Ralph, Donna, Calvin.
The trio — like Cher or Elvis, only first names are necessary — trips off the tongue in rapid succession, and even the most casual observers instantly know these three designers-turned-megabrands have been at the pinnacle of American fashion for decades.
But this year saw seismic shifts at these venerable houses.
Calvin Klein underwent a massive creative change at the helm by tapping Raf Simons as chief creative officer in August, taking on a role that hadn’t been filled since Calvin Klein himself stepped away from the company in 2003, after selling the business to PVH Corp. Simons’ appointment, which marked a strategic shift at the company, had been rumored for almost a year. The former artistic director at Christian Dior is now leading the creative strategy of the entire Calvin Klein brand. And the shift in creative heads rippled throughout the entire organization.
Stefan Larsson, chief executive officer of Ralph Lauren Corp., issued his “Way Forward” plan in June, exerting more influence over the $7.2 billion apparel firm. The plan involves speeding up the supply chain; focusing on the core collections of Ralph Lauren, Polo and Lauren; shuttering stores, and eliminating management layers that resulted in job cuts of about 8 percent of the company’s workforce, or 1,000 people, this year.
And Donna Karan International, which had been owned by LVMH Moët Hennessy Louis Vuitton since 2001, was sold to G-III Corp. for $650 million in July. DKI has had its ups and downs over the course of its 32-year history, and last year saw the departure of Donna Karan herself, who was cofounder and chief designer. Karan remained as a consultant to the firm, while pursuing her other apparel business and charitable initiative, Urban Zen.
Here, a look at these three major developments, at a time when the industry is consolidating and dealing with a highly promotional retail environment as the audience for apparel shifts its attention to experiences, technology and other web-based pursuits.
The Donna Karan and DKNY brands were never at the core of LVMH’s portfolio and the group struggled for years to turn DKI into an American luxury brand in sync with its other holdings. Still, it was highly unusual for LVMH to divest one of its key properties, even though there were rumors for years that it was looking to sell DKI. The last property that LVMH sold was Christian Lacroix to The Falic Group in 2005.
In a deal that took the industry by surprise, G-III Apparel Group acquired Donna Karan International from LVMH Moët Hennessy Louis Vuitton for $650 million. The acquisition closed Dec. 1, heralding changes in leadership and design.
Caroline Brown, chief executive officer of DKI, and DKNY co-creative directors Dao-Yi Chow and Maxwell Osborne of Public School will exit the company by the end of the year.
At the time of the acquisition, Morris Goldfarb, chairman and ceo of G-III, referred to the deal as a $1.3 billion opportunity. He said he expects DKNY to become a $1 billion brand and Donna Karan to reach more than $300 million in wholesale volume over the next several years. What he didn’t expect was Wall Street’s reaction to the acquisition. The news sent G-III shares down 14.5 percent to close at $42.91 in Nasdaq trading the day the deal was revealed. Investors were more excited for LVMH, and viewed the sale as the end of a 15-year headache and rare misstep for luxury titan Bernard Arnault. Shares of LVMH closed up 1.5 percent to 144.45 euros, or $158.77 at the time, on the Paris Bourse.
But Goldfarb was undeterred.
“The $1 billion trophy for us I believe will be DKNY,” he said. He anticipates huge opportunities for the brand in women’s and men’s footwear, handbags, intimates, jeans and resurrecting DKNYC, as well as home and cosmetics. He also sees a robust licensing program for Donna Karan. The designer herself paid a few visits to Goldfarb’s showroom following the news of the acquisition to share her passion for the business with employees. Karan resigned from the company in June 2015.
G-III has lots of expertise in the better-price world, manufacturing such collections as Calvin Klein (white label), Tommy Hilfiger and Ivanka Trump, among others, and Goldfarb seems up for the challenge.
