Fashion Notebook

Week in Review Pt. 1: Louis Vuitton Rocks Out, Kohl's Gets Punked, and More Rumbles for the Luxury Market

OK, so we've kinda been bad lovers the past two weeks. Yeah, we admit it;
we haven't been updating as often as we, or you, would like. But our offline
job got a bit crazed last week and that prevented us from posting. So, in effect, it's not you, it's us.

Also, we were, like, on pins and needles waiting for the finale of Project Runway. And, hopefully you'll agree, we're so, so, so, fiercely happy that Christian Siriano won we can barely contain ourselves. Kid has some serious talent, and we're sure that we'll be hearing from him sometime soon. Is he adoptable  by the way? We might just forego that Boston Terrier we'd been planning on bringing home and swap it for that adorable pocket-gay (though he'll have to sleep in a closet, as we're still living in a New York state of reality folks!).

But let's leave all this relationship drama to the Spitzers! It's time to take a look at what's happened, what it means, and where we see things going... So without further ado...

Louis Vuitton's New Bag
Unless you've been hiding out under a mountain of paperwork (like us), you've probably already heard that Rolling Stones guitarist Keith Richards is the new, wrinkly face of Louis Vuitton (SEE PHOTO, BELOW, LEFT). (Insert "Vuitton's new, iconic wrinkled bag" joke here, hell, everyone else has. For SHAME Saturday Night Live! You, like fashion, were more inventive in the 1980s.) If you haven't seen the spot already, check the photo at right.

We have to say to say that this is an interesting choice, and it's already done its job many times over in terms of exposure (more than we'd imagine placing, say, Katherine Heigl, or some other, safer choice, in front of the camera). But hasn't Vuitton really missed the rebel-rock-me boat by like, say, 40 years? We would prefer to see the ads featuring this Keith.

Also, how does John Varvatos feel about all of this. Certainly, the Stones trump Cheap Trick, not to mention the fact that the campaign pretty much cribs from Varvatos' own advertising mantra: Bring back old rockers and consumers will come. Of  course, Varvatos seems to have more credibility here and we're still not sure what a great cover boy Richards is for the brand. After all, while he's definitely rich beyond words—and amazingly still alive—we're just not sold on him as a real luxury guy. Then again, maybe that's what rehab and old age will do to you. I'm sure that he has a wonderful assortment of organic teas backstage, but is he really throwing those outfits in a Vuitton steamer?

Love to hear your thoughts on this. Drop us a line, here.

Kohls Pumps Up Its Juniors Jam with Avril Lavigne
Yeah, the girl ain't punk kids. Then again, Richards sold his ass to Louis Vuitton, so what does define the legitimate rocker persona? Anyways, Avril Lavigne maybe didn't steal your boyfriend, but she did ink a deal with Kohl's to produce "Abbey Dawn," a collection of apparel (priced $24 to $48) and accessories (read: jewelry, for now) that will hit the mass merchant's doors nationwide in July.

The move obviously means that Lavigne will get some dollars in her coffers—seriously, is she even that hot anymore?—but it also seems to really define her audience in a way that could be limiting for the popstar. Launching just in time for back-to-school shopping, the line is allegedly for the "broad group of shoppers" that Lavigne attracts, according to SVP Don Brennan, but we're calling bullshit. If it's B-T-S, the tricks are for kids, and that's fine, after all, those are the types that will pay retail for her album "The Best Damn Thing," which came out last year and for which the star began touring to support last week.

According to spokeswoman Vicki Shamian, the line shouldn't cannibalize any of the retailer's other exclusive brands, like Candies given Avril (and by proxy, her collection's) "feminine yet rock n' roll attitude." [Side note: Meanwhile, no notes on how the Simply Vera collection is doing. If you've got deets, or reactions, or if you've tried on the products, send a note here]. Advertising, on which details aren't yet available, will be handled by the Kohl's in-house team, in conjunction with lead agency McCann Erickson, New York. Stayed tuned.

 

Financial Desk: Luxury Retail's Mixed Bag
Ok, so we've probably hammered this to death, but there might be trouble with the luxury market.

Saks Fifth Avenue announced last week that it had approached roughly $1 billion in sales for the quarter ended Feb. 2, up almost 5% from the year-earlier period, but with comp store sales increasing by 9%. Meanwhile, net income rose dramatically, some 83% drama, to $39.5 million, or 26 cents a diluted share. However, gross margin slipped about 50 basis points to 37.4% of sales.

But there's trouble ahead. According to a statement by chairman and CEO Steven Sadove, January and February comp store sales grew by only 4.1% and 3.4%, respectively, and "previously high-growth rate businesses such as handbags, footwear and men's have slowed."

