KASPER SEES ‘GREAT POTENTIAL’ IN ITS ACQUISITION OF ANN KLEIN

Byline: Thomas J. Ryan

NEW YORK — “It’s well known worldwide as one of the top designer brands, even if people think it’s Calvin’s sister.”
That’s Mary Ann Domuracki, Kasper A.S.L.’s executive vice president of finance and administration, touting the potential of Anne Klein, which Kasper acquired from Takihyo for $60 million on July 12.
“We think the growth opportunities at Anne Klein are phenomenal,” Domuracki said Tuesday at Kasper’s annual shareholders meeting, held at the law offices of Weil Gotschal & Manges, pointing to the firm’s plans to reintroduce the Anne Klein II line for fall 2000, introduce an Anne Klein suit line, grow internationally and open Anne Klein outlet stores. “We expect nothing but great potential from it.”
The optimism comes despite a string of losses experienced by Anne Klein & Co., according to a filing with the Securities and Exchange Commission by Kasper.
Anne Klein Co. lost $2.1 million on revenues of $34.3 million in the six months ended July 2, according to the filing.
The loss reflected a $1.8 million management fee paid to its parent, Takihyo, a holding company helmed by Frank R. Mori and Tomio Taki. Year-ago comparisons were not available.
Last year, Anne Klein lost $19.2 million after a number of nonrecurring charges against a loss of $2.9 million in 1997.
The charges in the latest year included a $5 million write-off of receivables from the Anne Klein outlet business, which is operated by a separate company affiliate with Takihyo, and a $3 million write-off of its investment in and amounts due from Takpac Co. Ltd., which held a majority interest in Anne Klein Hong Kong Ltd. The year also included a $3.1 million write-off for the impairment of long-lived assets, and a $3.6 million management fee.
Revenues in 1998 eased 0.7 percent to $94.5 million from $95.2 million.
Sales nudged up to $84.6 million from $84.4 million, but licensing income slid to $9.9 million from $10.8 million.
The last time Anne Klein made a profit was 1996, when it earned $3 million despite losses of $4.8 million from the discontinuance of Anne Klein Collection, its high-end fashion business, in April of that year.
The loss from the collection division consisted of a $2.79 million operating loss and $1.97 million loss on disposal, primarily severance and related closing costs.
Net revenues in 1996 were $112.1 million, including $3.2 million in collection sales.
Domuracki said Anne Klein’s recent losses were not surprising considering that the company was in a state of flux.
“They knew they were going to be sold, so they were in the process of winding down,” Domuracki said.
Domuracki said Anne Klein’s growth, whose potential she described as “up to anyone’s imagination,” will be spurred as Kasper develops greater segmentation between Anne Klein, which serves the bridge market, and Anne Klein II, which serves the better market, “to clearly differentiate” the lines in the marketplace.
She said the line provides greater entry for Kasper to high-end specialty stores like Saks Fifth Avenue and Neiman Marcus, noting that only some of its Albert Nipon lines presently sell in that market.
Kasper’s first lines under the Anne Klein bridge label and the A Line Anne Klein label, the casual counterpart, will be shipped in the fourth quarter, and Anne Klein II will launch in the third quarter of 2000.
“The retailers are clearly looking forward to getting product from us next year,” Domuracki said.
She also cited strong opportunities for licenses, noting that there currently are fewer than 13.
In early August, Kasper signed an agreement for Maxwell Shoe to make the A Line Anne Klein and Anne Klein II women’s footwear lines.
Anne Klein’s watch license accounted for 32 percent of licensing income last year, and jewelry, 15 percent, according to the SEC filing.
The company is also negotiating with the landlords to take over some of Anne Klein’s 25 outlet stores. Kasper currently has 58.
Domuracki also noted “tremendous opportunity” overall to expand internationally, noting that international accounted for 3 percent of Kasper’s sales and 10 percent of Anne Klein’s last year. Kasper is the number one women’s career brand in the U.K., she said.
For its part, the Anne Klein business should benefit from Kasper’s strong sourcing capabilities in the Far East, and cost savings, said Domuracki.
Domuracki also said she expects continued growth in Kasper’s existing portfolio, primarily through growing through existing doors and by introducing e-commerce to the Kasper.com web site in the next 30 days, but the bulk of the presentation was on Anne Klein.
The meeting was attended by a sparse crowd, mainly bankers and accountants working with the company, board members and management.
Arthur S. Levine, chairman and chief executive officer, was unable to attend since he was in Europe for the designer collections, Domuracki noted.
In the half ended July 3, as reported, Kasper’s earnings dipped to $1.7 million from $1.8 million. Earnings per share were flat at 26 cents a share. Sales slipped 2.8 percent to $154 million from $158.5 million.