APPETITE FOR BIG-NAME LICENSES GROWS
Byline: Karyn Monget
NEW YORK — Wanted: More big names and megabrands for lingerie licensing ventures.
Must be a household name or have star potential.
Must have a distinctive fashion identity.
Must have the oomph needed to be marketed to millions of consumers in the global marketplace.
It’s no secret that many major players in the apparel industry are on the hunt for brands that will be universally appealing to women in locations as diverse as Toledo, Spain, or Toledo, Ohio.
The names — a fashion brand like Calvin Klein Underwear made by The Warnaco Group or the licensed Ralph Lauren Intimates at Sara Lee Corp., a cartoon character like Disney’s Mickey Mouse or a retail imprint like the Gap — all have one common denominator: They have a cachet that appeals to women in a specific lifestyle — from career women and homemakers to teenagers and grandmothers.
But why is innerwear — particularly underwear and foundations — suddenly such a hot area? And why is corporate America chasing a commodity business that some have long believed to be as exciting as pork belly and soy bean options?
The answer is simple. Unlike the mercurial highs and lows of the financial market, the demand for underwear is consistent 12 months a year.
In the past several years, the $11.2 billion intimate apparel industry has been consolidated by mergers and acquisitions as well as bankruptcies.
In the process, it has become a streamlined yet more powerful industry controlled by three giants: Sara Lee Corp., Warnaco and VF Corp. Each of these companies, armed with tremendous production, distribution and marketing clout, has gobbled up a number of premium brands, as well as retail space.
These firms have helped make innerwear as desirable a licensing property as accessories, fragrances and jeanswear, industry executives note.
In several cases, a licensing venture or an acquisition of a single powerful name has resulted in a business representing several franchises under one umbrella, with classifications such as bras, underwear, shapewear, daywear, sleepwear, robes and at-homewear.
Observers and industry executives generally credit Warnaco for getting the ball rolling when it acquired the Calvin Klein Underwear businesses for men and women in 1994 in a deal worth $62.5 million.
Warnaco, which posted overall wholesale revenues of $1.4 billion in 1997, $941.2 million of it in intimate apparel, is poised to generate total sales “in the area of $2 billion” in 1998, said Linda J. Wachner, Warnaco’s chairman and chief executive officer. Calvin Klein men’s underwear and women’s innerwear had combined wholesale sales of $319 million last year, Wachner said.
Warnaco’s profits are expected to increase dramatically following its acquisition in December of Designer Holdings Ltd. and its $470 million-a-year Calvin Klein designer jeans and khakis business. The move substantially expanded Warnaco’s piece of the $2.5 billion Calvin Klein worldwide empire.
Since then, major stores such as Bloomingdale’s have begun to give Calvin Klein Underwear exposure in CK Jeans and Calvin Klein Underwear shops in different areas of the store.
Warnaco’s 1998 advertising and marketing budget for its Calvin Klein unit is $50 million — split evenly between underwear and jeans, said Wachner.
Sara Lee upped the ante in late 1996 when it took on its first designer license, Ralph Lauren Intimates.
Officials at Sara Lee and Polo Ralph Lauren have never given a sales estimate for Ralph Lauren Intimates. But industry observers said it could eventually add another several hundred million dollars to the designer’s empire.
Sara Lee posted annual sales of $19.7 billion in the year ended June 28, 1997, $7.5 billion of which included intimate apparel and hosiery, with names like Playtex and Hanes Her Way. As reported, Sara Lee acquired another brand in March for $21.5 million — Strouse, Adler Co., a shapewear specialist.
In the past three months, two other big names have jumped into the innerwear arena: the licensed Tommy Hilfiger women’s sleepwear and robes at Cypress Apparel Corp., a unit of Russell-Newman Inc., and a licensed collection of underwear, daywear and sleepwear by DKNY at Wacoal America. The combined DKNY women’s and men’s [underwear] businesses — set to be launched in early 1999 — eventually could generate annual volume of roughly $200 million, according to industry estimates.
Wacoal America, the U.S. arm of innerwear maker Wacoal Japan, has been producing the licensed Donna Karan Intimates since 1982.
John Idol, ceo of Donna Karan International, noted, “The dedication the consumer has to the DKNY brand is terrific. This will be a major launch that will further extend the DKNY family of products. It’s a critical step in the global development of DKNY, furthering the brand’s accessibility to the world as a label which represents all things New York.”
