WWD: Fashion's Big Issue: Succession Planning

WWD | MILES SOCHA

PARIS — Crafting succession plans for its creative departments is no doubt a smart strategy for any large fashion firm.

But the scale of today’s most powerful brands is increasingly insulating them from turbulence when designers depart — whether from death, retirement, flameout, poaching or otherwise.

Christian Dior — one of the hottest topics of this European fashion season — is a case in point.

The search for a successor to disgraced designer John Galliano has now clicked into its second year — a delay which so far has not proven an impediment to the French firm’s business momentum. Operating profits more than doubled last year as sales in Dior’s own stores advanced 28 percent.

Dior has remained mum on its intentions, insisting it will take all the time it needs to find the right designer.

RELATED STORY: Christian Dior RTW Fall 2012 >>

The house is believed to be mulling continuing with a team approach, possibly adding some young, up-and-coming talents. The studio is currently headed by longtime Galliano collaborator Bill Gaytten, who has earned encouraging reviews — and traction at retail — for subdued collections faithful to Dior’s iconic, Fifties-flavored glamour.

As reported in these columns, Dior has also conducted talks with hot young Parisian design Maxime Simoens, who made his debut Monday as the creative director at Leonard. Sources indicated Leonard and Simoens are likely to reveal a separation by mutual agreement.

While far less known and accomplished than other contenders for the Dior job — who have ranged from Marc Jacobs to Alber Elbaz — Simoens’ story is a compelling one with echoes of Yves Saint Laurent, who famously succeeded Christian Dior following the founder’s death in 1957.

Aside from a physical resemblance — a reed-thin physique and prominent eyeglasses — Simoens, 27, is a French wunderkind. The bio on his Web site notes that he became the first designer ever to be accepted as a member of the French Fashion Federation before having shown any of his collections.

Simoens has repeatedly denied to WWD that he has had any contact with Dior. 

Dior officials had no comment on Monday.

Observers agreed that decisions today about creative leadership are tied to the brand-related considerations, rather than a designer’s vision or personality.

“The overused term of brand building has become paramount,” said Robert Burke, president and chief executive officer of the consultancy Robert Burke Associates in New York. “The brands today more than ever are attuned to how to run a business.…No longer is it a one-man show — not with so much business at stake.”

“When a designer has managed to turn his/her company into a brand — with product pillars, codes and strong identity, combined with very efficient management — then succession remains a big issue, but at least there is less pressure on timing,” agreed Floriane de Saint Pierre, who runs an executive search and consulting firm in Paris. Besides the Galliano drama, the industry has been shaken by other unexpected designer shifts.

In 2010, there was the suicide at age 40 of Lee Alexander McQueen, and the sudden exit of Christophe Decarnin from Balmain following stress-induced health issues. Designer underlings succeeded both men: Sarah Burton and Olivier Rousteing, respectively.

More recently, the Jil Sander company persuaded the house founder to return once again, dislodging Raf Simons as creative director, despite almost universal acclaim during his seven-year stint.

Also, amid robust growth in sales and profitability last year at Yves Saint Laurent, Hedi Slimane is expected to succeed Stefano Pilati, who staged his swan-song show on Monday.

Succession is also a timely and highly sensitive subject given that a good number of major designers — including Giorgio Armani, Oscar de la Renta, Karl Lagerfeld, Krizia’s Mariuccia Mandelli, Vivienne Westwood and Ralph Lauren — continue working into their 70s.

It’s widely known in the industry that the “S” word is verboten at companies including Armani and Chanel. “And look what happened to Alber Elbaz and Jean-Paul Knott when they dared enter the Krizia lair,” said one European source, referring to short-lived stints by the Israeli-born and French designer, respectively, at the Milan-based house.

Executive search and other experts agreed that a visionary creative leader adds vital verve to a fashion brand, making succession planning crucial, while cautioning that transitioning to new design talent is a murky enterprise fraught with complications.

“We’ve all seen what’s happened when it’s the wrong designer,” Burke pointed out. “But that tends to happen when there’s less clarity about the direction of the brand or the label.”

He cited Valentino as an example. The Rome-based house endured a few turbulent years following the retirement of its founder in 2008, and before the current designers, Maria Grazia Chiuri and Pierpaolo Piccoli, found their footing. The duo, who had been in charge of accessories under the house founder, have been faithful to the founder’s vision and the brand’s values, treated with a lighter, fresher hand.

“It took not just designers. It took the ceo and all the people in the organization to take it in the right direction,” Burke said.

“I think it’s terribly dangerous to not have a succession plan,” stressed Vanessa Denza, the founder and owner of Denza, a London-based fashion recruitment agency.

She lamented that few designers deliberately cultivate and retain their eventual successors. In her view, Graeme Black was a “natural” to eventually take over from Armani. However, the Scottish-born designer exited Armani in 2001 after seven years, and has since done stints at Ferragamo, his own brand, and Boss Black women’s.

Denza applauded Diane von Furstenberg for last year recruiting Yvan Mispelaere, a seasoned talent with experience at Prada, Gucci, Louis Féraud and Chloé, to be her creative director. “She’s the president of the CFDA. She is a pragmatic woman,” Denza commented.

Observers agreed that securing design talent today is increasingly challenging for a multitude of reasons, including such contractual obligations as non-compete clauses that limit mobility.

Concetta Lanciaux, who runs a luxury advisory company based in Switzerland, noted that finding successors is more difficult today because senior “high-talent” designers prefer to continue working with the brands they have relaunched. Examples of this profile would include Elbaz at Lanvin and Nicolas Ghesquière at Balenciaga.

What’s more, the promising “next-generation” talents — including Christopher Kane, Alexander Wang and Damir Doma — have succeeded in building successful, sizable companies, making moonlighting for another brand a less urgent priority, and a less sought-after career path, Lanciaux said.

A pioneer who introduced management succession planning as the longtime head of human resources and synergies at LVMH Moët Hennessy Louis Vuitton until 2007, Lanciaux noted that the vagaries of creativity make it more challenging to anticipate what to do when a brand requires new design leadership.

“Designers, you have to leave them free to develop their creativity,” Lanciaux explained. “There is this affinity to the brand — this is paramount in creative functions, while management is transversal.”

Design studios can yield high-talent successors.

“Nobody could anticipate that Tom Ford would emerge at Gucci, or that Sarah Burton would emerge to the extent she has today,” Lanciaux said.

Yet she cautioned that not all second-in-command designers can rise to the challenge. “Next to these successful examples there are many unsuccessful ones,” she said. “Being a No. 2 for too long may freeze a designer in that profile.”

De Saint Pierre noted that France is the first country with a strong fashion industry to have dealt with major successions: Dior in the late Fifties, Chanel back in the Seventies, in addition to Givenchy and Yves Saint Laurent more recently.

Multiple observers noted also that once-strong houses can recede from prominence, with Emanuel Ungaro and Claude Montana frequently cited as examples of ill-handled successions.

According to de Saint Pierre, there is no rule for finding a suitable successor. “It just depends on talent and personality. One needs to be creative, to deal with an extremely high level of work and pressure, to have a modern inclusive management style and to fit with the brand,” she said. “Creative directors with true creative vision and true capacity to understand the newness of the 21st century are key to driving luxury global brands. “

Echoing other observers, Mary Gallagher, Paris-based associate for New York search firm Martens & Heads, noted that Dior is still performing very well even without a star designer.

Still, “I do think a figurehead helps sell the dream, especially a rare talent like Galliano,” she said. “I think the customer, unless it’s a die-hard fashionista like Daphne Guinness, does not need to have Lee [Alexander McQueen] or John [Galliano] actually sketch and drape her dress. The customer buys into the quality, design, cachet and reflected glory of a fashion house. And in most cases, it’s the studio that is proposing to the creative director, who then approves the sketch or collection.”

Observers noted that brands also require an up-front designer because the press, especially, often demands a name — and in some cases, a hero — to engender their ongoing interest.

Joelle de Montgolfier, director of Bain’s luxury group for EMEA (Europe, the Middle East and Africa), noted that human resources departments are typically engulfed in the immediate needs of business, and “not systematically forward looking.” Where succession planning exists, it rarely goes beyond management and the ceo position.

“It’s the common bottleneck: People are absorbed in daily execution,” de Montgolfier said, noting that’s especially the case during times of economic downturn and at a time when the “speed of change” in business life is accelerating.

What’s driving growth in luxury goods is the expansion of directly operated store networks and emerging markets, and creative concerns are rarely top of mind, she said. Still, “we are absolutely advocates of advance planning for future growth, and talent would be part of that,” she added.

De Montgolfier noted that many luxury brands have been around for generations, meaning they have survived the passing of their founders.

“Look at Hermès. They don’t have that famous designer in place and no one’s worrying about how they’re faring,” de Montgolfier said. “The weight of power is a bit more balanced with the rest of the organization. People have come to realize that the thrust of the company and its ability to grow goes beyond the creative talent,” she continued, mentioning the example of Ford, whose 2003 exit as creative director at Gucci Group did not impede its global advance.

Brands can become so significant in the marketplace that they live a “life of their own,” de Montgolfier said.

“It’s become a global industry and a very professional one,” she said. “It’s not about a person making an impression. It’s about a brand meant to survive across decades.”

WWD: L Capital to Shop for Mid-Market European Brands

WWD | ALEX WYNNE

PARIS — L Capital Management is going shopping. The LVMH Moët Hennessy Louis Vuitton-backed investment vehicle said Friday it had closed its third round of funding, with commitments in excess of 400 million euros, or $533 million at current exchange.

