FASHION’S BOTTOM-LINE BUNCH
Byline: Anne D’Innocenzio / Rosemary Feitelberg / Karyn Monget / Arthur Friedman
The personalities are varied, but the chief executives of some major fashion houses agree on one thing: Balancing creativity and the bottom line is often a delicate juggling act.
Jeffry M. Aronsson
NEW YORK — For Jeffry M. Aronsson, the road from writing legal briefs to planning store openings has been peppered with a student’s desire to learn and a businessman’s need to succeed.
Aronsson, chief executive officer at Oscar de la Renta Ltd., said one thing he’s learned in the two years since he’s been at the helm is that in the fashion business, “the only constant that does not change is change itself.”
Aronsson came to de la Renta after a career in corporate law, and other than acting as the firm’s general counsel for several years prior, he had no hands-on apparel industry experience.
“The key to survival, let alone growth, is adaptability, which must come from innovation,” Aronsson said. “Innovation is born out of creativity and determination. I am advantaged to work with a fantastic team, starting with Oscar de la Renta, that exudes creativity and determination.”
Aronsson said the role of a fashion house ceo is to manage the bottom line while supporting an environment that is “conducive to the fueling, expression and marshalling of the designer’s creative energy.”
“Oscar de la Renta makes this easy for me, because he is as astute a businessman as he is an artist and creator of beautiful clothes,” Aronsson said.
The biggest challenge in running the company right now is the retail environment. Aronsson said the company continuously strives to improve the quality of its communication, service, information gathering, marketing and deliveries to meet this challenge.
Another challenge for the firm, which is in the midst of global expansion, is making the most of international opportunities while confronting the high risks of global growth, especially in the luxury market.
Aronsson noted that the company’s growth initiative comes from new products and expansion into new markets.
International growth in the past two years has seen the opening of the first six de la Renta boutiques. Two stores have opened in Hong Kong; two in Jakarta, Indonesia, and one each in London and Panama City.
On the home front, the company last month launched Oscar, a secondary line of sportswear and ready-to-wear with first-year sales expected to hit $20 million. De la Renta’s signature collection grabs about $40 million in sales annually.
The company also has some 27 licenses in the U.S. and abroad, including men’s wear, fragrances, furs, intimate apparel, swimwear and accessories. These combine for a retail volume of about $500 million for all de la Renta licensed products.
“New business means new responsibilities to nurture and maintain…to assure sound health,” Aronsson said.
Aronsson said a common thread that runs through all parts of the business is maintaining delicate balances. This includes weighing volume with exclusivity, growth against loss of control, investment of funds versus maintaining reserves and “keeping an eye on the horizon while watching every step the company takes.”
NEW YORK — Keeping business and creativity on an even keel at Betsey Johnson Inc. is simple, according to Chantal Bacon, vice president: Partners have to be friends.
Apparently, this credo works for Bacon and Johnson, the firm’s president and designer, respectively, in an era of hard-line money management and the take-no-prisoners approach of many apparel companies.
“It’s like a marriage — sometimes we argue about the length of a skirt,” said Bacon. “I think to be partners, you have to be friends. It’s a good partnership because we both respect each other’s territories. And we understand that we can sit and talk about things.”
Johnson — who is known primarily for her somewhat wacky, hip sportswear, said, “I don’t think we came from a killer business. We connected as people and friends. We’re very much a separate little planet in the industry — very ungarmento.”
Bacon and Johnson met here in 1975, when Bacon was working as a sales associate for a former apparel licensee, Betsey Johnson Kids at Shutterbug. They quickly became buddies, and in 1978, they formed Betsey Johnson Inc. on a shoestring budget of $50,000.
“It was glitter rock, a fun time in fashion,” recalled Bacon, who had been a model in London in the Seventies. “That’s why I got interested in fashion.
“We could have had backers, but we really didn’t need them,” continued Bacon. “We saw that we wouldn’t have been able to do things as quickly as we wanted, and we’d have to explain why. So, we took out loans at banks.”
The company initially employed five people. Today, the firm includes 24 Betsey Johnson boutiques in the U.S. The boutiques generate a volume of about $18 million.
Bacon, who oversees day-to-day operations, observed, “Now, a lot of companies do it backward… they start out with the money, put a company together and hire somebody to style the line. It’s unfortunate for new ideas and new people.”
She said one of the biggest challenges in keeping the business viable has been a continuing balancing act of more mainstream ideas with newer, more exciting concepts.
