Byline: Mark Tosh, with contributions from Holly Haber, Dallas

NEW YORK — Wal-Mart Stores may have found its own apparel angel.
The nation’s largest retailer, which is on a mission to improve its apparel business, is preparing to launch a Kathie Lee Collection of women’s apparel this spring, built around television personality Kathie Lee Gifford, as reported.
In another brand development, Wal-Mart officials said Tuesday the retailer will add the Catalina label for sportswear and activewear next spring. Wal-Mart has successfully carried White Stag sportswear for more than a year. Both are established labels that have been repositioned for the mass market by Authentic Fitness Corp.
Apparel has long been considered a weakness for Wal-Mart and these branded moves could signal not only an increase in apparel for the discounter’s total merchandise mix, but a broader attempt to upscale or add more value to its soft lines.
“We are becoming more branded, I guess,” John Lupo, a senior vice president and general merchandise manager at Wal-Mart, said in an interview, citing the additions of Kathie Lee in the career segment, White Stag in casual and Catalina in active, or sportswear, categories.
The Kathie Lee collection will not be a high-end apparel line at Wal-Mart, but will “fit right in with our gut price points,” Lupo said. He said the line also should help Wal-Mart in its attempt to offer “more of a related look between tops, bottoms, accessories and dresses.”
Analysts said the addition of Kathie Lee’s collection also fits with the giant discounter’s stated goal of adding more branded merchandise and recognizable private label to its apparel selection.
Soft lines, including apparel and home textiles, accounted for an estimated 27 percent of Wal-Mart’s $67.3 billion annual volume last year.
With the addition of a Kathie Lee collection, Wal-Mart joins the ranks of other major discounters such as Kmart and Target, who are trying to beef up or broaden their branded apparel businesses.
The move is also seen as a specific counter to the success Kmart Corp., its chief competitor in the discount sector, has had with its Jaclyn Smith line of apparel.
The Jaclyn Smith label, launched at Kmart nine years ago by the former Charlie’s Angel, generates estimated annual volume of about $150 million at Kmart’s 2,350 stores. Recently, Kmart added to its celebrity collections with an exclusive line of swimwear under model Kathy Ireland’s name.
Lupo said the addition of Kathie Lee’s collection is “really out of character” for Wal-Mart. “But we’ve been doing business with Halmode for some time in the dress category,” he said. “We just started talking about it and one thing led to another.”
Halmode will produce a portion of the line for Wal-Mart. The private-label line, which could be in Wal-Mart’s 2,225 stores as early as February, will include sportswear, dresses and accessories, Lupo said.
Lupo declined to provide an estimate of sales for the Kathie Lee collection, but he said it likely won’t be as broad as the Jaclyn Smith line at Kmart.
For her part, Gifford is no stranger to the apparel wars. Under Halmode Apparel, Gifford helped develop a dress line that premiered in department stores in 1992. First-year wholesale volume reportedly hit about $10 million and the brand was projected to hit $50 million in its third year.
Gifford, in fact, has already developed a following in the fashion business. A 1993 consumer brand study by WWD ranked the Gifford brand among the top 10 most recognizable names in the Dresses, Suits and Eveningwear category.
“Essentially, what [Wal-Mart] is trying to do is either present branded goods or develop private label with national names,” Woody Whyte, an analyst at Stephens Inc., said. “I think it’s basically a way for Wal-Mart to convey value choices and recognizable brands to the consumer.”
Whyte added, “If you go into any of their new discount stores or supercenters you will see branded apparel featured more prominently.”
Whyte said he believes Wal-Mart has been working to improve its apparel offering for a few years and has “never been shy about taking ideas” from competitors and then expanding on them.
Kenneth Londoner, vice president of J&W Seligman & Co. investment advisers, said Wal-Mart has been working on the Kathie Lee collection for at least six months, including buying fixtures for a model for the new department and testing them in its home office.
“It will be a significant launch and the cornerstone for an apparel strategy, the first of many stages,” he said.
Seligman said Kathie Lee Gifford has become very visible and popular doing television commercials. Her talk show, “Live with Regis & Kathie Lee,” draws an estimated 8 million viewers in its 10 a.m. weekday time slot.
“Women will buy products with her name on it,” he said.
Wal-Mart executives have been talking up the retailer’s attempt to improve apparel collections for some time.
Donald Soderquist, vice chairman and chief operating officer of Wal-Mart, told executives at an advertising conference in Chicago last month, “We like to shout brand names in our stores.”
He added, “It’s been difficult for us to get name brands in apparel, but we’re getting them now.”
Soderquist said White Stag, one of Wal-Mart’s most recent branded apparel additions, “is going gangbusters.”
Other discounters, too, are attempting to improve their apparel business, which is a higher margin category. Kmart, for example, continues to develop and expand the Jaclyn Smith collection.
The Jaclyn Smith line now includes shoes, handbags, accessories and hosiery in addition to apparel, and it may expand into children’s wear in the future. It is estimated that 30 million American women have worn something from the collection.
One reason Gifford is willing to take her line to the mass market is the success other products she has endorsed have achieved at Wal-Mart and other mass merchants, Adler of Halmode said. Her exercise video, “Feel Fit & Fabulous Workout,” sold well at Wal-Mart stores across the country, Adler said.
“She had also heard from many of her customers and fans that the dress collection was generally too high-priced for them,” Adler said.
Janet Mangano, an analyst at Burnham Securities, said she believes Wal-Mart is “thinking of its consumer” in developing a Kathie Lee collection.
“I’m sure that it is nice in terms of incremental sales and profitability, but you know Kathie Lee and Regis have great appeal across America,” she said.
Kathie Lee is a mother of two, married to former football star Frank Gifford, and always “well turned out,” Mangano said.
“She really is a role model for a well-groomed woman, casual or dressed. She is not a movie star or a presidential wife, but I think people identify with her.”
The question, though, is how Wal-Mart translates the collection in terms of styles, price points and sizes, Mangano said. It should be a collection that is both “affordable and easy to wear,” Mangano said.
“That’s the way I think Wal-Mart is going to execute it, but we have to see what it looks like on the racks,” she said.
Whyte, the Stephens analyst, said he believes the Kathie Lee collection at Wal-Mart would need some time to match the sales levels of Jaclyn Smith’s collection at Kmart.
“Jaclyn Smith had to ramp up to that volume,” he said. “It didn’t just happen as soon as it hit the floor.”
Currently, the apparel selection at Wal-Mart consists primarily of basic and undifferentiated merchandise, many analysts said. Wal-Mart does execute its underwear and lingerie departments well, but the casual separates and sportswear areas are in need of updating.
“I think the clothes there are suitable for many different tastes, but they lack pizzazz,” Mangano said. “I think Kathie is a good person to use to give it some sparkle.”
Some competitors, however, have a wait-and-see attitude.
“Some people make personality merchandise work for them,” said Barger Tygart, senior executive vice president and director of merchandising and support operations at J.C. Penney Co. “It really depends on the value of the product, how fashionable it is and if [Kathie Lee’s] name brings credibility to product and raises the value of it for the consumer.
Tygart agreed that Gifford is a popular televison personality.
“If that translates to the consumer, that could be a plus,” he said.

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