The firm, whose previous investments include the contemporary brand stable of Sandro, Maje and Claudie Pierlot, plans to buy into between 10 and 15 European midmarket lifestyle and retail brands, it said.

“They are already looking at two or three companies in Europe,” a spokesman for L Capital said, without revealing details.

There is speculation that L Capital has kicked the tires of U.K.-based retail jeweler Aurum, owner of the Mappin & Webb, Watches of Switzerland and Goldsmiths chains. Aurum was put up for sale by Landsbanki Islands hf, an Icelandic bank, last year.

The economic climate in Europe is likely to see certain family or designer-owned brands thinking twice before rejecting financing, where in the past they may have held on tight to their independence.

“European brands are particularly interesting right now, because of the financial situation. It’s not as easy for them to get funding from banks as it has been in the past,” said John Mitchell, president of retail and luxury goods consultancy Robert Burke Associates.

There are several high-end European brands that may be in the market for investment. Market sources cited Charvet, Christian Louboutin and Kiton as potential targets for investors.

But L Capital has made a habit of investing in midrange firms that have a strong retail footprint already, including Gant, Pepe Jeans and Hackett Group.

“L Capital invests in brands that are too small or do not have enough of a luxury positioning for LVMH,” HSBC analyst Antoine Belge commented.

“They are the champions of retail, and there are not many specialist retail [investment firms] out there,” noted Karine Ohana, owner of boutique M&A firm Ohana & Co.

In the midmarket segment, companies that may be seeking investors include French dancewear and shoemaker Repetto, lingerie maker La Perla and high-end linen brand Frette, according to sources. The latter two are owned by San Francisco-based JH Partners, which may be looking to make an exit.

L Capital is also likely to target brands that have strong international expansion potential, especially in emerging markets.

“Changing demographics, consumer behavior and emerging new market segments in mature economies in Europe and the U.S., an increasing wealthy middle class and emergence of important, powerful economies in China, India, South East Asia and South America create significant demand for lifestyle brands,” L Capital Management chairman Daniel Piette stated.

The investment firm’s sister fund, L Capital Asia, made two acquisitions in February. The first was a minority stake in Chinese contemporary clothing firm Trendy International Group, which owns the Ochirly brand, one of China’s leading domestic labels in the fast-fashion segment, as reported. The second is an 8 percent stake in Indian ethnicwear retailer Fabindia, which has a total of 148 stores in five markets.

WWD: Rebound for Glory

WWD | DAVID LIPKE

This year has been pivotal in the young life of the Michael Bastian business.

After ending his license relationship in November with the backer that first launched his line in 2006, Bastian took the fall 2011 season off to regroup and is now reintroducing the collection for spring. The aim of the transition is to lower prices in order to become more competitive at retail while growing the label into a bigger independent brand.

In an ironic—and well-timed—twist, Bastian took home the CFDA award for Menswear Designer of the Year in June, despite skipping the runway shows in February since he had no collection to show for fall. It had been the fifth consecutive CFDA nomination for the designer, who lost out the four previous times—once for the Swarovski Award for emerging men’s talent and three times for Menswear Designer of the Year.

“I had no expectations. I didn’t even get a new tuxedo for the night—I already had four summer tuxedos from before,” recalls Bastian, who edged out Simon Spurr and Patrik Ervell for the prize. “I didn’t write a speech. When I got up there, that was genuine shock.”

The win came at a fortuitous moment for Bastian, as the designer, by that time, was gearing up to begin selling his spring line to retailers, the first collection produced entirely by his newly independent company. Previously, the collection was manufactured and distributed under license by Solomeo, Italy-based Brunello Cucinelli, known for its luxurious cashmere knits and tailored clothing.

“We got the award and immediately flew to Milan to open up the new collection,” says Bastian. “I think it really helped put us on people’s radars again. We had appointments with accounts that hadn’t seen us before.”

For spring, Bastian has almost doubled sales from a year ago, with all of his old retail partners like Bergdorf Goodman, Barneys New York and Saks Fifth Avenue restocking the label and a number of new accounts picking up the line for the first time. “We’ve gotten a bunch of new stores from Europe and particularly Korea,” says Bastian. “Korea has really come to life—it feels like the new Japan.” Among those new accounts are Tomorrowland in Tokyo, Boon in Seoul, Beyman in Istanbul, Matches in London and Duchatel in Biarritz, France.

Bastian’s main goal in taking his business in-house was to reduce prices by 10 to 20 percent, to get them more in line with other brands in the designer space at retail. For the new spring ’12 season, the average retail price for a blazer is $1,769, shirts are $405, jeans are $413, shorts are $388 and outerwear is $1,534. By comparison, last spring blazers averaged $2,039, shirts were $475, jeans were $465, shorts were $438 and outerwear was $1,756.

However, not all prices came down this first season. For example, last spring dress pants averaged $461 and for this spring they are up to $545. Bastian will continue to work on finding ways to bring those prices down. His high prices previously kept distribution limited to just 20 high-end doors in the U.S. and 15 overseas.

“We’ve worked our way backwards on pricing and figured out where we need to be in each classification, even if we aren’t getting the margin you’d expect,” Bastian says.

The separation from Cucinelli was amicable—Bastian bought back the license for a fee and took back his patterns and sample archive—with the Italian company intent on concentrating on growth of its own signature brand. “In order for Michael to grow, he needs a partner that can invest all their time and energy into helping his brand really get to the next level,” said Brunello Cucinelli at the time. “Due to the increasing growth of Brunello Cucinelli in the past couple of years, I felt it was important for us to focus all our efforts nurturing our brand. I think Michael has a lot of potential going forward.”

While Bastian was growing up, that potential in the fashion industry was not immediately apparent. He was born in Lyons, N.Y., in 1965, to a homemaker mother and a father who was a high school history teacher. The first time he lived away from home was when he entered Babson College, where he majored in business with the goal of working on Wall Street. But as fate would have it, the first job offered to him was as an assistant buyer at the now-defunct Abraham & Strauss department store in Brooklyn. “I wasn’t very good at it, and was probably going to get fired. I started in junior knits and ended up in rugs and carpets, which was like God’s waiting room there. It was their way of telling me I needed to find a new job,” remembers Bastian, who scored a gig as an assistant at Avenue magazine in the nick of time.

After a short time in publishing, Bastian moved on to the marketing and public relations department of Sotheby’s for nine years. Later, he transitioned to Tiffany & Co., where he worked with celebrities like Susan Lucci and Phylicia Rashad to create tabletop installations for the flagship store.

Bastian went on to work in creative services at Polo Ralph Lauren before being recruited by a former colleague, Robert Burke, who had gone to Bergdorf Goodman as fashion director. Burke tapped Bastian as men’s fashion director at Bergdorf’s, even though Bastian had no previous direct experience in men’s. “Robert told me it was more about my eye, so I decided to give it a shot,” says Bastian.

At Bergdorf’s, Bastian helped remake the men’s store from a stuffy emporium for older shoppers to one with a hipper, more eclectic vision, while staying true to the store’s reputation for luxury and exclusivity. Among the brands he worked closely with was Cucinelli. When Bastian began conceiving the idea of starting his own line after five years at Bergdorf’s, Burke—a close mentor to Bastian who now runs his own consulting firm—suggested Cucinelli as an ideal partner.

Bastian, Burke and Cucinelli met in a hotel room in Florence to discuss the idea and sealed the deal with a handshake. “When I told my mom I was leaving Bergdorf Goodman, there was a long silence. Then she said, ‘Well, you can always move home if it doesn’t work out,’ ” says Bastian, with a laugh. “I was like, ‘Thank you, but that’s not going to happen.’ ”

When Bastian and Cucinelli launched the Michael Bastian collection for fall 2006, it was immediately picked up by Bergdorf’s, Saks Fifth Avenue, Neiman Marcus and Holt Renfrew. Bastian’s design sensibility hews to casual, preppy basics—with some tailored clothing thrown in—but with carefully wrought details and high-end fabrics, trimming and construction. “There was this big void in between Gap and the suits you wore to work. I wanted to put as much care into your shorts and shirts as others put into your suits,” Bastian explains. “Really what I do is elevated sportswear.”

For his return this spring, Bastian created a collection inspired by James Dean and the blue jeans, oversize sweaters, chinos and glasses that are part of the screen star’s iconography. “I’ve been keeping this inspiration in my back pocket for when I really needed a good collection,” says the designer, who made sure to not take the theme too literally but instead modernized the fits and reinterpreted the looks to fit into his own aesthetic. “James Dean represented such a big chunk of classic American style. We have some Western stuff from Giant, and the cool jeans and T-shirts and knits from Rebel Without a Cause. We re-created his horn-rim glasses—he had really bad eyesight.”

One pair of chinos was inspired by a look from East of Eden, with a double set of belt loops. The collection also includes a singlet, in a nod to Dean’s high school days as a wrestler.

Producing the new collection was no small feat. Leaving the Cucinelli fold has meant Bastian and his employees—you can count them on one hand—have had to develop their own infrastructure for design, production, sales and deliveries. “It’s been a steep learning curve,” Bastian admits. “I had it very easy before, in a way. I would go to one factory with Brunello Cucinelli, and everything was very centralized and they made a very beautiful product. But the downside was that I had no control over pricing or distribution. We’re taking the necessary steps to turn this into a real business and not just make beautiful clothes nobody can afford.”