"As expected, the more challenging promotional and overall macroeconomic environment that we began to experience in the third quarter continued throughout the fourth quarter and put pressure on our merchandise margins," Sadove continued. "Our outsized comparable store sales growth indicates that we significantly improved our competitive positioning by market, driven by our merchandise, service marketing and capital investments."

And then  came the wahn-wahn moment.

"Nothwithstanding our improved performance and the longer-term outlook for the luxury channel, we expect to continue to face an increasingly challenging macroeconomic and promotional environment in 2008, and are taking a more conservative approach to planning the business this year," Sadove said, adding that the company expects to see comp store sales growth in the mid-single digits for 2008, with low-to-mid single digit growth in the first half of the year.

Meanwhile, at Neiman Marcus, positive earnings were also overcast by ominous notes. Revenues at the luxury department store grew almost 6% to $1.37 billion in the second quarter ended Jan. 26, while net earnings grew 8% to $44.3 million. However, February comp stores sales posted a 7.3% decrease.

In a conference call, Neiman Marcus chairman and CEO Burt Tansky seemed to feel, well, pretty much like every other luxury retailer these days. He's playing a cautious game as the news of a buckling economy and decreased consumer spending prophecies an even rougher year.

"As we all know, the entire U.S. retail sector has seen sales growth diminish somewhat, and this slowdown has affected some parts of the luxury market," he said in the call. "Our sense is that the aspirational customer has pulled back somewhat in response to concerns about the U.S. economy in stock and housing markets. However, this aspirational customer appreciates quality and can be expected to buy more as the economy improves. Nevertheless, we feel confident that the pure luxury customer, the affluent to the very affluent, will continue to demand only the finest."

Seems plausible, of course, except that we're not getting at raw numbers here. What's the proportion of aspirational consumers to pure luxury consumers? Wethinks it be disproportionate and that Neiman's might have a few, hopefully not too many, pricey dresses that are staying on the racks as Sex and the City fangirls start closing up their upper-middle class purses.

Financial Desk: Pre-Announcement of Dismal Q4 and Fiscal 2007 for Liz Claiborne

Ruht-roh...

That's the feeling we get from the latest announcement from the financial office over at Liz Claiborne.

A pre-announcement of Q4 and full-year 2007 earnings forecasts greater-than-expected profit losses prior to the official report due out Feb. 27.

Bear with us as we go through the details. It gets foggier than Pynchon prose at times as you roll down the balance sheet expectations.

For the fourth quarter, the company said it now expects losses of $0.90 to $1.00 per share, with earnings per share of $0.15 to $0.25, compared to earnings  of $0.71 per share in the year-earlier period. Net sales for the fourth quarter are projected at $1.21 billion, down 3% from the prior year.

For the full year, expects losses of $0.25 to $0.35 per share, on the assumption of posting earnings of $1.25 to $1.35 for 2007, a serious dip from earnings of $2.46 a share in 2006. Net sales for 2007 are estimated at about $4.6 billion, down 1.4% from 2006.

It's important to call out that the projects don't include any impact from the sale of the Ellen Tracy brand today, which went to Radius Partners LLC, Westport, Conn., for $27.3 million (plus up to $15 million more, depending on how the brand performs over the next four years). That adds some dollars to the coffers that could help offset some of the expected weakness.

But it's equally important to remember that the  projections don't include the impact of costs associated with the company's efforts to "streamline operations," the shuttering of some of its cosmetics brands, as well as what appear to be the weakened status of those 16 brands the company had under review.

But well, let's let CEO William McComb sort it out. Here's what he had to say.

"While 2007 marked a very difficult period, we see the fundamental in this company heading in the right direction," McComb said in a statement. "This conservative view we are taking in our 2008 guidance-specifically around our Partnered Brands performance—is only prudent given the challenging retail environment."

He also added that "markdown pressure" hit those Partnered Brands—which include Liz Claiborne and Dana Buchman—hard during the quarter, but that they're going on the offensive with recent design deals for Claiborne that include Isaac Mizrahi tackling the women's end and John Bartlett handling men's, as well as licensing Dana Buchman out to Kohl's. For more on that, see here.

On a positive note, it looks like Juicy Couture is doing well, with Q4 comp store sales expected to be up 25%, while the brand jump 23% in sales for the full year. The Lucky brand remains flat against year (hey, it's better than being in the red, people!), though Mexx was down 3% for the quarter and 2% for the year.

Liz Claiborne Steals Isaac Mizrahi from Target!

Talk about a shake-up.

It appears that after a successful, five year marriage to Target, designer Isaac Mizrahi is setting sail for Liz Claiborne.

As the newly-tapped creative director for the Claiborne brand, Mizrahi, one of fashion's more ebullient and popular personalities, will oversee design and marketing for the brand's women's apparel, accessories and licensing businesses. His first collection under the Liz Claiborne label is slated to debut in spring 2009.

