It’s also clear that righting its biggest and most established brand is vital to turning around Kellwood’s women’s business, which was hit hard in 2001.
Todd Slater, an analyst with Lazard Freres, said, “The direction of the economic cycle will drive results more than any other single factor. But clearly, if Sag Harbor improves, it would provide Kellwood with a good shot in the arm.”
Slater estimated that Sag Harbor generates sales of $500 million to $600 million at wholesale.
Reasoning that consumers today want to look younger, dress more casually and are seeking greater options packed with style, the moderate maker has bid adieu to its focus on the wool blazer and has opted for updated, trendier separates aimed at fitting the lifestyle needs of its core customer, a woman roughly between the ages of 39 and 55. The changes began to be evident for holiday, but will take hold in earnest for fall.
“A year-and-a-half ago, Sag was known for its wool blazer, which we still do, but the line was much more limited in scope and diversity than it is now,” said Stephen L. Ruzow, who became the president of women’s wear at Kellwood Co., Sag Harbor’s parent firm, in late October. “This is the most fashion-forward the line has ever been, but appropriate to this customer. This is not the old Sag Harbor.”
Ruzow said the new direction of Sag Harbor reflects an attitude shift, but not a size change, which is especially important considering the brand’s best-selling sizes are 12, 14 and 16.
“What we’ve done is intensified our focus on categories,” he said. “You want sweaters, we have sweaters. You want jackets, we have jackets. You want skirts, we have skirts. You want pants, we have pants. The stores today are really focusing on key items so they can get multiple sales.”
What consumers will see in the new line is a move away from flannel wool, which was the core business for Sag Harbor, and into worsted wool.
“That’s a product that you really see in the better market and we were able to bring that in at a price value and at the same time introduce something new,” said John Henderson, executive vice president of Sag Harbor and of women’s special markets at Kellwood.
The fall collection will be about 100 pieces, about 10 percent bigger than previous collections. Included in the line are trendier items, like herringbone suits with pleather piping, novelty sweaters in a variety of fabrics, and unconstructed jackets. Cotton ruffle-front tuxedo blouses, floral georgette skirts and longer cardigans will also be featured. Other new items include worsted wool jackets and pants offered in three silhouettes: flat-front, pleated and side-zip. Key items, such as a sweater coat, will be available in as many as 14 colors.
Average wholesale prices range from $10 for tops to $25 for jackets.
A new Sag Harbor logo, with a more modern typeface, will also be introduced — the first redesign in the line’s history.
Still, revamping Sag Harbor comes at a time when Kellwood has had its share of financial woes. Slammed by a broad-based 20 percent drop in its women’s sportswear division, a continued economic weakness and greater demands for markdown support, Kellwood’s third-quarter earnings were nearly sliced in half.
For the three months ended Oct. 31, net earnings for the group dropped 48 percent to $13.9 million from the year-ago quarter. Sales declined 14.5 percent to $601.4 million. Women’s sportswear revenues decreased by $98 million to $403.4 million.
The St. Louis-based company said the lower sales volume and gross margins resulted in part from having to provide retailers with lower prices and a higher level of markdown assistance. Due to the anticipation of continued markdowns and pricing pressures, Kellwood provided fourth-quarter guidance of a loss in the range of $3 million to $5 million, or between 14 cents and 24 cents a share. The comparable year-ago loss was $1.6 million, or 7 cents, which included a one-time $5.9 million pretax gain.
Hal J. Upbin, chairman, president and chief executive officer, said at the time that the company’s core brands — Sag Harbor, Koret and Kathie Lee — represented 62 percent of the firm’s women’s sportswear business. Sales for these labels dropped $65 million during the quarter.
“The moderate business has been difficult and everyone has shared that,” he said. “But Sag Harbor held the lion’s share of the career segment, and as career eroded, the king of the hill eroded, too. That’s why we went into the casual business this year in a major way. Casual was less than 3 percent of our business and this fall it will be 30 percent of our business.”
The key is diversification, Henderson added.
“When you are a go-to supplier in a career environment and career has slowed down, you have to be affected,” he added.
Design director Marina Pappas noted that the evolution of Casual Friday dressing was a big reason that led to Sag Harbor’s need to update its look.
“For a long time, we had a specific customer that didn’t change,” said Pappas, who has designed Sag Harbor since the line was founded in 1976. “But people are starting to dress more casual at work. They don’t wear suits all the time. They want to wear a sweater instead of a jacket and we are now adapting to meet that need and giving them options.”
Henderson noted the intense competition and promotional activity put on moderate labels from better-priced lines.
“There was an overabundance of better goods that were being liquidated and promoted, and our customer, like any customer, ran to a certain degree to participate in that promotional activity,” he said. “The marketplace has flushed itself of that situation right now and there are features that we put into our product that are not in the better market, in terms of fit. Most of the better product is geared a little younger and doesn’t relate to our customer’s needs.”
So far, Ruzow said reaction to the new look of Sag Harbor has been positive.
Retailers with substantial distribution of Sag Harbor include J.C. Penney Co. and Belk’s Department Stores. A spokeswoman for J.C. Penney said a buyer at the store described the new Sag Harbor as “very with it.”
“It’s exciting, trendy, a much better assortment than previous seasons,” the spokeswoman quoted the buyer. “We feel it should fit nicely in our merchandise assortment. One of our objectives going forward is providing our customer with trend-right, fashion-right merchandise and we think Sag Harbor will help us accomplish that objective.”
The Kellwood Brands
In addition to the Sag Harbor brand, which is estimated to generate annual wholesale volume of $500 million to $600 million, Kellwood’s women’s sportswear brands, which account for about $1.6 billion in annual sales, are listed below in size order:
Kathie Lee, a line sold exclusively at Wal-Mart, with estimated retail sales of $700 million.
Koret, a San Francisco-based sportswear label, considered its third-largest brand.
My Michelle, Dorby, Vintage Blue and Studio Ease, Kellwood’s second-largest tier of brands, in terms of volume.
Cricket Lane, coordinated sportswear.
David Meister, a better dress collection.
Bridge line David Dart.
Democracy, a bridge sportswear line.
Emme, a full-sized better sportswear line.