Instead of relying on that single factory in the Umbria region of Italy, Bastian now produces in 12 different plants throughout Italy and Portugal, which he had to seek out and visit. The designer opened a showroom in Milan to sell to European and Asian retailers and set up warehouse distribution in both Milan and Brewster, N.Y.

In Milan, Bastian works with Christine Ellis Associates to handle sales, while in New York he has set up his first office and showroom at 210 Eleventh Avenue, the same building in which Thom Browne, Simon Spurr and Adam Kimmel are located. Prior to opening his new headquarters in December—encompassing a cozy, inviting atelier and showroom—Bastian worked out of his West Village apartment. Samples were kept in the Union Square apartment of Eugenia Gonzalez Ruiz-Olloqui, who heads up Bastian’s public relations and serves as his constant sounding board and adviser in the business. “I don’t think people realized how bare-bones we were,” says Bastian.

Key to Bastian’s newfound independence and the establishment of his own company is the co-branded collection he designs for Gant, the Sweden-based sportswear brand that was originally founded in New Haven, Conn., in 1949. Launched in fall 2010, the Gant by Michael Bastian line brings in the lion’s share of company revenues for Bastian. The company expects to post total revenue this year of about $4 million, including sales of the Michael Bastian collection and fees from the Gant by Michael Bastian collaboration. “I put very little pressure on the designer line in terms of profitability and sales. Gant really takes a lot of financial pressure off,” Bastian explains. “The runway collection really drives the desire and communicates the point of view of the Michael Bastian brand—and I don’t want to crush that butterfly by strapping a financial weight to it.”

The Gant by Michael Bastian range is younger and markedly less expensive than the Michael Bastian collection, which uses more luxurious fabrics, is more minimal and involves fewer embellishments. A Michael Bastian shirt is highly engineered, for example, with vents in the back, darts to shape the silhouette and Neapolitan shoulders. A Gant by Michael Bastian shirt is a bit looser, shorter in length, with a classic pleat in the back.

The line is priced about 25 percent higher than regular Gant merchandise. It is sold in 30 countries, including more than 100 stores in the U.S. and 150 stores internationally. Retailers include Barneys New York, Bloomingdale’s, Saks Fifth Avenue, Neiman Marcus, Nordstrom, Ron Herman and Scoop, in addition to Gant’s own stores.

“We are growing the line at 20 to 30 percent per season,” says Ari Hoffman, chief executive officer of Gant USA, who was the architect of the deal in 2009. “We originally launched it as sort of a branding exercise, but it’s grown into a really nice business for us.”

Last year, Gant launched a women’s collection with Michael Bastian, which is sold in Gant stores only, and this year it introduced sunglasses and watches under the partnership.

Under his own flagship brand, Bastian launched an eyewear range earlier this year with his first licensee, Randolph Engineering, under the Michael Bastian x Randolph Engineering moniker. In February, Bastian became a finalist in the GQ Best New Designers in America competition and designed a khaki look for Dockers as part of the program. The designs are on sale at Bloomingdale’s in September and on Dockers.com as of October. Bastian has also designed flip-flops for Havaianas and, going forward, is seeking license partners for underwear, fragrance and perhaps even a diffusion label that would sit in between the designer collection and the Gant range.

Not bad for a former rug salesman in Brooklyn.

WWD: Can Small Men's Brands Build Big Businesses?

WWD | JOCELYN ANDERSON

When Rupert Sanderson decided to step outside his comfort zone of evening heels and make saddle shoes for women, he had no idea that would become his first men's style.

The British footwear designer viewed the 2009 debut of his Saddled O's as a sociological experiment: Give a free pair to 50 of the most influential women in the U.K. art world and monitor the result. He hoped to create a trend among a stylish group, but he got a lot more than that.

"Suddenly, all these women were wearing them at once," said Sanderson. "But one of the effects it had was that men wanted a pair as well. So we started making them in men's sizes."

While Sanderson turned to the men's market as more of a novelty, other high-end designers are following suit by offering small footwear collections for guys. United Nude, Yigal Azrouël, Shipley & Halmos and Bespoken have all launched men's shoes this year. Gianvito Rossi will debut two sneakers and a loafer for spring '12.

Renewed life in the men's footwear market provides fertile ground for such introductions. But what's the point of launching a new category in such small numbers? The reasons, Footwear News discovered, are as varied as the collections. But in all cases it's about more than money.

Sanderson said he is meeting a demand. Others said they are expressing themselves artistically, realizing a dream and carefully laying the groundwork for a larger offering.

"[We don't have] too many pieces since we're just testing the men's market," said Rem D. Koolhaas, creative director and co-founder of United Nude, which launched three men's styles for spring '11 but has increased each season, with six available for spring '12. "We make shoes that we would like to wear."

The category addition, however small, is also a way to expand a brand's identity, to be not just a men's apparel label or just a women's shoe company.

Shipley & Halmos, for example, primarily a men's clothing line that started in 2008, launched three men's shoe styles for fall '11 to complete its customers' wardrobes. A fuller accessories line is planned for spring '12.

"We wanted to keep [the shoes] focused so the production numbers were not 20 [styles] right off the bat," said Jeff Halmos, co-owner of the label. "I don't think we could have supported something like that from a production standpoint."

Similarly, men's apparel label Bespoken has expanded steadily since its founding in 2008. The owners had worked with Grenson for runway shows, but they felt a fall '11 line of three shoe styles would complement the brand's menswear, said co-owner Paul Goncalves. Bespoken turned to U.K.-based firm Kurt Geiger to develop the shoes and then landed footwear accounts with Harrods, Selfridges and Liberty. The brand is now seeking U.S. retailers.

But Goncalves recognizes such a small launch comes with a few issues.

"The challenge in footwear is that in a department store, it's going to sit separately from the [apparel]," said Goncalves. "And we're still in the midst of establishing ourselves and generating awareness for the brand."

Such trials are the same for any brand that chooses to start small, and indeed, experts said mini collections can be both helpful and harmful to building a brand's footwear profile. If designers have the "it" shoe of the season, ample choice won't matter. And when high-profile retailers pick up even just one style, there is a prestige factor that can be very beneficial. But if buyers want more options, that's a different story.

"If retailers want to edit at all, it can be challenging," said Robert Burke, president and CEO of luxury consulting firm Robert Burke Associates. "It becomes more difficult than if they have four or five styles and you can make an assortment with multiple colors. You can actually sink your teeth into it and start to have a business."

And, in general, persuading retailers to buy something new can be tough, especially with a small, expensive line in this economic climate. "At the end of the day, it's all about margin: high sell-throughs and low markdowns," said Monique Umeh from trend forecasting firm Stylesight. "A lot of retailers are afraid of the liability. That's really going to be the challenge with smaller groupings."

Celebrity stylist Maryam Malakpour, who makes Newbark shoes with her sister, Marjan, has learned a lot about placement in the two years since the line debuted. While a men's offering has always been part of the brand, the duo felt they could only successfully market and sell women's product from the outset.

"We had to really concentrate on one [category] first to get ourselves launched and understood," said Maryam Malakpour.

The brand's slipper-like line started with one slip-on style on Net-a-porter.com and is also sold at boutiques such as Blue & Cream. The designers have added a split-sole style for men and women, and a loafer and boot are now available for women. Malakpour said she would like to make those two styles for men next.

"Being a small company that is very artisan and handmade, we are taking the growth and movements very slowly so we can make sure we aren't overdoing it," she said. "The way we've been moving with [men's shoes] has been successful, but in a small way."

To be sure, measured success is often good enough as these brands get started with footwear. Credibility in the market and celebrity fans may be just as valuable as wide profit margins.

"We always take great pride in working with great mills — we don't go outside Europe for manufacturing — so it's not like we are dealing with significantly high profit margins," said Bespoken's Goncalves. "It's more about maintaining the integrity of the brand and building on the foundation we've created so far."

And experts said designers shouldn't expect that launching men's shoes in such small numbers will be very lucrative at first anyway. In fact, with many of the lines made in Italy, production costs are high, and sell-throughs aren't guaranteed.

"In the beginning, they know they are going to take a loss until they can start establishing the brand and eventually grow the brand," said Stylesight's Umeh. "But it is the right thing to start small."

That's especially true for men, said designers. Knowing that male and female customers shop differently, most designers said they don't believe men even need the level of choice offered in the women's category.

Gianvito Rossi took that into account when planning his men's launch for spring '12. Rossi, son of Sergio Rossi, bowed his namesake women's label for spring '07, but when it came to his men's collection, he decided less is more.

"It's only three styles because it's intended as a [classic selection]. And in men's, in the end, the styles are not so many," said Rossi. "We are much more restricted in our minds than women are with shoes."

Shipley & Halmos also focused on basics for its shoe line, which will grow to four styles for spring '12.

"We've got a few staples in our apparel collection that we've been running for several seasons in a row, and we want to try to build a couple of [staples] into the shoe category as well," said Halmos. "The oxford, [for instance], will carry over for spring."

Such a selling strategy takes some of the risk out of a tough retail environment. Burke said this is a model that could become more popular going forward — and that's a positive thing.

"It's good because it's allowing brands to experiment in new product categories, and it gives retailers something to buy. It diversifies the offering and gets the name out in a new and creative way," said Burke. "And it's good to see the men's shoe assortment not being dominated by the established designers and companies."

WWD: Robert Burke Associates Expands to London, L.A.