“At merchandising meetings, Betsey will say ‘Do we have to go with this?”‘ said Bacon. “I guess there’s a little bit of compromise when it comes to bestsellers. Since we’ve been doing this so long, we really have a strong core of Betsey customers. If we like it, we assume our customers will all go in that direction.”
Bacon described Johnson’s established customer as a type who likes to wear clothing that is “sexy, more fun, not real traditional.”
In addition to the Betsey Johnson boutiques, the designer’s domestic-made products, which include fragrance, accessories, and legwear — all produced in-house — are sold to specialty stores and some department stores in the U.S. The company also has distributors in Canada, England and Japan.
“The bottom line is if your clothes don’t sell, you’re not in business,” Bacon said. “The boutiques are a great support system, because you’re in control of what’s going to happen. They’re also a very good indicator of what’s going on out there.”
As for Johnson’s enduring image in the fashion arena, Bacon noted that from the onset, Johnson was considered “very alternative.”
“Now everybody is alternative and wants to be that edgy, hip designer,” she said.
NEW YORK — For those who know Bud Konheim, it should come as no surprise that when it comes to running Nicole Miller Ltd., he does it his way.
“There is no ivory-tower approach,” said Konheim, chief executive officer and a partner with designer Nicole Miller.
“It’s more like a moving-target atmosphere. Nicole, the sales people and I work very closely. “
Konheim said from the beginning he and Miller have tried to balance original design with commercial acceptability. Miller has stuck to her signature prints and sexy dresses, and she and Konheim have developed new products and licensed merchandise.
“My theory is that we can make mistakes, but never one that will hurt so much it puts the business in jeopardy,” Konheim said. “That’s difficult for us, because Nicole doesn’t design for what the customer says she wants. We don’t do consumer research because all that tells you is what the consumer is buying, not what she will buy next season.”
Konheim said the big issue is encouraging original design while keeping in mind that cutting-edge can often lead to failure.
“On the other hand, I believe something that’s innovative has a better chance than something that’s been done before,” Konheim said. “So the safest thing is something original, because then you have no competition.”
Konheim said one of the biggest changes in his 40-plus year career is the loss of the buyer’s input in purchasing decisions.
“There used to be a time when department store buyers sought the best merchandise for their stores based on their taste levels,” Konheim said. “Now the message has changed. Buying is now based on bottom-line guaranteed sales. The buyer is forced to buy safe and basic, and that leads to disaster.”
How does Nicole Miller deal with stores that operate that way?
“We don’t bother,” Konheim said. “We’ve organized our business to sell to stores that want to buy our designs, not to dictate to us.”
One of the main outlets for Nicole Miller merchandise is its freestanding signature boutiques. In the past five years, the chain has grown from a single unit to 25. Four of those are company-owned — two stores in Manhattan, one in Los Angeles and one in Seville, Spain. The rest — from Boca Raton, Fla., to San Francisco and three stores in Mexico — are franchised.
These shops, combined with a growing list of independent specialty stores, now account for more than half of the firm’s $60 million annual volume. Five years ago, the great majority of sales came from department stores.
“What’s important is that the managers of those stores buy independently,” Konheim said. “They buy the merchandise that’s right for their stores. Those stores keep us honest. What’s beautiful about it is that it’s a pure test of marketing your product.”
NEW YORK — Visitors at the Caroline Herrera corporate offices here won’t find Michael Pellegrino holed up.
They might, however, find the chief executive officer brainstorming with the design team, working with production employees, negotiating new licensing deals and, oh yes, number-crunching to map the company’s long-term business plan.
Pellegrino, who studied at the Fashion Institute of Design with the intention of pursuing a design career, said his background is advantageous. Unlike some senior executives, he said, he doesn’t need to see the final product to determine how important the pieces will be at retail, how they should be merchandised or priced.
Pellegrino readily admits that his involvement with the business — at all levels — is greater than it has ever been since he joined the company 11 years ago. “By being in touch with our employees, I’m anticipating much more rather than assuming things will happen in a certain amount of time,” he said. Despite the shrinking retail market, evidenced by the closures of such key accounts as I. Magnin and Montaldo’s, Pellegrino said there is good deal of business to be picked up. Volume is growing due to the company’s ability to open new accounts and expand distribution.
Nonlicensed apparel exceeds $8 million in annual wholesale volume and the company is planning sales to be up at least 20 percent this year, Pellegrino said.
“Understanding what retailers are looking for is absolutely essential today. Design is everything, as Carolina and I have discussed many times. Good design will sell at any price — from $200 to $2,000 wholesale, but marketability, value and competitive pricing are also important,” he said. To get a better grasp of retailers’ and consumers’ needs, Pellegrino said he regularly attends trunk shows to see firsthand how women shop.