Jockey International, based in Kenosha, Wis., has been producing the licensed men’s and boys’ underwear for Hilfiger since 1993. Jockey officials continue to claim that Jockey has right of first refusal to manufacture women’s underwear and foundations for Hilfiger. But Jockey would not comment on whether it has plans to do the women’s line. Cypress has been making Tommy Hilfiger men’s robes and sleepwear for three years.
Commenting on the status of a license for women’s underwear and foundations bearing the Tommy Hilfiger name, a spokeswoman for Hilfiger said only, “At this time, no licensing agreement has been signed with anyone.”
While the innerwear market may appear to be sated with brands, the action is far from over. Other bigwigs such as Liz Claiborne are on the prowl for a lingerie license. As reported, Paul R. Charron, Claiborne’s chairman and ceo, said earlier this month, “We are in dialog with several [innerwear] manufacturers. That’s the next, maybe last, big category for us.”
At the same time, a pact between two of the biggest names in the business, Nike and Vanity Fair Intimates, a unit of VF, is expected to be announced later this year. As reported, both firms — each with a formidable worldwide network — are discussing a collaboration that would produce a line of bodywear, activewear and sports bras. The active-inspired line could be launched as early as next year. Sources said it easily could yield first-year revenues of $100 million.
In December, VF got into the designer lingerie business for the first time when it acquired Bestform Group Inc. for $184.3 in cash and repayment of $44.4 million of debt. Bestform, which posted sales last year of $307 million, has four designer bra licenses — Oscar de la Renta, Christian Dior, Natori and Josie.
The acquisition also gave VF a bigger chunk of private label business with a name that’s become synonymous with lingerie: Victoria’s Secret. Bestform manufactures the successful Angels by Victoria’s Secret line of iridescent sheer bras and panties in fashion colors.
Lingerie specialist Victoria’s Secret — its combined catalog and store divisions at Intimate Brands Inc. generated revenues last year of more than $2.1 billion — has fueled the fire with its legions of lingerie-clad supermodels.
The business potential is beginning to lure upscale specialty retailers such as Burberrys into the intimate apparel business. Kerry Glasser, vice president of licensing at Burberrys, said the retailer is “extremely interested in doing a lingerie license.”
“It’s a process that takes a while to quantify the right company, in between shoes and other categories we are looking to do,” Glasser said. “In addition to our 50 stores worldwide — 18 of which are in the U.S. — we envision distribution of intimate apparel to upscale stores such as Saks Fifth Avenue and Bergdorf Goodman.”
Glasser would not reveal the companies with which Burberrys was in discussions, but noted, “We will design a specific ad campaign for intimate apparel.”
In the past year, Burberrys has been working with a contractor in the Far East to distribute the brand’s intimate apparel to Japan and parts of Southeast Asia.
“One reason we want to do a lingerie license is because the products have been very well received in that part of the world,” Glasser said, “and we are receiving numerous requests for intimate apparel in our stores.”
But while interest in lingerie has intensified at both retail and wholesale levels, licenses are nothing new, particularly collections bearing the signature of a ready-to-wear or sportswear designer. In the past 30 to 35 years, it has been a niche business, catering almost exclusively to customers of high-end stores or lower-income shoppers whose access to designer merchandise is limited to a bra or briefs.
In the U.S. market, other established licensees include Valentino Intimo at Warnaco, Jones New York at Madison Maidens, Guess at Assa International, Mary McFadden at Boutique Industries, Crabtree & Evelyn and XOXO at NAP Inc. and Natori and Josie foundations at Bestform.
One enduring designer label in the innerwear field is Christian Dior. Carole Hochman Designs Inc. has been producing and distributing the licensed Christian Dior sleepwear to major department and specialty stores in the U.S. since 1963. The license, which was to expire at the end of the year, was renewed late last week, said a spokeswoman for Christian Dior Couture here, and Neal Hochman, corporate secretary of the Hochman firm.
Bestform has had the license to manufacture Christian Dior foundations in the U.S. since 1988. There are plans to renew the Dior foundations license with Bestform before the end of the year, said Beatrice DuPont, president of Givenchy SA, which, like Christian Dior Inc., is an affiliate of LVMH Moet Hennessy Louis Vuitton.
In the meantime, the Hochman firm took on another designer sleepwear license — Oscar de la Renta. As reported, Oscar de la Renta Ltd. signed a licensing pact with Carole Hochman in March to produce the first full-fledged collection of sleepwear, daywear, robes and at-homewear by Oscar de la Renta. First-year wholesale sales are projected at $5 million.