WWD | MARC KARIMZADEH

NEW YORK — Robert Burke Associates, founded in New York in 2006, is expanding.

In May, Robert Burke, president and chief executive officer of the consultancy, opened in London and Los Angeles to better serve emerging markets and the growing interest of entertainment personalities in fashion.

The London office will serve designers, brands, retailers, retail development groups and investment bankers in Europe and the Middle East. “We are seeing a lot of activity from private equity groups looking to invest in fashion brands there,” Burke said. “In London, a fair amount of brands also want to enter the U.S. market and we can help them with it.”

Florence Hampson Bellon, whom Burke worked with when she was in the London buying office for Neiman Marcus and Bergdorf Goodman and he was Bergdorf’s senior vice president of fashion and public relations, is running the London office.

The Los Angeles branch, led by Tracy Chow, who previously worked for Burke in New York, primarily focuses on celebrities and other personalities looking to translate their profile into brands. The office will help them develop brand concepts, product lines and brand extensions with collaborations and licensing agreements. Clients in that arena so far include Daphne Guinness, Andre 3000 and Carmindy.

“We are seeing so many personalities and celebrities who want to be a brand, and while that has been somewhat haphazard for many in the past, we are now available to put together a brand strategy for individuals,” Burke said.

He said international markets continue to gain in importance for luxury firms, citing countries from the former Soviet Union, including Kazakhstan, where the company is working with Saks Fifth Avenue on its first location in the region; Azerbaijan, and Poland as newer opportunities. The BRIC countries, he added, continued to represent many opportunities for fashion houses, but each comes with its own set of nuances that needs to be addressed.

“The business has changed over the past five-and-a-half years with the growth of emerging markets,” Burke said. “Some people think that with the BRIC countries, you enter and make $100 million instantly, but each one is different. In China, the luxury consumer is still being educated, and the importance of marketing and a brand presence is critical there. What works in the U.S. does not mean it automatically works in China. Brazil has its own specific challenges because of taxes and duties, but that consumer is becoming much more global. Brazil has an emerging middle class that didn’t exist as such before.”

WWD: String of European Firms See Designer Changes

WWD | MILES SOCHA

PARIS — The furious game of musical chairs currently under way in the design studios of Europe shows no signs of slowing down.

According to market sources, Chloé is to expected to reveal as early as today that Clare Waight Keller, most recently creative director at Pringle of Scotland, will succeed Hannah MacGibbon at the helm of the French firm.

Chloé would simply be the latest of a host of European brands expected to name new designers in the coming weeks and months, headlined by Christian Dior, which ousted its star couturier John Galliano last March amidst widening allegations of racial and anti-Semitic outbursts.

The High Court here is expected to announce Thursday a date when the designer is to stand trial on a charge of public insult.

Alexander McQueen’s Sarah Burton — thrust to international stardom for dressing England’s royal bride, Catherine Middleton — is said to be at the top of the list of potential candidates that luxury titan Bernard Arnault is coveting as Galliano’s eventual successor.

Meanwhile, the industry can anticipate new faces at a host of august names in the coming weeks and months.

Balmain has already said that Christophe Decarnin will be replaced by his number two, Olivier Rousteing, while Gianfranco Ferré, Cacharel, Azzaro, Kenzo and Trussardi are among brands said to be recruiting new creative leadership.

Even men’s wear, traditionally a less volatile industry sector, is suddenly teeming with upheaval, with Z Zegna’s star Alessandro Sartori said to be headed to Berluti; Jil Sander designer Paul Surridge tapped to succeed Sartori, and former Dunhill designer Kim Jones making his debut here next month at Louis Vuitton.

Meanwhile, Waight Keller’s successor at Pringle, former Balenciaga alum Alistair Carr, is already at work on the resort collection and will show his first men’s wear collection in Milan next month.

The flurry of change comes at a buoyant time for high-end fashion businesses, and after a long period of stability in design studios.

“The entire world is changing so deeply and so quickly in this moment. Perhaps some brands are feeling the absolute need to change their designer if he or she is no longer able to make consumers push the door of their boutiques,” mused Jean-Jacques Picart, an industry consultant here.

Tancrède de Lalun, merchandise manager for men’s and women’s wear at Printemps, said the revolving door scenario was a cyclical one and was amplified by the domino effect that every departure has on other houses.

“During the crisis, for two or three years, nobody moved,” he said. “Everyone was just ducking and waiting for the crisis to blow over by making as little noise as possible and hunkering down with their teams.”

The return of double-digit growth among many leading luxury brands has emboldened managers to give their labels a makeover, both in terms of strategy and creative talent, de Lalun said.

Lucian James, creative director and founder of Paris-based strategic consultancy Agenda Inc., agreed creative and business imperatives are in flux.

“The reason is that new sets of skills are being prioritized in an accelerated, fragmented fashion culture,” he explained. “In a social media-fueled landscape, a new breed of designer needs to operate more like commissioning editors, treating their brands as media channels that edit cultural themes, and manifest them as clothes. And while it seems new, interestingly it’s the same approach that drove Coco Chanel to success — an understanding that fashion wasn’t just clothes, it was about ideas and the culture that could be expressed as clothes.

“Designers are changing because consumers are changing; consumers want brands to inspire them with ideas, not just with advertising, and to tell them about the future, not just the past,” James added.

According to Robert Burke, president and chief executive officer of Robert Burke Associates in New York, the current game of musical chairs is likely to end with brands eclipsing the designers that eventually fill the empty seats.

“The last thing the brand wants is instability,” he said. “I wouldn’t be surprised to see lower-profile [hires] as opposed to major star designers.” Naming Christophe Lemaire to succeed Jean Paul Gaultier at Hermès and designer-creative director tandems like Sébastien Peigné and Nicola Formichetti at Mugler are other examples of the antifame trend, concurred Printemps’ de Lalun.

“The market is recovering; it’s bringing back the energy and people think business could be even better,” de Lalun said. “It’s positive in the sense that it injects energy and a fresh vision. Having said that, hopefully things will not change every couple of years, because when a house changes its designer every two years, it’s very destabilizing.”

Liberty’s managing director Ed Burstell agreed. “Generally speaking, the overall merry-go-round of designers is not great for the industry. For a retailer, it’s really difficult to stand behind a brand that has a potentially changing designer,” he said. “A retailer wins by building a loyal rapport with its clientele, and you do that with consistency. It’s really difficult to establish that rapport when the consistency is not there. Look at the best brands. Take Burberry, for example. It has a consistent vision over time. Or Chanel. A consistent vision over time.”

Chloé has certainly weathered turbulence in its design studio since the 2006 exit of Phoebe Philo.

Before installing MacGibbon, one of Philo’s deputies, Chloé experimented with a team approach and three unfruitful seasons under Swedish designer Paulo Melim Andersson.

Seen as a knitwear expert, Waight Keller claimed to have helped transform Pringle over her six-year tenure “from a Scottish knitwear company to an international luxury brand.”

Before Pringle, Waight Keller was a senior women’s designer at Gucci during the Tom Ford era. Before that, she was design director for Ralph Lauren’s Purple Label men’s line. Her first job was as a women’s wear designer for Calvin Klein.

Chloé officials could not be reached for comment at press time.

Floriane de Saint Pierre, who runs an eponymous executive search and consulting firm in Paris, said fashion firms must now face a “new world” of digital media and fast-growing emerging markets.

“Pure creativity is becoming equally important as the ability to manage creative talents at a global level,” she said. “In the past decade, we’ve seen designers become ‘creative directors.’ Now we are probably facing the need to have chief creative officers as creative partners of chief executive officers. This requires redesigning organizations.”

WWD: The Business Impact of the Royal Wedding

WWD | WWD STAFF

Dressing Catherine Middleton for the royal wedding has catapulted the house of Alexander McQueen from niche designer business into household name, giving management the delicate task of balancing its exclusive reputation with the wider commercial potential now within its grasp.

That’s how industry observers and retailers reacted to Friday’s fashion coup, which also marked a dramatic trajectory for a label once synonymous with ragtag rebellion — and one whose future seemed tenuous a year ago in the wake of the suicide of its incendiary founder.

“It will have a phenomenal impact in terms of brand awareness. The brand is still a niche brand, and this exposure will definitely bring a wider clientele,” said Ralph Toledano, the former Chloé executive who now operates a Paris-based consulting business, RT Management.

Still, Toledano said the feat of dressing Middleton, now known as the Duchess of Cambridge, should not be trumpeted too loudly. “This assignment is an honor for the designer, a fantastic tribute to the legacy of Lee Alexander McQueen. I think it should be considered as that, and not become a marketing tool,” he said.

Lucian James, creative director and founder of Paris-based strategic consultancy Agenda Inc., said the royal milestone transforms McQueen “into a true fashion house with guaranteed legacy, rather than a brand in transition centered around the original designer.”

It also “tames the edginess of the brand, raising it to a new endorsement by A-list consumers,” James said, highlighting that infamous McQueen story that, while working at Anderson & Sheppard in London, he incorporated an expletive into the lining of a jacket for the Prince of Wales.

“This moment tips the brand back to the focus on technique and on the Savile Row origins of Lee Alexander,” he said. “Meanwhile, you have to wonder whether Sarah Burton has received any calls from Bernard Arnault.”

