and you want to pick a [license] specialist in each of those categories.”
The size of the company, owned entirely by Ireland — and the expectation it will continue to grow — has triggered questions about an IPO.
“I never say never,” responded Ireland, who emphasized, however, “I love being a private company. It allows us the freedom to make choices.”
More likely in the near term are acquisitions. Within the next year, Roseberry predicted there would be at least one. He said the firm is eyeing media and consumer product brands trading at excellent values for purchases.
“She is very inspired by what Warren Buffett has done with Berkshire Hathaway. He buys good companies and lets them run themselves,” said Roseberry, noting, “As a company, we don’t have a single penny of debt. We are very proud of that. [During the recession] most companies leveraged themselves. She did not.”
Beauty is an area the company wants to develop more fully over the next few years. In this segment, in which Ireland currently has a licensee for skin care and has been affiliated with a wig company, Ingemi said that Ireland would be an ideal fit for products from nail items to hair care to hair color.
“She’s been involved with that business before, and we are really looking to expand upon it,” he said.
In five years, Ireland imagines her brand as an all-encompassing resource. “What you think about when you wake up in the morning, and you wash your face, you put on your makeup, you get dressed, your hair care, how you spend your day, your leisure activities, your work — [I want] to be able to make beautiful things that address [my customer’s] needs from the time she wakes up to the time she goes to bed, at every age, at every stage of life,” she said.
For someone whose mission is making life easier for families, and is a mother herself, Ireland maintains a rigorous schedule.
“I don’t advocate the amount of sleep I get. I keep thinking, Some day I’ll get more sleep. But there really is no typical day, every day is so different. I’m usually up between 4 and 6 a.m.,” said Ireland. “My priorities for myself are my faith, my family and being of service through our work, and if I don’t honor those priorities, I’m a mess. Coping skills are out the window, stress is unmanageable, I’m not very effective at anything. So it’s important to get those priorities honored.
“I start the day, I take the kids to school,” she related. “And our team — I mean, it seems like a well-oiled machine. We’ve known each other so long, we know how we work. We look at the calendar 18 months out, and we start with all the dates that are important. Of course, things come up last minute, but when we start with that as a foundation, it really helps. Then we fill it in exactly where things can work. Our kids are only going to be young for this small period of time, it means there’s a lot of business opportunities that I say no to at this point in time….I was 40 before I learned that ‘No’ was a complete sentence.”
Would her kids one day join the business?
“Only if they wanted to. Our kids have been exposed to it for sure,” she said. “I mean, they help with design. They come up with some great designs. I love it. And since they were little, I’d hand them a disposable camera, and at that eye level, how they see the world — we got some cool stuff, some really great design inspiration. All three of them are creative. They’ve got great eyes. They’re interested in photography. They’re such individuals….They haven’t expressed interest in wanting to join the family business. [They’re going to] do their own thing.”
When Ireland founded her brand with socks, did she ever imagine she’d be in the advantageous position she’s in now, having segued from model to model-mogul to her preferred title of mom-preneur, with acquisitions and $10 billion in sales within her grasp?
“Yes and no,” she said. “Back then, there was a bigger vision. We still have a long way to go and so much to accomplish.”