“Carolina and I get an opportunity to see what [consumers] are looking for in design, price and value — even at the designer level there is consciousness of price.”
This year the company expects its slate of 50 trunk shows — an 11 percent increase over last year — to be a major contributor to the planned 20 percent gain.
Negotiations are under way to develop licensed lines of sportswear and costume jewelry, Pellegrino said. The lines should be introduced for holiday. First-year volume for sportswear is estimated at $3.5 million and jewelry is expected to hit $1.5 million.
Carolina Herrera currently has seven licenses: fragrance, eyewear, watches, sewing patterns, fashion accessories, intimate apparel and fine jewelry.
Having worked as vice president of marketing at Halston, which had 32 licensees at one time, Pellegrino said he plans to continue to “carefully” develop licensing deals at Herrera.
“That’s why we haven’t put on 25 licenses. We watch what we’re doing,” he said. “Licensing has to have everything going for it. Just to have the name out there is not enough. We have to ask, ‘Is this the very best license we can get for our money?’ “
Carolina Herrera also aims to create private label programs for specific stores.
“Retailers are looking for exclusivity,” he said. “They don’t want to have the same product as any other store. With the retail climate being the way it is, this is a creative way of introducing a product category that makes it interesting to retailers.”
The company is considering launching a home furnishings collection in 1997 and opening its first freestanding boutique within the next few years.
NEW YORK — Sometimes the pressure just gets to Tony Longoria.
Longoria, who’s been Todd Oldham’s business partner for 10 years, said recently he was so crazed, “I almost forgot to send my father a birthday card.”
“Things have been so frantic. Every part of my personal life now revolves around work,” said Longoria, noting he’s been on the phone all week with deejays and record stores, frantically searching for the right tunes for Oldham’s fall show, set for Thursday night at the Puck Building here.
It’s only been in the last few years that Oldham’s star has risen, and the sportswear firm now is fast diversifying way beyond its signature collection and Times Seven bridge line.
This has forced Longoria to wear many hats. In addition to overseeing sales, merchandising and marketing for the two lines, he is now responsible for merchandising and sales for two outlet stores.
The first shop opened two years ago in SoHo, and the second opened March 1 on Beverly Boulevard in Los Angeles. The stores, he said, have “heightened awareness” of the designer’s name in the area and have increased sales in its nearby department store accounts.
Longoria also plays a big role in Oldham’s licensing ventures, which have shifted into high gear and now cover products from shoes to perfume.
In the past year, deals have been signed with Nikon for eyewear, which bows for fall; Fossil for fashion watches, which will have a holiday opening, and Sun Apparel for jeanswear, which hit stores this spring. Several other deals are in the works, but Longoria wouldn’t elaborate.
“There’s definitely a lot of opportunity out there,” said Longoria, who expects double-digit increases this year. He wouldn’t give a specific company volume, but industry estimates put it at $15 million to $18 million last year.
And he says all the talk about fashion depression is hogwash.
“There are always peaks and valleys; it’s always going to happen,” said Longoria, who worked in buying and merchandising at Neiman Marcus for nine years before teaming up with Oldham.
“You can blame it on this or that,” he said. “You just have to learn to adjust — and diversify.”
“Todd has an incredible following — among all age groups, and with his appearance on MTV’s ‘House of Style,’ he’s gotten a younger customer,” said Longoria.
“Even when we opened our Los Angeles store, we had all types of people there, from rave girls and high school kids to professionals,” he said. “I love that. He’s all-inclusive.”
Harnessing Oldham’s creativity is tricky, Longoria said.
“There is constantly this friction between fantasy and reality, and they clash in the middle,” he said. “What falls to the ground is the best possible product.”
Take, for example, those bright tile prints that were the talk of Oldham’s spring runway show.
“From a selling point, we had to get that point across,” Longoria said. “For one store, you are showing the buyers how to match the outfits. For another store that caters to a more daring customer, you are showing the look exactly the way it came off the runway.”
Then there were the laminated jeans, a fashion item for spring that excited Oldham, but made Longoria a little nervous.
“There was this drum roll,” said Longoria, who remembered being uncertain whether the look would have a broad appeal; so he limited the initial distribution to select stores.
“Our staff was all worried about what the reaction would be,” he said. “We thought that the consumer might find it too hot or too uncomfortable to wear. But they became our number-one seller, across the board for the season.”
“All along, Todd was really comfortable with the idea.”