John Guy, a retail and luxury goods analyst for The Royal Bank of Scotland, said, “Obviously, for the PPR Group this is very positive,” noting how “Other Brand” sales of which Alexander McQueen is a key sales contributor, increased first-quarter sales year-over-year by more than 20 percent to 165 million euros, or $244 million at current exchange. (Also in PPR’s “Other Brand” category are Balenciaga, Stella McCartney, Boucheron and Sergio Rossi.)

Given how well-received Middleton’s wedding dress has been and how the Burberry Prorsum trench she wore for her first post-engagement appearance sold out, Guy said, “This bodes extremely well for the McQueen business.”

While the Alexander McQueen business is significantly smaller than PPR’s Gucci, it has been a strong performer sales-wise. Further growth for this more niche label would most likely stem from opening boutiques and concept shops rather than rolling out wholesale, Guy said.

But whether it was a casual enquiry about the dress or a friendly probe about what it might mean for sales, staff at the Alexander McQueen boutique on Bond Street in London were studiously tight-lipped on the subject of the wedding on Friday afternoon following the ceremony. Temporary staff with no history at the company were working at the store for the day to help maintain the silence. In addition, one enormous security guard was positioned at the entrance to the store to fend off giant groups of tourists posing for photos.

Betsy Pearce, a Paris-based legal adviser who represented McQueen in 2000 when he sold a majority stake in his London-based house to Gucci Group, today PPR’s luxury division, marveled at the transformation of McQueen, which went from something “feral” and “deeply antiauthority” through a slow “domestication” under the umbrella of a corporate behemoth to the brand’s “coronation” last week before the eyes of the world.

“It’s the quintessential rags-to-riches story,” Pearce said. “My concern is that it’s easy to take advantage of and cash in on it. With any brand, there’s only so much time at the pinnacle.”

Pearce noted the dressing coup is a tribute to Sarah Burton, and, “I have to imagine there’s a mutual understanding of two young women thrown into a situation they didn’t expect, with enormous media scrutiny.”

In this instance, the media attention on the big day will pay off, many observers said.

“The amount of media impressions through TV, Twitter and blogs will catapult the Alexander McQueen name to familiarity it never had,” said Kim Vernon, president and ceo of Vernon Co. “Whether it translates to more perfume sales or made-to-order dresses, it is nothing but positive.”

This could include more opportunities for licensing, said Robert Burke, president and chief executive officer of Robert Burke Associates in New York. “This is a new chapter for his fragrance,” Burke said. “The objective will be to maintain the high fashion image and also be commercial.”

Burke was alluding to the late designer’s dismal foray into fragrance in 2003 and 2005 with the scents Kingdom and My Queen. When L’Oréal acquired YSL Beauté for 1.15 billion euros in 2008 from PPR, the fragrance brand was not part of the transaction and the McQueen license is now thought to be dormant.

Still, the fact that McQueen remains part of a large corporate group puts the company in a strong position to capitalize on the publicity windfall, according to Burke.

He also highlighted the already international reach of the McQueen franchise, unlike the “small, British designers” the royal family has favored in the past.

“One couldn’t have scripted it better,” Burke remarked, noting the hubbub around the wedding dress will surely dovetail with an exhibition dedicated to Alexander McQueen opening this week at New York’s Metropolitan Museum of Art.

The events will also surely catapult the profile of Burton, the current creative director at McQueen, who is already on the radar of luxury titan Arnault as he hunts for a successor to John Galliano at Christian Dior and wields one of the biggest checkbooks in the industry.

Sources said Burton seems open to discussions about working for another big brand, but PPR would likely shore up more resources to keep her ensconced at McQueen. Burton has spent her entire career at the elbow of the acclaimed British designer, the son of a taxicab driver whose seminal and controversial Highland Rape collection of 1995 ignited his career, ultimately landing him, at age 27, as couturier at Givenchy, a role he kept for five years.

Armando Branchini, deputy chairman of Milan consultancy InterCorporate, characterized the bridal credit as an “assist” to the brand that would have a “very positive” influence on the business: “It won’t increase its sales tenfold — and it would be a mistake to change its niche quality — but it will increase its allure and appeal.”

The McQueen business has weathered some rocky years, and in 2004, then Gucci Group ceo Robert Polet set a 2007 break-even deadline, which the company met ahead of time. The founder’s suicide also raised questions, given his renowned cutting skill, imagination and flare for showmanship.

“If there was any doubt about the future of the brand following Alexander McQueen’s death, then that has been completely banished,” said George Wallace, ceo of consultancy MHE Retail. Asked whether this was the moment to expand with brand extensions, he said: “The brand can now reach a wider audience, with fragrance and accessories lines. But they would need to be managed carefully.”

Retailers said they expect an immediate bump to the business. And Saks Fifth Avenue could be first in line. Fortuitously, the company had already lined up Burton for a trunk show appearance Tuesday at its Fifth Avenue flagship. The private meet-and-greet will be her first official in-store appearance since McQueen’s death. Per agreement with the house, Saks executives declined to comment Friday about the event and the retailer’s plans for the business.

“This is a dream come true for a brand,” said Jeffrey Kalinsky, executive vice president of Nordstrom. “I do think the business will go through the roof.”

Prior to the wedding, Nordstrom had already been exploring ways to build on the McQueen business, which has been “really strong” for ready-to-wear, as well as shoes and accessories, he said. “If you take a brand that is already successful and it gets that level of worldwide exposure, it will have a tremendous impact on the business,” Kalinsky said.

“The wedding will have a big impact on the McQueen business,” said Stephanie Solomon, vice president of fashion direction at Bloomingdale’s.

On Friday, Barbara Atkin, vice president, fashion direction at Canada’s Holt Renfrew, said the store was already receiving calls enquiring about Sarah Burton’s collection for McQueen. “I do not believe that customers outside the fashion world were even aware of Sarah Burton prior to this wedding,” Atkin said. She said McQueen has been performing “extremely well since Sarah has taken over the brand. We are repeating styles and seeing double-digit results exceeding our plans with this collection. We are opening more doors in our chain. We actually wrote the gown that [Middleton’s sister] Pippa was wearing and we expect to get lots of enquiries on that stunning ‘Pippa’ gown.”

Sarah Rutson, fashion director at Hong Kong-based Lane Crawford, said her McQueen business was on an upswing before the wedding. “However, for our market, I don’t believe [the wedding] will have significant impact just because of the dress. The significant impact and success has always been its strong design regardless.”

Averyl Oates, chief buying director at Harvey Nichols, said the wedding pumped up British pride. “This will have a spectacularly immediate impact on both the industry, and sales for the brand,” Oates said. “Alexander McQueen has long proved itself a popular brand with our customers, but hopefully this will now extend its visibility across the world, and what better platform than to be adorning the future Queen of England.”

“The brand is in much demand today and its desirability continues to grow,” said Marigay McKee, fashion and beauty director at Harrods. “There is always a demand for exquisite couture and I’m sure the house has a great future. There is a new McQueen flagship going in store for spring 2012, which we are all tremendously excited about.”

Caroline Burstein, creative director of Browns and director of Browns Bride in London, said Burton is now fully out of the shadows.

“I have always known that Sarah was the backbone of the McQueen brand. He brought what he brought to the brand, but it was Sarah who underpinned it. She has an amazing attention to detail, and always kept a balance at the brand — she wouldn’t let it go too far,” she said.

Burstein said when she launched Browns Bride in 2004, she brought in rtw pieces from McQueen. “There was always a sense of occasion about them. They were just beautiful,” she said.

Burstein added that the royal wedding dress would give a bump to an already healthy brand. “The McQueen label stayed strong. His death did not affect sales at the label because the clothes are good. They are what women with style like to wear — and not just skinny women. They work on real women.”

WWD: Can John Galliano Ever Come Back?

WWD | MILES SOCHA

PARIS — Will the taint of bigotry cling forever to John Galliano — an albatross around his neck? Or will the incendiary British designer rehabilitate himself and his name over time, only to rise again like some fashion phoenix?

Retailers, headhunters and other experts seem to be rallying for the latter scenario, arguing that Galliano — ousted from Dior last month amidst mounting allegations of racist and anti-Semitic outbursts — has the potential to write himself a new chapter and rebound from the crisis.

“I hope so. Otherwise, it would be such a waste,” said Carla Sozzani, owner of Milan-based fashion retailer Corso Como 10. “Maybe I’m a dreamer, but I’m hoping he’s going back to his own brand. It would make sense that he works for Galliano.”

That scenario is unlikely: As reported, at a recent board meeting of the John Galliano company, his employment was officially terminated. And while Christian Dior SA, which owns 91 percent of the Galliano house, has received unsolicited expressions of interest in the business from several of its Italian licensing partners as well as a Chinese group and a firm from the Middle East, it is understood a sale of the company is not a priority and no banks have been contracted to do so.

Whether an eventual new owner would seek to reemploy the namesake designer remains an unanswered question.

Despite this hurdle, many industry observers are of the school that people in fashion have short memories — and that Galliano might find this tragic episode quickly behind him.

“Look at Naomi Campbell. She had so many problems. No one remembers,” Sozzani said, recalling how the supermodel, convicted of assault in 2007 and sentenced to community service, transformed the penalty into a quirky fashion opportunity, posing for W magazine as a chic street sweeper serving out her sentence.

“After a while memories fade and, as the British say, ‘Today’s news is tomorrow’s fish-and-chip paper.’ I really believe most people do get a second chance and rebound,” agreed Sarah Rutson, fashion director at Hong Kong-based specialty retailer Lane Crawford, characterizing Galliano’s fashion career as simply on pause. “If John truly gets the help he needs for his issues and shows that he is genuinely doing everything in his power to rehabilitate himself, he will be forgiven and accepted back.”