"[We] believe that [Mizrahi's] innovative design sense and widespread appeal will breathe new life into the Liz Claiborne brand," said Liz CEO William McComb, in a statement. "It is certainly no secret that the brand has been lacking a clear and cohesive vision and has languished as a result. With this appointment, we are taking a major step towards our goal of creating irresistible product that will provide today's discerning woman with a compelling reason to buy."

While no financials of the deal were disclosed, Mizrahi's own statement seems to betray, if not a fairly lucrative deal, then at least boosted branding opportunities for the designer who pioneered the high/low design ethos when he signed on to produce a women's collection for Target in 2003, paving the way for many others who followed in succession, including Karl Lagerfeld (in 2004, with a capsule collection for H&M), and most recently, Vera Wang (in 2007, with her Very Vera collection for Kohl's). For more on those partnerships, and their impact in the industry, please see my previous article, "Split Personality," here.

"I'm honored to have the opportunity to build on this fantastic legacy and excited to reestablish the label as a must have," Mizrahi said, in a statement. "And as excited as I am about developing Liz Claiborne, the collaboration also affords fantastic opportunities for growth in my own brand."

Aside from the forthcoming collection for Liz Claiborne, Mizrahi will also bow his new web-based series, "Watch Isaac," in February at WatchIsaac.com. His collections for Target will continue to be sold through the mass-retailer throughout 2008.

However, we have to say that the move seems a risky one, given several factors. First, Isaac had a pretty successful collection at Target, reportedly garnering annual sales of $300 million. Why shirk that to head over to Liz Claiborne, which posted 65% dip in third quarter net income on a 4% sales drop? And yet, it's not like things are all milk and honey over at Target, which posted a sales gain of only 0.1% (at $9.26 billion) for the month of December. Then again, it's important to remember that Mizrahi is no stranger to ups and downs himself, and that the deal he inked with Target back in 2003 can be credited, at least in large part, to revamping what was then an ailing name brand.

What the move means for Liz, and its impact on Target's business, remain to be seen.

"It can't hurt Liz Claiborne...but the issues there are more than one individual can conquer. Bringing the brand back to its heyday will require a lot more than just a new design concept or featuring a household name on the brand's marquee; it will have to be a major shift in management, merchandising, marketing and advertising and ," said Marshal Cohen, chief industry analyst at NPD Group, Port Washington, N.Y. "As for Target, they've shown that they understand the consumers' desire and the need to constantly revolve  their brands. Will they miss Isaac? Probably. But they'll find something to replace [him]."

Cohen also suggested that Mizrahi might have some growing pains to contend with in his new post.

"He was an island unto himself at Target; all of those other brands paled in comparison to his work, and he was treated as the prized jewel in that environment, " Cohen said. "In the mall environment [where Claiborne is], he'll be up against hundreds of other brands, where he's no longer the shining star by default."

 

The news of Mizrahi's switch comes following the appointment, earlier this week, of John Bartlett as Claiborne's new men's sportswear designer.

On a lighter note, if you're unfamiliar with Mizrahi or if you feel you need a refresher course on why this guy seems to be such a hot commodity for these mass merchants, check out "Unzipped," the 1995 documentary that took Isaac as its subject, with all his quirky humor and non sequitur dialog to go along the way.

One of our favorite lines: "All I want to do is fur pants, but I know, like if I do them, I will be stoned off of Seventh Avenue, like some wanton heretic or something. So there won't be any fur pants coming down my runway. It's about women not wanting to look like cows or something."

Move Over Vera, Kohl's Latest is Fila

Kohl's announced today that it will have exclusive U.S. retail distribution for Fila Sport, part of a multi-year licensing deal it has inked with the Seoul, Korea-based athletic brand. The collection—a full-arsenal mix of apparel and accessories for women, men and children—hits Kohls brick n' mortar and online in fall 2008.

According to the company, the move is geared toward cashing in on consumers’ increasing adoption of sports and activewear across a wider variety of wear occasions. Hmmm... Where have I heard that before?

“Industrywide, the active and sport business continues to grow [and] the addition of Fila Sport capitalizes on the market opportunity and expands our exclusive offerings with one of the most recognizable names in sportswear,” said Kohl's Prez Kevin Mansell, in a statement.

Per the agreement, Kohl’s will work with Fila on product design for the collection, in addition to heading up the manufacturing, production, distribution, sales and marketing of Fila Sport. Sounds like it's a Kohl's line that just has Fila's named slapped on the label. 

The Fila deal is the latest licensing agreement for the company, following a much-hyped launch of its collaboration with womens-wear designer Vera Wang, dubbed Very Simply Vera by Vera Wang, in September. For more on that collaboration, and others like it, check out my piece, Split Personality.