Quotes of the Day
"I've never dressed this group before," exclaims designer Michael Kors. He's talking about the millions of consumers out there who may covet designer fashion but are not prepared to shell out $850 for one of his 10-ply cashmere sweaters or $8,900 for hand-beaded pants. Or who may not even know his name. Kors built a fashion reputation dressing American jet-setters in cashmere and sequins, but now he covets single-name status like Ralph or Calvin. So he's launching MICHAEL Michael Kors (yes, the first name twice), intending to swathe Americans in what he calls "affordable luxury"--bright Argyle sweaters, paisley-print raincoats and stamped-leather handbags, most priced at less than $500. The new collection debuts this month in 350 department stores across the U.S. and next year in Europe and Asia.
The Michael-as-Ralph strategy is the brainchild of Kors' financial backers, Silas Chou and Lawrence Stroll, who bought a majority stake in Kors' company for a reported $100 million in January 2003 through their firm Sportswear Holdings Ltd. "It was time for him to become the next great American designer," says Stroll, who, along with Chou, conducted a "simple process of elimination" before they put their dollars behind Kors. "We wanted to invest in someone who is American, whose style is aspirational and who is seasoned but not too old. With these criteria, there were surprisingly few names to choose from."
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Kors, 45, not only had the right experience; he was hungry. After 23 years in business, one trip to bankruptcy court and a seven-year relationship with LVMH Moet Hennessy Louis Vuitton, where he designed the Celine line, Kors was respected but not iconic.
Stroll and Chou intend to change that by turning Michael Kors into a $1 billion brand within a decade and taking the company public along the way. It's an ambitious plan to say the least, but they've done this kind of thing before. Canadian-born Stroll and Hong Kong — based Chou were the masterminds behind Ralph Lauren's international licensing deals throughout Europe in the 1980s. In the '90s, they put their money and Seventh Avenue experience behind a novice designer named Tommy Hilfiger. They took Hilfiger from a $25 million jeans business to a $1.8 billion global brand.
The secret of their success is the combination of Chou's manufacturing power — his family owns Novel Denim, one of the largest suppliers of textiles, sweaters and yarns in the Far East — and Stroll's keen knowledge of international distribution, product development and marketing. With Hilfiger, they were able to use manufacturing muscle to lower prices below those of competitors like Ralph Lauren. They also invested millions of dollars in advertising, flooding international markets with Hilfiger's name and attracting a trend-setting young urban crowd to the brand. In 1992 they took the company public with one of the industry's most successful IPOs. In 2001 Chou and Stroll cashed out their holdings in Hilfiger and a year later relinquished their co-chairman titles in order to branch out and invest in other brands. They had already bought the British luxury-goods firms Asprey and Garrard in 2000, and after unsuccessful runs at Valentino, Brooks Brothers and Calvin Klein, the partners went after Kors.
Although he has worked almost exclusively in the top end of fashion, Kors has the perfect personality for mainstream retail. He is a former child actor who was nicknamed Chuckles for his sense of humor. He started in the business designing clothes and windows for a small shop in New York City. Before long he was selling his line to Bergdorf Goodman. Not your typical fashion prince, Kors calls himself a T-shirt-and-jeans kind of guy — a bit, you might even say, like Ralph and Calvin — and is more gossipy gadabout than aloof designer. He is known for leading his ladies-who-lunch customers into the fitting room and genially telling them what to wear.
Re-creating Ralph is going to be more difficult this time around. In the past two years, the better fashion category (second-line clothes created by designers for department stores at lower prices than designer originals) has been saturated with new lines from the very same Ralph Lauren, not to mention Tommy Hilfiger and Calvin Klein. And no other designer has attempted to launch so many different product categories at once: more than 10, including a full line of men's wear, women's wear, handbags, belts, shirts, eyewear and watches. "Kors has partnered with people who are very smart and very successful," says Janice Kaplan, executive vice president of ready-to-wear at Federated Department Stores, the retail giant that will feature the line in Bloomingdale's, Macy's, Burdines and Bon-Macy's. "Chou and Stroll know how to market. Look what they did for Tommy Hilfiger. Before them he was a total unknown."
Chou and Stroll have grown confident in their ability to predict changing consumer tastes and then to satisfy the new appetite. It sounds simple, but just how do you dress 100 million Americans? "Every generation of consumers has a specific taste," says Chou. "In the '80s it was Waspy, which is what Ralph Lauren delivered. Then in the '90s the urban and street look took off, and Tommy Hilfiger owned that. Today the consumer is swinging back. They want smart casual."
What's interesting is just how calculating Stroll and Chou are about this launch. Time was, a fashion designer would land on Seventh Avenue and either strike the right chord or strike out. These days, no one can afford to be so haphazard. After picking their designer, Stroll and Chou targeted four department-store chains where they saw a void in the designer better market — including Federated, May Department Stores, Saks Inc. and Dillard's. Then they signed several licensing deals including watches and men's suits, shirts and ties. To prevent the stores from cherry picking, they made the unusual stipulation that in order to carry any part of the collection, retailers would have to buy from each category. Finally, they devised a family-theme advertising campaign that would attract a 35-year-old mind-set. As Kors likes to say, everyone wants to look as if they're 35, whether they're 22 and want to be more sophisticated or they're 55 and want to look younger.
Will the strategy work a third time? So far, it seems to be catching on. At Kors' first personal appearance at a trunk show in St. Louis, Mo., more than 400 customers showed up to shop, despite a power outage. "I know it's going to be a huge seller," says Kal Ruttenstein, the fashion director of Bloomingdale's. "He's very smart, and he's a good designer, and he has finally become a mogul with big money guys behind him." All the more reason the stores are betting on Kors.
- Kate Betts