“I think he’s talented enough to recover from this and to come back,” added Agnès Barret, principal of Paris-based creative search firm Agent Secret. “Kate Moss did it,” she noted, alluding to the supermodel who was initially shunned following a 2005 cocaine scandal — only to come roaring back a year later and appear in a slew of high-profile ad campaigns.

“When people are really talented, they have the right to express themselves. His talent will not disappear,” Barret said. “I would advise him to do it in a different way.”

Bonnie Brooks, president and chief executive officer of Canadian department store The Bay, cautioned that it could take a long time to restore the Galliano name.

“We believe in his genius; however, we do think that in order for his brand to be successful, there would need to be assurance that all of the right conditions would be met to restore the good faith required between a designer brand, a luxury retailer and sophisticated customers,” she said.

Betsey Pearce, a Paris-based legal adviser and consultant with a specialty in fashion, noted that Martha Stewart and Tiger Woods are relevant examples of famous, high-functioning personalities who rebounded from scandal, an investment scheme and marital infidelity, respectively. “Would Tiger Woods be terrible if he weren’t married?” she asked. “Is it relevant to his golf, other than the effect of being vilified?”

Pearce hinted that plenty of designers are guilty of behavior that would be deemed reprehensible if caught on tape. “Are we buying the guy’s morality, or the guy’s incredible talent?” she asked. “He’s a genius in his work.”

With unanimity, observers stressed that Galliano should not be absolved of individual responsibility for his behavior and his horrendous statements cannot be swept under the carpet. Druggy or diva behavior is one thing; invoking Adolph Hitler quite another.

Asked if Galliano would be able to come back if he made amends, Franca Sozzani, editor in chief of Vogue Italia, said: “It’s not a matter of making amends, because what happened will never be excused. You must let time go by and recognize that, on a human level, he’s made a mistake, and that, on a creative level, he remains a huge personality.”

Robert Burke, president and ceo of Robert Burke Associates, noted that the anti-Semitic nature of Galliano’s outbursts is “pretty unprecedented” and distinct from the familiar wild-child antics of pampered stars from fashion or Hollywood.

“America loves a comeback story, but this is a very different offense that’s very sensitive to many people,” Burke said. “Time will tell.”

The designer is to stand trial on a charge of public insult at the High Court here, which is expected on May 12 to set the date for the proceedings. Three people — Géraldine Bloch, Philippe Virgiti and an anonymous woman — allege Galliano hurled racist and anti-Semitic remarks at them in a Paris bar. He could face six months imprisonment and a fine of 22,500 euros, or $31,271 at current exchange, according to the French prosecutor.

Galliano has denied the allegations against him, apologized for his behavior and stated plans to pursue a claim of defamation, insult and menace filed against Bloch and Virgiti. Sources said the designer recently completed an “intensive” one-month treatment at a rehabilitation center in Arizona and is now in extended “after care,” recognizing effective treatment is a long, ongoing process.

Barret suggested the designer must repent further, make amends with the Jewish community, and prove that his ability to dazzle and innovate is intact.

Crisis management experts agree penance is a key first step.

“He needs to spend at least three months quietly rehabilitating in a clinic,” said Gene Grabowski, senior vice president of Washington-based Levick Strategic Communications. “When he emerges, he should announce that he has changed his life and has learned new and healthier habits and that he is ready to contribute to his field and to society again. He then must demonstrate that he is serious about his new direction by contributing a sum of money or his time to a worthy project connected to the fashion industry or to helping a cause connected with Jewish interests. He behaved himself into his situation and now he must behave himself out of it.”

Grabowski cautioned, however, that the process could take a year or two “for the new reputation to build and for memories of the old behavior to fade.”

Robbie Vorhaus, founder of Vorhaus & Co., based in New York and Paris, rattled off a long list of famous people who came back from the brink: Robert Downey Jr., Eminem, Mickey Rourke, Britney Spears, Winona Ryder and Hugh Grant.

Yet he said their transgressions only seem passé and irrelevant now because they went back to work and demonstrated their talent, diverting public attention away from their bad behavior.

“Redemption and resurrection is a powerful story, and if Galliano can show that he retains his talent, instincts, skill set — and that he is sorry for his actions — he can, over time, return to a leadership role. However, it can’t be an act,” Vorhaus said. “If John Galliano is, in fact, in his heart racist or anti-Semitic, or is not willing or able to remain with his addiction recovery program, or he falls back into socially unacceptable behavior, he will have lost significant momentum for a long time to come.”

“I think he’s finished for a good while,” warned Glenn Selig, founder of Florida-based The Publicity Agency. “While he may be well known in fashion, to the vast majority of people this is their introduction to him. Because the public really doesn’t know him as a person, there’s no real reason for the public to open their hearts to him.”

Lingering anger toward Galliano surfaced last week when an onlooker called the disgraced couturier a racist as he whisked through the Los Angeles Airport and ignored questions lobbed at him.

Caught on camera, the video went viral — just like the one a month ago that depicted Galliano saying in a slurred voice, “I love Hitler,” and cost him his job.

Yet addiction experts agree rehabilitation is possible for the 50-year-old iconoclast.

“It may take more than one attempt but it is always possible,” said Lou Lebentz, an addiction therapist at The Priory Hospital in Roehampton, London.

Asked whether a return to the fashion industry could be a hindrance or a help to Galliano’s recovery, Lebentz replied: “[One has to ask] how important your work identity is to you. Do you need it in terms of boundaries and purpose or to take your mind off yourself?” she said, highlighting that the purpose and routine a patient may find in work could have a positive influence on their recovery. “Recovery is an inward journey, about shutting off the external world…you will not find the answers outside yourself.”

Deirdre Boyd, ceo of the U.K. charity Addiction Recovery Foundation, said that a lot of male addicts in recovery tend to go back to work. “Often they do very well because they are grateful to their employers, they may feel they owe their lives to their employers,” she said. As for Galliano, she said: “Maybe he will look more objectively on his life and reevaluate his priorities, and maybe the fashion industry is not the right place for him to go back to.” She added that the greatest predictor of successful recovery is support from family and then support from your place of work.

For the moment, Galliano has no job to which to return.

It is understood the in-house design team at Galliano, which shares members with Dior’s, will be charged with continuing to produce collections at a label prized for bias-cut dresses, newspaper prints and retro-tinged tailoring.

The Galliano business is based mainly on licensing. Key partners include Gibò Co. SpA for the signature men’s and women’s collections; Ittierre SpA for the second line Galliano: Perfume Holding for fragrances; Diesel for children’s wear; Marcolin SpA for eyewear; Albisetti for swimwear, and Morellato for watches.

Although sources deem an eventual sale of the company a foregone conclusion, as Dior seeks to put more distance between itself and the disgraced designer, Dior may first seek to further disentangle itself from the designer, who holds a minority stake in John Galliano SA.

It is understood there are other legal tussles ongoing related to Dior’s dismissal of Galliano, though nothing that would prevent it from naming a new couturier (see related story, page 5).

Revenues in 2009 at John Galliano SA, mostly from royalties, totaled 14.2 million euros, or $20.9 million, while losses tallied 5.3 million euros, or $7.8 million, according to legal information filed with the commercial court in Paris. Dollar figures are converted from average exchange rates for the period. According to Dior’s 2010 annual report, Christian Dior acquired John Galliano SA in 2008 for 17 million euros, or $23.8 million at average exchange rates for that year.

In an indication that it won’t be easy for the designer to return to fashion, retailers are already shunning Galliano products.

One American retailer, speaking on condition of anonymity, warned that the Galliano name now has toxic connotations. “I think his label will continue to create controversy for some time,” the executive said.

A spokeswoman for Selfridges, which has featured the Galliano second line in its men’s department, said the London retailer no longer carries the brand, but she declined to comment further. However, an industry source said the decision had to do with customer reaction to the Galliano drama.

Corso Como’s Sozzani said she has dresses from Galliano’s spring-summer designer collection hanging in her shop, but she did not place an order for fall, partly because of Galliano’s absence. “I’m waiting to see what happens,” she said, citing a policy that prohibits designer brands created by another person, if the founder is still alive.

According to market sources, retailers in America and the U.K. reacted immediately and sharply to the scandal and often pulled products off shelves, while the business in other regions, including Asia, Europe and the Middle East, remains largely unaffected.

“We hope Galliano will continue to perform. Despite what happened, we are happy with the license,” said Enrico Ceccato, president and ceo of Perfume Holding, the brand’s fragrance licensee. However, he denied interest in acquiring the Galliano business, insisting the company is dedicated to fragrances only.

According to Ceccato, the rollout of Galliano’s new Galliano women’s fragrance, Parlez-Moi d’Amour, is happening at almost the same pace as originally scheduled. The scent is set to launch in Asia and South America after hitting Europe and the Middle East at the end of last year. “The only question mark is how and when to launch in the U.S.,” said Ceccato referring to Perfume Holding’s initial plans to launch the scent there in early spring.

Antonio Bianchi, owner of Albisetti, which now controls Ittierre, acknowledged interest in the Galliano business, saying he is discussing ways to generate new and more extensive agreements “given the optimal relationship” it already has.

Whatever Galliano’s fate, his downfall highlighted the risk companies can face if their brand is too closely tied to the specific image or talent of one individual, who could leave the company, die or fall from grace, according to the legal adviser Pearce.

