SALES SYNERGIES EMERGE FOR JONES-NINE WEST
Byline: Anne D’Innocenzio
NEW YORK — Powered by its Nine West acquisition, Jones Apparel Group is getting ready to embark on its first major cross-selling venture: The launch of Nine West sportswear, set for fall retailing.
The introduction of the better-priced Nine West collection, which company officials said reflects “the modern spirit of its footwear,” comes just eight months after Jones Apparel acquired the shoe giant.
The Nine West apparel venture, which company executives said has the potential to generate “several hundred million dollars” in sales in a few years, is expected to be one of the major growth vehicles for the company, whose revenues are expected to come in between $4.125 billion and $4.175 billion this year.
At the same time, the company is also getting ready to relaunch accessories under Jones New York, which is projected to be a $200 million business over the next two years. The business, under a former licensee, had generated sales of only $3 million to $4 million annually. When the acquisition was completed last June, Jones bought back most of its shoe and handbag licenses.
Projecting 15 percent top-line and 20 percent bottom-line growth for 2001, much of the company’s future sales are being pegged to cross-selling: Tapping into Jones’s manufacturing expertise to develop corresponding apparel for many of the dozen or so Nine West sub-brands, while using Nine West’s shoe expertise to revitalize shoes and accessories for many of Jones Apparel’s apparel lines.
Jones’s cross-selling venture is among the first in what industry sources see as a trend of companies seek to capitalize on the expertise of their acquired partners.
With Nine West apparel, which offers a plentiful offering of hip leather looks and chic black styles, company officials are banking on the line to strike a balance between better, traditional styles of clothing and contemporary’s trendy fashions.
A strong selling point, the company noted, will be the fact that the collection will sell for about half the price of such contemporary labels as BCBG and Laundry by Shelli Segal, and will be merchandised in the better career collections. It will be the least expensive of Jones Apparel’s portfolio of better brands — the licensed Lauren by Ralph Lauren and proprietary Jones New York collections.
For example, a Nine West jacket will retail for $160, while a Jones New York version sells for $200. The average price for a Lauren by Ralph Lauren jacket is $250.
Jackwyn Nemerov, president of Jones Apparel, projected that the Nine West collection should reach “several hundred million” dollars within the next three to five years, with the company planning to develop jeans, casual sportswear and eveningwear.
The Nine West brand in accessories and footwear had sales of about $800 million in 1999, sold through 1,000 Nine West units as well as department and specialty stores, but Nemerov believes it could be a $1 billion business over the next couple of years.
“We believe that we will put a halo over the brand,” she said. “We will create awareness and opportunities.”
The launch of Nine West apparel, which is being previewed by major department stores this week, is only the beginning. The company is set to launch Easy Spirit apparel, with an emphasis on casual, comfortable wear, slated to be in stores sometime in 2001, Nemerov said.
Wes Card, Jones Apparel’s chief financial officer, believes that Easy Spirit apparel has the same sales potential as Nine West apparel. The company also plans to launch Enzo Angiolini, Capezio and Amalfi in better department stores over the next two to three years.
With Pappagallo and Calico footwear, both dormant labels, Jones Apparel wants to develop an exclusive partnership with a mass retailer, aiming to capitalize on Nine West’s expertise in that area. Nine West’s Jervins private label shoe business does a big business in selling to mass marketers like Wal-Mart, Kmart and Target.
Such a venue would be a new avenue for Jones, which has not gone below the Sears-Penney’s moderate level.
“That’s what motivated us to acquire Nine West,” Nemerov said. “There are so many cross-selling opportunities to maximize the stable of brands.”
This brand-extension strategy will allow Jones to offer a unified approach to dressing different consumer segments from head to toe.
“We have direct control of every brand,” said Nemerov. “That’s what we saw as the potential when we acquired Nine West. We can look at the length of the skirt, or the width of the pants and relate that back to footwear. If embellishment is happening, we will interpret that for both footwear and apparel.”
Nemerov said that Nine West Apparel’s nine-member design and merchandise team is constantly coordinating efforts with Marc Fisher, president of design and merchandising for Nine West’s footwear and accessories, as well as Bruce Makowsky, president of Nine West’s sales and marketing. Prior to the acquisition, Fisher had been president of Nine West’s Jervins mass market division and Makowsky was president of all accessories. “The apparel line reflects the roots of the footwear collection,” Nemerov said.
About 25 percent of the offerings in the fall Nine West line, to be shipped in July, is in leather and suede, according to Heather Pech, president of Nine West Apparel. Pech is also the president of Jones New York Sport, Evan-Piccone, Jones Wear and Jones Jeans divisions.
The collection features about 20 percent black, with fake mink vests, which mirror Nine West’s short boot with fake fur trim; and with lacquer red a hot trend in apparel, Jones made sure to highlight the color in both the shoe and apparel collections, Nemerov said.
Nine West also offers technical stretch fabrics and knitwear. Styles for early fall deliveries include a black nylon and Lycra spandex dress, novelty space-dyed sweaters, a printed silk skirt with tiny ruffles and an ankle-length merino wool knit skirt with Fair Isle border trim.
