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NEW YORK — Kellwood Co. landed the lucrative CK Calvin Klein women’s license on Thursday and company executives immediately said they plan to take aim at a burgeoning better-price sportswear market once dominated by a single designer sub-brand — Lauren by Ralph Lauren.

After five months of discussions with nearly every major apparel company, Phillips-Van Heusen and its CKI subsidiary awarded the deal to Kellwood, which has been increasingly competitive in building up its stable of brands for the better and moderate markets, while also mounting a challenge to the dominance of its competitors, Jones Apparel Group and Liz Claiborne Inc.

This story first appeared in the June 20, 2003 issue of WWD. Subscribe Today.

Last week, Kellwood threw its hat in the ring in a potential bidding war for Kasper ASL and its Anne Klein franchise with an offer valued at $163 million.

Landing the CK license was widely expected, as Kellwood’s interest was clear from the time PVH chairman and chief executive officer Bruce Klatsky reached a deal to purchase CKI in December. Since the completion of the acquisition in February, PVH also entered into a licensing arrangement with Kellwood for a women’s moderate collection under its Izod label, giving the company an inside track during the development of the CK talks.

In an unusual move, however, CKI and PVH teamed with two companies that were bidding for the deal, creating an arrangement for those firms to manage the design, sales and marketing of the CK collection, while Kellwood will handle production, financials and logistics.

Under the terms of the deal, Kellwood will collaborate with a new business formed by Giorgio Armani veterans Andrew Grossman and Alexander Vreeland with Jay Schottenstein, chairman of American Eagle Outfitters. The company, GAV, was formed in December to develop new lines and is continuing to negotiate for other deals.

The CK deal is structured so that Kellwood is CKI’s licensee and has formed a partnership with GAV.

The venture brings together a broad spectrum of industry talent — playing the strengths of the design history of Grossman and Vreeland, who is the son of the late Diana Vreeland, off of the proven infrastructure of the $2.2 billion Kellwood Co. Insiders said the companies were teamed up because there was a perception that Kellwood, with its Sag Harbor image, perhaps lacked the level of design sophistication expected by Calvin Klein, while there were concerns that GAV, as a start-up, would not have been prepared to handle the scope of production for CK, with its wholesale projection of $500 million over several years.

The combination also gives PVH additional leverage in its ability to bring CK better women’s product to stores relatively quickly, with the first deliveries anticipated by next March. The men’s CK collection being developed in-house, meanwhile, is also planned to retail in time for the Father’s Day selling period next year.

The deal is moving so quickly that within hours of the signing of the pact on Thursday, the company held its first design approval meeting, Vreeland said, when initial concepts developed by GAV since December were presented to CKI and PVH executives, including Mark Weber, president and chief operating officer of PVH; Tom Murry, president of CKI; Kevin Carrigan from Calvin Klein’s design studio, and Robin Howe, who was formerly the design director for Jones New York and is married to Grossman.

“Predictably, it looked very good,” Murry said. “We’ve been planning on getting into this zone of business for a long time…and we have the best team by far in the industry to enter this zone. Calvin Klein is the biggest brand that is not in better sportswear, but we’ve just been waiting to make sure we really have the right team in place.”

The company described the launch as taking place in select department stores for spring, with a more definitive statement for fall 2004.

“This is the right time for us to be launching this business and I couldn’t be more pleased about the people whom we’ll be working with,” Calvin Klein said in a statement. “Andrew Grossman and Alexander Vreeland have a history in this business, they have an appreciation for what I do and Kellwood has the business platform to support them.”

The industry-wide urgency to invade the better market stems from a perceived opportunity in the lower-priced apparel arena, where Lauren by Ralph Lauren has held enormous real estate at department stores across the U.S. for several years, representing the most successful transition of a designer label into that price point. The signature Liz Claiborne line still holds tremendous real estate in stores, with sales of about $1.6 billion, although it is seen as a mature brand.

Donna Karan has made some progress with the City DKNY collection that is licensed to Liz Claiborne, but it has not taken off with the same trajectory that Lauren by Ralph Lauren did when it was introduced by Jones at retail in the spring of 1996, with initial sales of more than $35 million that grew to about $548 million last year.

However, a dispute over the collection between Polo Ralph Lauren and Jones this year climaxed with Jones’ decision this month to walk away from the line and sue Polo Ralph Lauren, which then countersued. Now Polo, Jones and virtually every other company with an eye on volume is scrambling to strike in the better market, including designers like Michael Kors and Marc Jacobs who are looking for their own licenses.

Kellwood’s victory in the CK bid gives it an advantage with department stores as the company looks to expand beyond its core of moderate apparel. Its position would also be enhanced by an acquisition of Kasper, which produces its better-priced suit staples, as well as AK Anne Klein in better and the Anne Klein in bridge. However, Jones is said to be considering a counter bid during Kasper’s auction as part of ongoing bankruptcy proceedings, and its ceo, Peter Boneparth, might be ready to respond to Kellwood’s boastful challenge. He did not return calls on Thursday.

Hal Upbin, chairman, president and ceo of Kellwood, said the company has been working on the CK deal for at least three months.

“It’s kind of like when you’re on an exciting project and it’s important that you succeed and you finally do,” he said, noting that the deal will further strengthen Kellwood’s relationship with PVH. He also said it puts Kellwood on a path of bringing recognizable brands into is portfolio.

“Everybody says you need brands, and I said ‘OK,’” Upbin said. “We’ve got XOXO for junior, Izod for women’s moderate sportswear, and now CK Calvin Klein and very hopefully Anne Klein and Kasper. All I can say is we were selected, so we’re happy.”

Stephen Ruzow, president of women’s wear at Kellwood Co., noted the CK Calvin Klein women’s wear license marks Kellwood’s first big entrance into the better sportswear department, competing with the Jones New York lifestyle brand that Jones is building to replace its Lauren business, the Lauren business being developed by Polo in-house and the existing AK Anne Klein collection at Kasper.

“Of course, it would be amazing to have Anne Klein and Calvin Klein,” Ruzow said. “This will be a direct competitor in terms of open-to-buy dollars [with Lauren by Ralph Lauren], but the product will be very different. It’s going to be much more modern, but totally Calvin’s aesthetic. I don’t think it will compete with any of the [existing better] companies in terms of the look. We see this as a major, major business. This is Kellwood women’s wear’s biggest initiative to date — on a licensing deal. Obviously, the acquisition of Kasper in terms of dollars [would be] bigger.”

PVH positioned the announcement as the completion of the company’s three major goals announced with the acquisition of CKI: integrating operations, developing the men’s better line and finding the partners to launch women’s sportswear, a target that the companies’ retail partners have been equally anxious to realize.

Federated Department Stores, the largest customer of CK Calvin Klein apparel, was briefed on the negotiations during the process, Murry said. Terry Lundgren, president and ceo of Federated, identified the opportunity of the better collection as tremendous and promising. Frank Doroff, executive vice president at Bloomingdale’s, also said he is looking for new labels coming into the better sportswear business.

“We need new ideas, new resources, new thinking,” Doroff said. “But it’s all about the product.”

The combination of Kellwood and GAV was also lauded by the stores, familiar with the creative history in the collaboration between Grossman and Vreeland.

Vreeland was executive vice president of Giorgio Armani until September 2001, when he started his own consulting firm to guide luxury goods companies in the American market. Grossman recently consulted for Claiborne, after leaving his position as chief operating officer of Giorgio Armani Corp. in February 2000. He had earlier served as ceo of Chaus, and before that held increasingly senior management positions at Jones, including president from 1991 to 1994.

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