No matter how many people may be involved in bringing fashions to market, “we want rock stars: We want individuals that stand out,” she said.

A boilerplate statement in Dior’s annual report notes: “Inadequate products or communication policies with the brand image, inappropriate behavior of persons who represent the brands, along with circulation of prejudicial information to the media, could affect brand image and lead to an adverse effect on sales.”

Lucian James, creative director and founder of Paris-based strategic consultancy Agenda Inc., highlighted the irony that luxury brands, until recently nervous of social media, were seduced by the exposure opportunities the digital world afforded. “So it’s genuinely unfortunate that it is the John Galliano video outside La Perle which has become the most viral in fashion history,” he said.

Moreover, the Galliano incident highlights important changes that will affect the broader luxury industry. According to James, “We are witnessing the beginning of an important debate about the relationship between creativity and business imperatives.”

For one, “the acceleration of fashion has created more of a ‘hit-factory’ approach to creativity, which can squeeze and frustrate designers, and also put pressure on the overall business.

“It’s no surprise that the movie ‘Black Swan’ was so successful in this cultural mood because it exposes the ferocity and destructive power of creative talent. And more specifically it’s no surprise that the movie was such a personal favorite of so many people who work in the fashion world, and could identify so closely with its theme,” he continued.

James also predicted luxury brands will emphasize their original designers and “spiritual leadership so that issues like this are less damaging.”

For example, he said it would be a “powerful ritual symbol to concretely restore the image of Monsieur Dior at this point, via, for example, an empty chair at each runway show.”

WWD: Men's Wear CEO Summit: Retail Opportunities

WWD

The men’s wear shopper is back, but the recession has changed him. Instead of buying the same old, same old, he’s seeking newness in fit and label, but he’s still holding back a bit and not purchasing at the same levels he did before the financial crisis.

That was the message from a roundtable on Retail Opportunities, which was moderated by Robert Burke, president and chief executive officer of Robert Burke Associates.

“The men’s business is coming back, but the customer has changed,” said Russ Patrick, senior vice president and general merchandise manager of men’s for Neiman Marcus Group. “He’s more thoughtful about his buying habits. He’s asking a lot more questions and is more educated and thoughtful about buying.” He said the customer is “demanding newness. The worst thing for him to see is what was there before.”

At Saks Fifth Avenue, it’s the younger, more contemporary customer who has been the first to return, according to Tom Ott, svp and gmm of men’s. In fact, he said, while sales of traditional men’s product fell off most during the recession, “the contemporary and designer businesses were less worse.”

Bob Mitchell, co-president of the Mitchells Family of Stores, said although the customer is coming in less often, his business has “seen 15 to 16 months of nice growth.” And when he does come in, he’s returned to the high-end luxury product that he purchased before the downturn. “They would rather buy more of the best [merchandise], even if they buy less of it.”

Kevin Harter, vice president of fashion direction for men’s at Bloomingdale’s, agreed that the men’s customer has returned, but noted that there has been a marked change in his spending habits. “Now, 84 percent of men make their own decisions,” he said, meaning that retailers can “market to guys. It makes us better retailers and better at our game.”

Mitchell said one of the things drawing men into stores is the new silhouette. Acknowledging that men “don’t like change,” and often return time and again to the same brands, he said stores should tout the “new fit from their old friends to make them comfortable.” At the same time, he believes men are “open to new brands,” and will mix in a few new vendors if they’re presented properly.

Harter agreed, saying Bloomingdale’s tends to “nurture the brands we already carry,” but “balance” those with new labels.

Ott believes there is an opportunity for new brands to flourish and expects there will soon be a “changing of the guard” as some of the more-established brands lose ground to what Harter described as a “young pool of designers.”

He added that any brand trying to break into the men’s arena needs to “offer a distinct point of view and message.” He also encouraged brands to come to the stores and meet the shoppers so they’re well-versed in what today’s customer is seeking.

Mitchell urged vendors to work with the sales associates in the stores to get them behind the brand. “That’s the cheapest, most effective way to market your brand,” he said. “You can connect with the customer through the sales associates, who are your champions on the selling floor. That’s how you can get your first lift.”

The same can be said of private label offerings, a big initiative for many large stores today.

Calling it a “major underpinning of our strategy,” Ott said it is essential for retailers to offer shoppers a differentiated point of view. The Saks Fifth Avenue Men’s Collection, which launched in 2009, is the largest brand in the men’s store, and was launched to fill “white space” that the company saw for men’s wear with an international classic sense of styling. “We really went after it during the recession.”

At Neiman’s, Patrick said the store uses private label “when we fall in love with specific product,” but stressed the company’s mission remains “building big businesses with the best designers.”

Online selling was also a topic of discussion. Patrick said the Neiman’s shopper often researches products online before shopping in the stores and is a “huge driver” of the men’s volume. Harter said the Internet provides an “editorial voice” for the company’s offerings, but many still want to “feel, touch and taste” the product in the store. He said the goal is to create a “synergy” between the two channels.

The panel was in agreement that sales of men’s wear will continue to strengthen in the future.

“The future looks bright for men’s wear,” said Patrick, who said he expects steady growth as men dress up again and shop to complete a more “polished” and “finished look.”

For Bloomingdale’s, attracting a younger customer will be key to future success, Harter said. “The contemporary tailored clothing business is one of our fastest growing,” he said, adding that it is essential that retailers learn how to “engage” this younger guy. The secret? “Technology, technology, technology,” he said, noting stores should install Wi-Fi and “wire” their sales associates to attract these shoppers.

A question from the floor about the future of premium denim evoked a range of responses. Mitchell said denim continues to grow steadily. “We sold a lot during the recession and it will continue to be an important part of the mix.”

Harter said Bloomingdale’s is selling the same number of units, but the prices are lower than they were a few years ago. Patrick said he has reduced the number of units he bought, but the quality has remained the same.

One big growth area for all the stores, however, is accessories. Noting that products such as pocket squares or tie bars “finish off the look,” Mitchell said today’s man is more educated about his appearance and ready to buy just the right piece to complete his wardrobe.

WWD: Mark Lee Seen as Man to Bring New Era to Barneys

WWD | LISA LOCKWOOD

One of the most-watched acts in fashion is beginning to play out: Mark Lee's reinvention of Barneys New York.

The highly regarded Lee has been Barneys New York's chief executive officer for only four months yet already has made sweeping changes in the retailer's senior fashion ranks and overhauled its creative leadership. On Friday, the retailer tapped a new vice president and fashion director, Amanda Brooks, former creative director of Tuleh and a Vogue contributor. And more changes are said to be on the horizon.

The dawn of the new Lee Era at Barneys is under way — an iconic retailer that over-expanded, lost its way and is bleeding red ink — now headed by a young, seasoned, methodical executive whose track record includes successful stints as ceo of Gucci and Yves Saint Laurent, as well as senior positions at Giorgio Armani and Jil Sander. Sources believe every aspect of the company's operations are being closely examined, with the goal of returning the company — whose losses reportedly approached $60 million last year — to profitability for an eventual sale. Its volume reportedly hovers between $675 million and $700 million.

Industry observers believe Lee's main priorities should be:

• Close unproductive units such as those in Dallas and Las Vegas.

• Place more emphasis on "commercial" merchandise and better execution overall.

• Put a greater investment in the store's e-commerce strategy and social-networking initiatives.

• Create a new image campaign touting Barneys' distinctiveness and sophistication.

• Bring more in-store excitement and create more compelling visual displays.

• Freshen the merchandise mix and add more femininity and color, as well as a much-needed paint job at the Madison Avenue flagship.

A major signal the retailer is headed in a new direction occurred when Lee tapped Dennis Freedman as the store's creative director. Most recently creative director of W magazine, Freedman is known for pushing aesthetic boundaries and for his close ties to prominent photographers. He succeeds Simon Doonan, who was named creative ambassador at large. For the past 25 years, Doonan, the quip-a-minute, flamboyant Brit, has been the public face of the store as well as the man behind Barneys' showstopping windows, serving up a blend of kitsch and pop culture that have ranged from Prince Charles and the Duchess of Cornwall to Madonna and Tammy Faye Bakker. Doonan is believed to be on board with the change.

The tectonic shift in Doonan's role occurred two months after Lee replaced the store's top women's merchant, Judy Collinson, and installed his former Gucci colleague Daniella Vitale as chief merchant and executive vice president overseeing all of women's and barneys.com. Julie Gilhart, the store's longtime fashion director who nurtured many up-and-coming designers, also exited and was succeeded by Brooks, who most recently was director of fashion at William Morris Endeavor Entertainment and is also the author of a book, "I Love Your Style: How to Define and Refine Your Personal Style."

"He [Lee] is the first person who's taken over that store who isn't afraid to lose everybody," said one industry source.

Vitale's arrival has stirred some angst in the fashion world, as designers worry Barneys will cut back on its support of young talent in favor of more established, commercial collections. But numerous vendors, analysts and industry observers believe Barneys needs to do just that in order to broaden its appeal — especially in markets outside New York and Los Angeles. As one source joked, "They're too New York- and L.A.-centric, even for New York and L.A."

Shifting its fashion focus may prove a tricky proposition, though, since the store built its reputation on its designer discoveries and quirky, edgy and artisanal merchandise. Going more mainstream would put it in head-to-head competition with Saks Fifth Avenue, Bergdorf Goodman and Neiman Marcus.