About 15 percent of the Nine West Apparel business will be on replenishment. The 13 reorder styles for fall include several pieces in leather, such as a front-slit skirt, clean-front trouser and five-pocket jean. There are also sheath dresses and trousers, both in wool stretch, in the program.
According to Benny Lin, senior vice president and creative director for Jones Apparel, the goal is to build in-store shops from 400 to 1,500 square feet.
The shops, which will highlight a few key Nine West accessories and footwear styles, will feature a mix of walnut and Lucite, Lin said. The shops will also feature dressmaker chrome mannequins.
“It is quite nice. It looks modern but it has a misses’ fit,” said Frank Doroff, executive vice president of merchandising at Bloomingdale’s, who saw the line on Tuesday morning. “I think it will give a modern edge to better sportswear. Nine West is also hitting on a major trend — leather. It’s an opportune time.”
Jones Apparel plans to launch a fall print advertising campaign, to be created in-house, to spotlight Nine West accessories and apparel. Details are not set, but the plan is to include some outdoor advertising, Lin said.
The Nine West collection will be merchandised in Nine West’s eight lifestyle stores, Nemerov said.
At the same time, Jones Apparel is tapping into Nine West’s expertise in leather footwear and accessories and is moving ahead with ambitious plans to relaunch shoes and footwear under the Jones New York and Evan-Picone labels.
With Jones New York accessories, which had been struggling under previous licenses, the company plans to be the “dominant” resource in better department stores, according to Makowksy. The accessories, which include handbags and belts, will be launched in 700 doors this fall. The relaunch of Jones New York footwear is set for fall 2001.
Makowsky declined to offer a sales projection for footwear.
With Evan-Picone, which was repositioned in the better market for fall 1999, the company is relaunching its accessories business, which is being produced by Nine West. It is expected to generate about $50 million in sales over the next two years or so. Evan-Picone footwear has for a couple of years been produced by Nine West.
Like its apparel, the accessories and footwear collection sells exclusively to May Co. stores and J.C. Penney.
Meanwhile, Nemerov sees plenty of growth opportunities within the Jones brands.
Under Jones New York, the company is expanding its suit and dress collection for fall, capitalizing on the return to structured looks. The dress collection is in 150 doors and will be expanded to 300 doors for fall. Jones New York Suits is currently in some 450 doors, but will be expanded to 625 doors for fall.
The company widened prices for suits to reach more consumers. For fall, wholesale prices will range from $100 to $200, compared to $150 to $200.
Nemerov said that sales of the Jones New York Collection, its career component, had been down over the past two years, but she projected single-digit increases this year, due to the return of the career jacket.
Meanwhile, the company’s licensed Lauren by Ralph Lauren, Ralph and Polo Jeans lines ended the year with about $900 million in wholesale volume. That business “could double in revenues over time,” Nemerov said.
Jones’s cross-selling venture is getting kudos from Wall Street analysts, although some of them wonder how the firm will be able to manage its wide breadth of product offering.
Still, since March, when the acquisition was first announced, Wall Street has clearly warmed up to the deal. At that time, three investment firms downgraded the stock, due in part to concerns that Jones doesn’t know the shoe business and may be taking on too much in terms of operations.
At that time, Jones slid 3 3/16 to close at 22 3/4 on the New York Stock Exchange. Since then, Jones stock has been stable, although it took a hit earlier this month, losing 3 1/16 points to close at 23. That followed Jones’s announcement that 2000 revenues would be coming in short, due to difficulties in predicting Nine West store closings and gauging sales of some smaller, underperforming brands.
Jones reached a 52-week low of 20 1/8 in January, down from a 52-week high of 35 7/8 last May. It closed Tuesday at 24 1/6, down 1 3/8.
“This is definitely a novel approach,” said Margaret Whitfield, an analyst at Tucker Anthony Cleary Gull. “They will be able to monitor head-to-dressing. It will definitely benefit their footwear because they can coordinate color and fabric with the clothing. I can see footwear and accessories dramatically picking up.”
She added that she doesn’t see any conflict with the Lauren or Jones brands because the Nine West Apparel line targets a different consumer. Whitfield believes that this new entree could take market share from established contemporary and bridge companies.
For example, Whitfield said, “With Lauren, bridge consumers traded down.”
But Andrew Jassin, partner at Jassin-O’Rourke Group, said the cross-selling partnership could go either way.
“The challenge is to make sure that if one doesn’t go quite perfectly, it will not hurt the other business,” Jassin said.
He added that the Nine West shoe brand attracts both the mother and daughter, and time will tell whether the apparel line will do the same.
Josie Esquivel, an analyst at Morgan Stanley, who downgraded Jones’s stock, has since warmed up to the deal. She still has some concerns.
For one, given the intense competition at the department stores, Jones has to convince stores that they have something “fresh,” she said.
She also added, Jones is “going to have to juggle a lot of different businesses.”
“They have done a huge digestion job,” she said. “The challenge is how do they maintain some decent growth and how far can you stretch the management team. At least for now, I am positive. They have done an excellent job of melding Nine West apparel with Jones.”