WHEELING AND DEALING
This story first appeared in the July 7, 2004 issue of WWD. Subscribe Today.
The sizzling acquisition scene has attracted not only experienced consolidators such as Jones Apparel Group, Kellwood and Liz Claiborne, but also the likes of Tommy Hilfiger Corp., which has traditionally had a single-branded focus.
“It continues to be a very, very frothy [mergers and acquisitions] environment,” said William Smith, who had been president of Financo, but announced Tuesday he had resigned to become a partner with venture capitalist Christopher Burch. “Very good companies are coming to the market. There’s a lot of demand, a lot of interest. We’re seeing very, very healthy multiples paid.”
Quickly growing brands that consumers recognize continue to be popular targets for takeover.
“There’s always demand for strong apparel brands and there’s very strong demand for the 20 percent-plus growers because, in the apparel market in general, there’s not a lot of growth,” said Smith.
Hilfiger is said to be considering a couple of deals, which would help pump up its top line. In May, the firm noted it had held conversations with Marc Ecko Enterprises, but said no deal was in the works at that time. For the year ended March 31, Hilfiger’s revenues dipped 0.7 percent to $1.88 billion.
Phillips-Van Heusen Corp., which captured one of fashion’s most coveted names with the February 2003 acquisition of Calvin Klein International for more than $430 million, is also on the lookout for more deals.
At the firm’s annual meeting last month, chairman and chief executive officer Bruce Klatsky said PVH is positioned to take advantage of “any acquisition that might come along.” He said no deal was in the works at that time, though.
“We always look for who’s available,” added president and chief operating officer Mark Weber. “This industry will continue to consolidate and we’ll be one of the consolidating players.”
Jones, Claiborne and Kellwood executives say they are constantly considering acquisition candidates, though only a few can be expected to come to fruition in a given year.
Most recently making headlines was Jones, which last month signed a definitive merger agreement to buy Maxwell Shoe Co. for $346 million. The deal made particular sense for Jones, since Maxwell is the Anne Klein footwear licensee, a brand owned by Jones since it bought Kasper A.S.L. in December for $232.5 million.
In February, Kellwood snatched up Phat Fashions, along with its Phat Farm and Baby Phat brands, for $140 million in cash and unspecified incentives. Claiborne was also searching in the urban market and in December picked up Enyce for $114 million. — Evan Clark
Forget bipartisan politics, fashion has split into its own factions: the luxury world, and inexpensive fast fashion — with many designers playing both sides of the coin.
Not since the peak of the bridge market in the Nineties have designers been in such a rush to spin off less-expensive diffusion collections. Once the bridge market cooled off, however, for several years designers pulled away from lower-priced merchandise, fearing it would damage their brand image. But that trend has now changed again, with companies competing to see just how low they can go with designer-branded offerings.
The crux of the past two years was focused on the rush to better — with new collections in that category by Calvin Klein and Michael Kors, plus new offerings from Tommy Hilfiger and Ralph Lauren. Now, a newer target for designers seems to be moderate, or even lower. Isaac Mizrahi championed the extreme movement when he showcased his high-end custom line, which is being distributed in a new fourth-floor shop exclusively at Bergdorf Goodman, alongside looks from his Isaac Mizrahi for Target collection, priced at a fraction of the luxe line.
Mizrahi defended what he called a “bipolar shopping disorder” at the time, saying: “You don’t contain yourself to just expensive or inexpensive products. Those who can afford expensive clothes need to make it interesting now. When you see someone wearing only expensive clothes straight from a runway, it just doesn’t look good. They need to mess it up a little bit and make it real.”
Meanwhile, U.K. clothing retailers have a running list of guest designers: Sophia Kokosalaki, Hamish Morrow and Hussein Chalayan for Topshop; Georgina Goodman and Eley Kishimoto for New Look, and Clements Ribeiro for the Allders department store chain. From Paris, Karl Lagerfeld is the latest to jump on the trend, confirming he is creating a capsule of pieces for the Swedish chain H&M that will hit stores in November.
