DEVISING A BETTER PLAN
Byline: Kristin Larson
NEW YORK — A new conservatism has overtaken the better sportswear arena.
Dominating some of the biggest chunks of real estate in the troubled department store sector, these volume-oriented players are shunning any liberal forecasting and spending in favor of severe belt tightening.
To play it safe, firms are planning their businesses flat for at least the first two quarters, shortening production cycles and looking at ways to cut expenses — from employees to travel and entertainment — in an effort to stay as lean and flexible as possible.
A number of firms, including August Silk, Kenneth Cole and Tommy Bahama, are still planning expansions in 2002, either with new divisions or store openings.
Summing up the situation for many firms, Tony Margolis, president of Tommy Bahama, said, “We can’t be spending money as though business is charging forward aggressively. It’s time to be conservative, but not to get too scared.”
One thing is certain: Maintaining a positive attitude and looking for ways to entice the consumer through higher quality products offered at lower prices is paramount at a time when necessary expenses like gas, rent and food compete with whether to spend $50 on a sweater.
“We’re assuming one day, hopefully, business will turn around,” said Jason Tynan, chief executive officer at Finity. “Business is very emotionally driven right now. But if we go through the spring season and terrorist incidents are limited, people will start to feel more comfortable about traveling, buying, spending and consuming. Conspicuous consumption just doesn’t feel right, right now.”
Sigrid Olsen, creative director at the firm that bears her name, said the topsy-turvy environment has dumfounded designers — whose job is to forecast what consumers will want six months to a year ahead of time.
“It’s an unprecedented time and we can’t even project out for two weeks because things have been so drastically affected by the economy and people’s state of minds,” Olsen said. “But consumers are still shopping and they’re looking for two things: the emotional response and clothes that make them happy.”
Along this vein, Sigrid Olsen will launch a national print advertising campaign this spring intended to evoke a warm emotional response, Olsen said. Shot in the Bahamas, there will be close-up images of feel-good things like flowers and leaves — items that also serve as the inspiration for Olsen’s designs, she said. It will mark the firm’s first foray into advertising.
“We felt we were at a point where we had established ourselves as a fashion resource, but we hadn’t used our advertising to differentiate what sets us apart,” Olsen said.
Another first for Sigrid Olsen will happen in the form of retail, as it plans to open two stores in the new year. The locations and opening times have not been determined, Olsen said. In addition, the company this week announced the appointment of a new marketing director, Joyce Fish, who worked as a consultant at Global Licensing, a licensing company for Bert Pulitzer, McGregor and Botany 500 brands.
For Finity’s spring collection, Tynan said his firm is taking a more sophisticated approach, while leaning away from flamboyant and glitzy looks. To keep prices down, the collection will be centered on separates, such as silk shirts and novelty pants, as opposed to complete outfits that are often more pricey, he said.
The firm is also trying to reduce expenses by 12 percent and has laid off about 20 people, from midlevel to executive, over the last year.
“The biggest challenge will just be getting through spring,” Tynan said. “But a smart manager has to keep the company’s head above water, so when the tide starts to flow everyone swims together.”
Jones Apparel Group, which features in its stable of brands Jones New York, Lauren by Ralph Lauren, Nine West and Rena Rowan, saw third-quarter income decline 52.5 percent to $53 million. Revenues for the three months rose 3.7 percent to $1.24 billion.
Following the consumer’s more relaxed way of dressing at work, Jackwyn Nemerov, president and chief operating officer and ceo of the better sportswear group at Jones, said starting with second quarter, the company will take a more separates-driven approach with its Jones New York line.
“It’s more about the way the pieces come together rather than the matching of a jacket or a skirt,” Nemerov said. “The pieces are more multi-end use.”
Liz Claiborne Inc., which includes the better brands of Elisabeth, Liz Claiborne, Sigrid Olsen, DKNY and City DKNY, Kenneth Cole New York and Laundry by Shelli Segal, posted an 8.2 percent increase in third-quarter profits along with a corresponding 14.7 percent jump in sales. For the quarter ended Sept. 29, net income rose to $72.6 million. Sales hit the $1 billion mark for the third quarter, compared with $879 million last year.
At the time of the earnings announcement on Oct. 18, Paul R. Charron, chairman and chief executive officer, said in a statement: “While we are generally pleased with the performance of our brands in this unsettled environment, and while we continue to have confidence that our core strategies remain relevant, we cannot plan that the challenges we see ahead will become easier to deal with or will go away any time soon.”
As the quality versus price issue continues to be important, Kellwood Co.’s president of women’s wear, Stephen L. Ruzow, said the firm will continue to evaluate its sourcing strategies on a month-to-month basis.
“The natural course of events is that we’re looking to source smarter and better,” Ruzow said. “We’re also adding the additional risk factor, which is we’re at war — that is the new part of the equation that we hadn’t had to look at up until now.”
Kellwood features the better brands Emme, David Brooks, Jax and Northern Isles. Ruzow said Kellwood is looking at a “very conservative plan” for the first half and third quarter, and is hopeful at seeing an increase in business during the fourth quarter.
“I don’t know what the fallout is going to be on the retail and wholesale side after the first of the year,” he said. “There’s going to be people going out of business. The pie isn’t getting any bigger.”
John Idol, chairman and chief executive officer of Kasper ASL Ltd., which owns AK Anne Klein, said the company expects volume growth through a 25 percent increase in door count next year, based upon the line’s new concept, which is being redefined from primarily career dressing to a denim-based lifestyle collection. There are also plans to renovate all AK Anne Klein in-store shops by the end of next year, Idol said.
“The company expects a weak economic environment for the majority of ’02,” Idol said. “That said, we are very optimistic about the company’s potential.” (For a look at Anne Klein’s bridge outlook, see page 8.)
Shortening production times will be even more crucial going into the new year, said Lou Breuning, president of August Silk Inc., which has cut lead times from 60 days to 30 days.
“It’s as much about value, the right product and the right production,” Breuning said. “Because if we need to chase a business, lead times are going to be even more important.”
To facilitate this process, the firm has expanded its facilities in Hong Kong and China, he said.
While noting how challenging first quarter will be, Breuning stressed it’s also about offering the right product, which is why August Silk chose spring as the time to launch a new division called Logic Knits, which he described as a younger, more updated August Silk.
“This is an extension of the same customer, but a newer customer,” Breuning said. “I don’t see it taking away from the business that’s out there — it’s just the next tier.”
Breuning is planning business flat for the first and second quarters, and expects volume to reach $200 million between the U.S., Europe and private label.
“First quarter will be challenged, but I think we’ll start seeing business turn around in March, April or May,” he said. “We’re starting to see people back in the stores. Things are driven by price — there’s no question. However, we are hitting our sales plans.”
After opening the Reaction Kenneth Cole flagship in New York in October, Paul Blum, executive vice president and chief operating officer at Kenneth Cole, said the firm continues to look at opportunities for store expansions. In addition, there are plans to launch Reaction Kids and a fragrance in the second half, he said.
“I’m very optimistic and I think business has already started to turn around and it will just continuously get better,” Blum said. “We’re not pushing our plans too aggressively, but we feel business will continue to improve.”
While Tommy Bahama has cut back on advertising for spring and summer, and sales are down about 5 percent, Margolis said the company is committed to meeting its plans to open five to 10 stores each year.
“With eight leases signed, we’re on schedule,” he said. “We know our product presented in the right environment sells well, so we’re just going to try and stay centered and let the consumer regain their sense of security.”