Will the same branding principles that made Van Heusen one of the biggest shirt brands in America work in the world of high fashion?
This story first appeared in the November 17, 2003 issue of WWD. Subscribe Today.
Bruce Klatsky thinks so.
Earlier this year the chairman and chief executive of Phillips-Van Heusen Corp. pulled the trigger on a deal to buy Calvin Klein for more than $430 million. Now, as Klatsky oversees the 2004 launch of Calvin Klein better-priced collections at retail, the fashion industry is watching closely to see if PVH, expert at managing midpriced labels like Izod and Arrow shirts, will show the same touch with an iconic American designer label.
Klatsky, in his keynote address, embraced the challenge. “We bought a brand, maybe the Holy Grail of brands,” he said. “And you would be correct in assuming that our aggressive pursuit and acquisition of this particular brand says a lot about how we see ourselves and our place in the fashion industry.”
Klatsky conceded the acquisition of Klein boldly took PVH to places, especially distribution channels, where it has never been before, but he said the same focus on brand stewardship that had kept labels like Van Heusen and Bass vital for decades and longer would ensure that Calvin Klein could be developed successfully.
“Where [reporters, consumers and investors] see product and distribution channel, we see something entirely different,” he said. “We see brand. That’s why it doesn’t bother me at all to put Calvin Klein couture, Bass footwear and Van Heusen shirts in the same sentence —?and even in the same company. In today’s fashion world it is eminently sensible.”
Although the price points and positioning of Calvin Klein are different from those of Van Heusen shirts, the same principles will drive Calvin Klein’s success under its new ownership, Klatsky said. Regardless of their price point or distribution, brands require the same three elements for correct development: a product that is distinctive and true to itself; a distribution strategy that is appropriate, and a marketing proposition that is right for the brand.
“Calvin Klein is that rarest of rare birds — a world-class brand whose value is nowhere near being fully realized,” he added.
Asked whether his Calvin business would be affected if women’s designer Francisco Costa, a Gucci alumnus about whom there’s been speculation as a possible successor for Tom Ford at either Gucci or Yves Saint Laurent, left the firm, Klatsky said, “Calvin is an institution. It’s not dependent on [PVH’s president] Mark Weber or Bruce Klatsky, or anyone else.”
While commending Costa, Klatsky stopped well short of saying he was indispensable. “We want to provide Francisco with an environment he loves. He will contribute to the aesthetic of [Calvin Klein]. He’s a key member of the team,” Klatsky finally said.
The biggest challenge in the integration of Calvin Klein was transferring its men’s and women’s collection, previously produced in-house, to Vestimenta. That transfer has been completed and the line is selling “exceedingly well, I’ve been told,” said Klatsky. Van Heusen signed the Vestimenta deal in February.
Design and marketing remains at Klein’s offices on West 39th Street, though the back-office operations have been merged with PVH. The men’s sportswear business, which was kept in-house as a division of PVH, was moved to the Klein offices as well, he said.
With the relaunch of Klein under way, department stores are a topic close to Klatsky’s mind, and during his presentation he made an impassioned argument that national brands were key to the renewal of that sector. “It is not a stretch to say that the future of our company is in many ways linked to the continued health and vitality of department stores,” he said.
“The brands that department stores carry set them apart from their competition,” said Klatsky. “They establish uniqueness. They add prestige and cachet. They overcome resistance. They create excitement. They facilitate purchasing decisions. They attract customers. And they define the shopping experience.”
The department store segment is an area PVH has been carefully watching. Klatsky described the segment as “critical and a growing distribution channel for us…it remains the strongest and best retail concept for selling the kinds of quality brands that we are most interested in manufacturing and marketing.”
PVH sells its brands in a variety of distribution channels, including department stores for Van Heusen, Geoffrey Beene and Kenneth Cole dress shirts; middle-market chains for Arrow dress shirts, and mass retailers for private label. It also operates more than 700 stores, mainly outlets.
Although PVH uses a multibrand strategy, it ensures that its execution of that strategy preserves each brand’s uniqueness and value, Klatsky said.
PVH is returning Calvin Klein to department stores at a time when radical changes in global sourcing are making it harder for department stores to compete. The flannel shirt sold by a big box retailer is often made in the same factory that turns out designer clothes and, though the shirt may not be quite as well-made as the designer fashions, it still offers good value for its price, said Klatsky.
“Global sourcing has succeeded in delivering quality, fashion and value to mass merchandisers whose great creativity and ubiquity make them incredibly formidable competitors,” he said. Meanwhile, specialty retailers like Chico’s FAS, which found a niche serving normal-size, middle-aged women, are taking share from department stores as well, Klatsky noted.
The business has changed profoundly from years ago when brands like Gold Toe socks could analyze each market, and choose one department store to sell its products, said Klatsky. Now there is less loyalty on all sides of the equation. Consumers are more price-driven, suppliers serve multiple channels and department stores have turned increasingly to private labels.
As if it wasn’t enough to respond to those changes in the retail landscape, the fashion industry should expect there are more to come, said Klatsky. “I feel confident in saying is that within the next five years, some retail concept no one is anticipating will have taken the market by storm. And there is really nothing anyone can do to anticipate it or stop it.”
Department stores have turned increasingly to private labels, Klatsky noted, but he cautioned that if department stores depend too much on their own labels, they are essentially competing with specialty retailers on their own level, instead of playing up one of their biggest assets: the ability to offer a range of national brands.
But even if brands are department stores’ best defense against the competition, in today’s fast-moving world they are harder to develop than ever. In the past, retailers and wholesalers would stand behind a brand until it caught on with consumers, but today if something doesn’t immediately catch consumers’ attention, there is no room for it on the floor.
The costs of buying media time, as well as the challenges of developing product and establishing manufacturing also make it hard for new brands to be created, said Klatsky. “Hot new brands do emerge occasionally…but it is always serendipity when they do. And without proper attention and support to maintain their relevance to the consumer, such brands seldom last.”
To maximize the value of their brands, retailers and vendors need to cooperate as much as possible, Klatsky said. Vendors and wholesalers should be consulting on everything from preseason planning and brand assortment to promotional calendars and advertising, he said. Retailers should also choose their suppliers carefully since how they manage their brands can have a big impact on the bottom line.
Despite changes in the industry, consumers still know the best brands are found in department stores, Klatsky said. That means that brand management, brand development, brand preservation and brand extension are skills that fashion companies must have if they wanted to succeed.
As an example of successful brand management, Klatsky cited Van Heusen, which he called “in many ways the perfect brand,” with a large and loyal customer base and single-channel distribution. The brand has retained its unique image and iconic status even while responding well to line extension and updating, he noted.
“After 30 years of wringing value out of the [Van Heusen] name, I can tell you that it is a song that has much to teach us about all kinds of brands. And the message is relevant to brands across the spectrum — humble and post, inexpensive and premium, one-of-a-kind couture and dress-shirt common…
“It is by applying the lessons of Van Heusen and our other powerful brands…that we will orchestrate the symphony of Calvin Klein.”