“My dream is to do very expensive lines like Chanel and Fendi and very inexpensive things,” Lagerfeld said recently. “Today, people wear T-shirts and jeans with exceptional things.” — Eric Wilson
MODERATE IN FLUX
Moderately priced apparel is looking less, well, moderate lately.
Neva Turi, vice president of merchandising for Sag Harbor, the moderate brand owned by Kellwood Co., said its customer “just doesn’t want the same old basics anymore.”
The vibrant colors that have taken the market by storm have been as prevalent at moderate prices as in the better-priced and bridge areas.
Trends such as the bouclé jacket or trenchcoat have also been catching on more quickly throughout the price spectrum and bowing in the moderate area at the same time they hit the bridge and better area.
At least partially responsible for moderate’s makeover is increasingly sharp competition even from lower-priced retailers such as H&M, Zara and Target.
On the other side of moderate is better, which has been rejuvenated by a spate of new and relaunched lines, including Lauren by Ralph Lauren from Polo Ralph Lauren Corp. and Jones New York Signature from Jones Apparel Group.
In addition to pumping up its fashion quotient to meet this competition, the moderate market is moving toward grander experiments in brand building.
For instance, Kellwood is launching O Oscar, a moderate line produced under license from Oscar de la Renta. In addition to bringing the power of a well-known designer name to the market, the rollout for fall will be supported by a national ad campaign in fashion magazines.
Some alterations in moderate are reactions to retail developments. Lord & Taylor, a division of May Department Stores Co., recently moved away from the price zone in a bid for more upscale customers. Kohl’s Corp., which until last year had been the darling of Wall Street for its dramatic growth in the moderate area, has hit a tough patch. Earnings for the year ended Jan. 31 slid 8.1 percent to $591.2 million, while comparable-store sales slid 1.6 percent. — E.C.
THE YEAR OF THE COMEBACK
The growing interest in New York’s fashion scene stemming from a crop of burgeoning talents has a number of tried-and-true designers hitching onto that momentum to reestablish themselves. The latest in a long line to revive her signature label is Gemma Kahng, a star of the Nineties who once managed a staff of 20 in a suite of offices at 550 Seventh Avenue and saw her designs featured on the cover of Vogue.
Now Kahng can be found in a small loft on the outskirts of Chinatown, in a service-free building, where she is slowly putting back together the pieces of her business after shutting down three years ago.
“Now I know what not to do,” said Kahng, who is 50. “I was so unprepared for the success that I had early on that I was unrealistic in thinking I could do it all by myself. There was so much running the business to do that I couldn’t do everything right. I couldn’t focus on designing and then we had some problems with production, and you cannot afford to make a mistake in this business.”
This time, Kahng is thinking small, designing a handful of looks targeted at the designer market. Some looks for spring were carried by Neiman Marcus and Linda Dresner. For resort, Kahng showed dresses in a combination of visual patterns, inspired by paper cutouts of butterflies and ribbon bows, made of silk georgette, crepe de chine and taffeta.
The cutouts are reminiscent of the jackets she designed in the Nineties, usually characterized by a cutout of a leaf on the pocket or novelty buttons. That look grew into a $5 million business for Kahng, who started her career at Cathy Hardwick, working alongside Charles Chang-Lima, who became her first husband. When Kahng left Hardwick, Tom Ford took her job.
“I am so proud of that,” she said.
After closing her signature line, Kahng designed a contemporary collection called UniForm for several seasons, then freelanced for the past three years, mostly for a division of Renown in Tokyo, sketching collections and traveling to Japan to check on production. Her new signature line wholesales from $200 for separates to about $900 for dresses.
“I was starting to feel healthier again,” Kahng said. “Emotionally, my life was getting better, and I felt that I could do something different, something fun and sexy and sweet.” — E.W.