“The turnaround period is not going to be very long; the integration into our company is going to be almost seamless, and the capital expenditures for the future aren’t going to be huge,” he said. “We look at this as a bargain price [$650 million]. Where’s a power brand that can be acquired at this price? There isn’t. We’re grateful to LVMH for letting us buy it. If you look at pure earnings, as many investors are forced to do, they’d say ‘not a great investment.’ But if you look at potential and you have vision, it’s an amazing acquisition.” — Lisa Lockwood
The worst-kept secret in fashion became a reality in August when Calvin Klein Inc. named Raf Simons as chief creative officer for all its women’s and men’s brands. The appointment ended more than nine months of speculation that the former Dior artistic director for women’s couture, ready-to-wear and accessory collections was moving to New York and assuming the creative helm of Calvin Klein. Simons had a stringent non-compete with Dior that prevented him from coming sooner.
Prior to Simons’ appointment, Francisco Costa, creative director of Calvin Klein women’s Collection, and Italo Zucchelli, creative director of men’s Collection, both abruptly exited, adding intense speculation that Simons was headed to the iconic brand.
Simons leads the creative strategy of the Calvin Klein brand globally. Brands under the umbrella include Calvin Klein Collection; Calvin Klein Platinum; Calvin Klein; Calvin Klein Jeans; Calvin Klein Underwear and Calvin Klein Home.
“Not since Mr. Klein himself was at [here] has it been led by one creative visionary, and I am confident that this decision will drive the Calvin Klein brand and have a significant impact of its future,” said Steve Shiffman, ceo of Calvin Klein Inc.
Given Simons’ minimalist leanings, art and cultural references in his work, and directional and youth-oriented men’s wear collections, industry observers believe that Simons will disrupt the Klein business, which generates $8 billion in global sales, with the goal of taking it to $10 billion.
When the appointment was confirmed, Simons said he would bring in his longtime associate Pieter Mulier as creative director. Mulier had worked with Simons from the early days of his own men’s wear label and followed him to Dior. Mulier’s role is to execute Simons’ creative and design vision for men’s and women’s rtw, and bridge and better apparel lines and accessories. Two days later, Kevin Carrigan, global creative director of Calvin Klein, resigned. An 18-year veteran, he was responsible for ck Calvin Klein, Calvin Klein Jeans and Calvin Klein White Label, which generates most of Klein’s apparel business.
In November, Melisa Goldie, chief marketing officer of Calvin Klein Inc., abruptly left her role, while Amy Mellen, senior vice president of home, will depart at year-end.
Observers are waiting to see what Simons has in store for Calvin Klein’s debut women’s and men’s show, Feb. 10 during New York Fashion Week. That promises to be one hot ticket. — Lisa Lockwood
Ralph Lauren Corp. may have “dropped the ball,” as the company’s founder himself put it. But it now seems to be refocused, as it prepares to celebrate 50 years in business next year.
In mid-year, the company brought in Stefan Larsson as president and chief executive officer, and shortly after embarked on its “Way Forward Plan.”
The former H&M executive knows fast fashion well and is implementing some much-needed changes at Ralph Lauren. These include collaborating with its supplier base for best-in-class sourcing, developing a fabric platforming component for the business and focusing on innovation.
In June, Larsson outlined the restructuring to Wall Street analysts. The plan called for speeding up the supply chain; focusing on core products; shuttering stores, and eliminating management layers. For fiscal 2017, the initiatives are expected to result in $180 million to $220 million of annualized expense savings. The goal of the plan is to advance the company’s product, marketing and shopping experience to make the brand more desirable among consumers.
In addition to right-sizing the cost structure and implementing a return-on-investment-driven financial model, the plan frees up resources to invest and drive high-quality sales. While the core Ralph Lauren brand, along with its Polo Ralph Lauren and Lauren by Ralph Lauren brands made the cut, the Denim & Supply label didn’t. The company is cutting unproductive styles so it can focus on building pillars — like the safari jacket, peacoat and oxford shirt for the core Ralph Lauren brand — for each of its labels.
The plan seems to be working. Last month the company posted a 19-cent beat on Wall Street’s adjusted earnings per share projections for the second quarter. Larsson said the key to short lead times is fabric platforming for its core styles, a move that enables the company to increase the quality of fabric used, secure better prices and increase the firm’s flexibility to react during the selling season. The company is also halfway to its goal of a nine-month lead time — it was 15 months before Larsson joined the team — by the end of its fiscal year.
Shares of Ralph Lauren are in the $107 range, not that far from its 52-week high of $119.60 and far better than its 52-week low of $82.15. — Vicki M. Young