In an interview after a Tuesday approval hearing in a Manhattan bankruptcy court gave the go-ahead to hire him as president of the sportswear division, Warnaco chief executive officer Tony Alvarez and Kourakos said one of their main priorities is rebuilding the relationship with Calvin Klein Inc. Warnaco Group Inc. owns the rights to the innerwear business and holds the license for jeanswear.
“It’s been one of my goals to really make sure that the relationship between the licensor and ourselves improves a lot,” said Alvarez, who took the reins of the New York-based company after the November ouster of former chairman and ceo Linda Wachner. “The most important key is to get a common view and a common approach on product development that both sides believe in and work that through.”
While Alvarez said he didn’t discuss his decision on Kourakos with Klein, he acknowledged their previous working relationship had been a major factor in the hire. From 1994 to 1996, Kourakos served as president of Warnaco’s Calvin Klein underwear operations and before that he spent eight years working at CKI.
“While we did not ask Calvin to tell us, ‘Here’s a bunch of people that we think you ought to be thinking about,’ the fact that John had that in his experience — I think that Calvin thinks highly of him — was an additional plus,” Alvarez said.
CKI officials bore out Alvarez’s suspicion.
“We’ve had a great relationship with John,” Barry Schwartz, chairman and ceo of CKI, said through a spokesman. “I can think of no better person to head up this company. We’re thrilled to have him back.”
Kourakos said the rapprochement between Warnaco and CKI will be a key goal for him.
“One of the things I will try to bring, as I have in the past, is being able to communicate with both licensors,” he said. “We are not here to diminish the quality of the brand, we are here to enhance it.”
That’s not something the two companies have always agreed on over the past two years. In May 2000, Calvin Klein rocked the licensing world by filing a blockbuster suit against Warnaco Group and Linda Wachner, charging that its practices of discounting and selling to lower-end distribution channels were damaging the brand.
“We can’t stand by any longer and jeopardize the integrity and the value of the trademark,” Klein said in an interview at the time.
While the suit was settled a year ago, the relationship between the two companies has remained rocky.
One observer suggested Wednesday that CKI’s enthusiasm about Kourakos raises some interesting possibilities. Klein is said to be interested in buying the jeans and underwear licenses back from Warnaco — and it’s possible that the company would bring Kourakos along in the event of such a transaction.
Consultant Andy Jassin, a partner in the Jassin-O’Rourke Group, said: “In the event of Calvin taking the company back, which in my mind is more than likely through some relationship, it would be not only a transition for John to run the business currently, but it would be the full-time opportunity for John to be able to run the company in its new incarnation. Because one doesn’t know what is going to happen to Warnaco.”
Alvarez said it’s still hard to predict what the ultimate fate of Warnaco will be, but noted he aims to file a reorganization plan to bring the company out of Chapter 11 protection this year.
“Over the next three or four months, we are going to make a judgement on how we are going to get out of court,” he said. “We are going to dispose of non-core businesses and look at the core and determine if there are any of them that we would contemplate selling or any that we would contemplate reorganizing around+in middle to late summer, hopefully we are going to be able to propose a plan of reorganization and get out of court.”
When the company filed its bankruptcy petition in June, it showed assets of $2.4 billion and debts of $3.1 billion. Warnaco has continued to incur heavy losses since the filing. Most recently it disclosed in court papers that it accrued a $220.5 million net loss over the six months ended Dec. 1.
In 2000, the company lost $338.3 million on sales of $2.25 billion.
In addition to the Calvin Klein jeans and underwear business, Kourakos’s responsibilities will include Chaps by Ralph Lauren men’s shirts, ties and bottoms, and the ABS by Allen B. Schwartz sportswear and dress lines. Warnaco’s two other core units are Authentic Fitness swimwear and a multilabel intimate segment, including Warner’s and Olga.
William Finkelstein, the company’s former chief financial officer and one of Wachner’s right-hand men, had been overseeing the Calvin Klein businesses following his former boss’s departure. Alvarez said Finkelstein will now report to Kourakos. Alvarez said he was not sure what Finkelstein’s new title will be.
Kourakos said he wasn’t planning to make any immediate personnel changes.
“Housecleaning is not my style,” he said. “I go in assuming that I am now working with the best in the industry, and if that’s not there, we change.”
Kourakos acknowledged he will face some substantial hurdles in reinvigorating the sportswear operations, which represented well over half of Warnaco’s revenue in 2000.
“The challenges are to work with Tony [Alvarez] and the licensor in righting the ship,” he said. “It’s been a difficult couple of years at Warnaco.”
One of the hot-button issues on the Calvin Klein side is likely to be distribution. In 1999, Warnaco ticked off retailers and CKI by opening up distribution of the innerwear line to J.C. Penney Co. In CKI’s later lawsuit, it complained that Warnaco was relying too heavily on outlet stores and wholesale-club retailers for generating sales.
Kourakos declined to sketch out any immediate plans on distribution, but said he saw clear expansion opportunities for the Calvin Klein brands.
“Because you look at the distribution — and I’m not there yet, I don’t come on board until next week — I think you look at some of the opportunities within the divisions,” he said. “You look at Calvin kids or juniors, which personally are my first gut instincts that are underpenetrated compared to the rest of the market.”
While the juniors jeans category lately has been dominated by moderate-priced jeans brands, notably LEI, Mudd and Paris Blues, Kourakos said he wasn’t overly worried about pricing.
“If you can work with a licensor as creative as Calvin and concentrate on product, I think the consumer will respond to great product,” he said. “They respond to price secondarily, if the product isn’t great.”
A source described Kourakos’s strengths as being more on the sales side than in product development. However, that may not matter — terms of the settlement between CKI and Warnaco were said to have given Klein a much greater control over the licensed products that he had previously enjoyed.
Kourakos also has some history with Polo Ralph Lauren. Early in his career, he served as vice president of sales for women’s wear at that company. More recently, he worked at Tommy Hilfiger, stepping down as president of men’s wear in September after it became clear to him that he had exhausted his possibilities for advancement.
Alvarez, a turnaround specialist, said Kourakos will play a key role in most big decisions regarding Warnaco’s future.
“I am very committed to take this company through a plan of reorganization to get the best value for all constituents, to get the best answer for the business and the brands and to reorganize around the best set of properties we can go with,” he said. “John will be a part of determining that course and convincing constituents how to do it.”