"Mark [Lee] will keep the DNA of Barneys and will change the methodology of how the store is run. It's a different era and a different time. You can't run it the same way as 2006 or 2007, or even the Nineties. He's bringing in some people with a lot of experience," said one vendor, who requested anonymity. Another vendor noted, "He's the first one who comes with a back pocket of all the right people. This is the one man who can compile an A-list team."

Barneys needs one. It's been a bumpy ride for Istithmar World, the investment arm of the state-controlled holding company Dubai World investment fund, which bought Barneys in 2007 from Jones Apparel Group Inc. for $942 million, and has since pumped millions into the stores. The retailer today is worth significantly less since the recession and the consumer slowdown in luxury spending. Last year's losses were attributed to sluggish sales and interest payments stemming largely from debt, which includes about $500 million long term. Even without a ceo, Barneys opened flagships in Chicago and Scottsdale, Ariz., and rolled out more Co-ops, which specialize in contemporary merchandise, moves that were plotted by former ceo Howard Socol.

The fact that Barneys has been able to survive despite the recession and a lack of leadership at the top clearly indicates the inherent strength of the retailer. "Barneys, on the whole, has had a pretty major impact on the industry," said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates. "Its top-of-mind awareness is much bigger than its volume."

Bonnie Pressman — a 15-year Barneys veteran and former wife of Gene Pressman, grandson of company founder Barney Pressman — now has her own consulting firm, BLP Consulting Inc., and believes Lee has the wherewithal to restore Barneys' leadership position.

"With any new management, there's always going to be a shake-up," said Pressman, who earlier in her career was executive vice president, general merchandise manager, women's ready-to-wear and accessories at Barneys. "Mark took the position to better Barneys' future. He didn't need to do this job. It's a great opportunity to turn it around. Yes, it needs improvement. It needs some fresh blood. I've known Mark for a long time [from his days at Armani]. He really knew the DNA of the store and what the Pressman family was doing when the store was growing. Out of anyone out there, he's the right guy."

Pressman believes one of Lee's major strengths is the fact that he's worked with the top retailers around the world while at Armani, YSL and Gucci.

"Imagine what he knows. What he brings to the table could be the best of the best. He's seen it all being on that side of the business. He understands the merchants and understands designers. That's what you need," said Pressman. "In the past, there have been a lot of ‘suits' running the place."

Some may criticize Lee and Vitale for being "one-dimensional," since they only know the wholesale side of the business, but Pressman dismisses that concern. "Daniella worked with us. She knew the standards the Pressman family wanted," said Pressman.

Socol, who departed in 2008, came from an entirely different background, said Pressman, and was more operations driven. During his seven-year tenure under both Jones and Istithmar ownership, Socol oversaw an aggressive expansion of the chain to 38 U.S. stores, including seven flagships. Management was determined to open stores, grow volume and get a return on its investment. Among the stores that opened during his tenure were flagships in Dallas, Las Vegas and Boston.

Socol led the regional Burdines department store chain until 1997 and joined Barneys in 2001 at the recommendation of Allen I. Questrom, whom he succeeded as ceo and who led Barneys out of bankruptcy. During his tenure, Socol disagreed sharply with Istithmar over strategies, and particularly opposed overseas expansion. According to sources, one of the reasons Socol resigned was because he was reluctant to report to David Jackson, ceo of Istithmar.

"It wasn't about creativity. He did a good job at the back end, operationwise. [But] opening the other flagship stores around the country was not a wise thing," said Pressman, pointing out that the expansion mirrored what the chain did in the Nineties, which eventually drove it into bankruptcy. "Do we have to repeat the errors multiple times?"

It is widely believed Barneys New York is bolstered mainly by its three flagships in New York, Beverly Hills and Chicago, and dragged down by newer stores opened in Dallas, Las Vegas, San Francisco, Boston and Scottsdale.

Consultant Robert Burke of Robert Burke Associates believes Barneys needs to retain its existing customer base while attracting new ones. "It needs a broader reach," he said. He believes the store can still champion the underdogs and support emerging brands "but you can't build a business on that."

"You need to look at the brand assortments and the allocation of space," said Burke. "It needs some dusting off. As with any mature business, it got set in its ways. The business has changed dramatically. The customer today is more discerning and more willing to mix and match price points than ever before."

Burke believes Vitale, who was most recently Gucci's president of the Americas after positions with Giorgio Armani and Salvatore Ferragamo, will be a strong asset to the business. "She's a very smart merchant. She understands product and certainly understands the business." Burke, as others, stressed that one of Vitale's attributes is that she's interacted with every top retailer throughout her career. "She has seen the good, the bad and the ugly. She knows the best practices. She'll approach it in a very unique way."

Most observers believe that Barneys can still be the go-to store for emerging designers and should maintain its sense of discovery and experimentation. It also needs to work harder to distinguish itself from Bergdorf, which it has been looking more and more like.

"Yes, it can still be the champion of the underdogs," said Kim Vernon, a marketing consultant. "Between Saks and Bergdorf Goodman, all have been jockeying for underdogs more than ever. Barneys will continue to be supportive of emerging brands."

She said the retailer can change the merchandise mix and still find ways to remain special. "They've got a big merchandising team that's been there. I think they can maintain being Barneys but can move it toward what more customers want," said Vernon. "My clients tell me he [Mark Lee] is intent on keeping the uniqueness and specialness of Barneys intact."

Barneys' flagships have always had a distinctive look. Never overflowing with merchandise, the stores have always maintained a spare, art-gallery look. [See box below.] The current merchandise mix ranges from The Row, Derek Lam and 3.1 Phillip Lim to Jil Sander, Lanvin, Thakoon and Rodarte. Co-op vendors include J Brand, Rag & Bone, Diane von Furstenberg, Theory, Rogan and Trovata.

In a telephone interview, Gene Pressman, former co-ceo, creative director and head of merchandising and marketing for Barneys, — who recently was spotted having lunch with Lee at that media mecca Michael's but has no involvement in the business — didn't want to talk too much about the new management but offered, "I have confidence in Mark that he will find a bridge between knowing how to make a profit and being very demanding on his merchants to constantly find and develop emerging brands."

Observers believe there's plenty of work to be done to restore Barneys' bottom line, but feel the end result could be an eventual sale.

"Mark is going to revitalize the franchise," said Gary Wassner, ceo of Hilldun Corp., factors for Barneys. "He's a fashion person with a European perspective. Nobody knows what Istithmar's long-term commitment to Barneys is. Do they want to keep it for the next 10 years? I don't know. Other players have expressed interest. Ron Burkle would love it," said Wassner. "There's a lot of value in the Barneys name. I don't know why anyone couldn't do well with the company, even if they didn't overpay."

Burkle's Yucaipa Cos. bought about 15 percent of Barneys' senior term loan in late 2009, along with roughly 60 percent of the retailer's subordinated loan. It's unclear what the unpredictable, low-profile billionaire — who has a mixed track record with investing in the fashion world with holdings that include Sean John, Scoop, the jeweler Stephen Webster and a small stake in American Apparel — might do with Barneys if he were able to buy it. Nor is Burkle the only predator lurking: Perry Capital swooped in before him and bought up a large chunk of Barneys' senior debt.

As for the retailer's financial health, Wassner said that he's been very pleased with the way Barneys has been dealing with its financial commitments. "They're paying on time. On the button," he added. Wassner said that recently, Barneys' merchandise didn't look all that different from Bergdorf's. "They've allowed Bergdorf Goodman to take from them relationships that were so strong in the past," he said, noting several younger lines, such as Alexander Wang, Band of Outsiders, Gilded Age and Vena Cava, are now carried at both stores. He noted that it will take time to instill changes in Barneys' merchandise mix, since spring buys have already been committed. "The buys in the next market will be quite a different buy. Some lines will be dropped, others will be added," he said. "Barneys still has a much edgier list of younger designers, but the question is: What will it be next season? I've heard that the smaller collections will be limited, and younger designers may be dropped from the list. How they buy for fall will determine the direction going forward. When I see the fall orders, then I'll have a clear sense," said Wassner.

Wassner doesn't think Barneys needs to change its focus or become more accessible in price points. "They have Co-op for that. That's been successful for them. They just have to make better decisions and know who their customer really is."

The Co-op, which celebrated 25 years in business last year, is a profitable operation and accounts for 10 to 15 percent of Barneys' total sales. Its best-performing stores are in Manhattan, where there are three freestanding locations; in California, where there are four, and within certain Barneys' flagships, including Madison Avenue and Beverly Hills. While several Co-ops are slated to close next year — in the Houston Galleria in January and the Westchester Mall in White Plains, N.Y. by March — the plan is to continue to open more Co-ops.

To be sure, one of Lee's main objectives should be to bring back its sizzle, which the company used to possess in spades. Barneys hasn't kept up its creative efforts the last two years, due to both the economy and a lack of leadership at the top, said market sources. Karl Hermanns, executive vice president of merchandise planning, marketing, e-commerce and operations, exited in the fall. Charlotte Blechman, former vice president of public retailers at Gucci, has been tapped as Barneys' senior vice president of marketing and communications, reporting to Lee.

"The new ceo needs to bring back the magic that existed around Barneys," said Marc Gobe, ceo of Emotional Branding. "It was the hottest and hippest place to go. It was your first choice for fashion, innovation and style. They've become one of the pack now. I would immediately start to build a community online. They need to find their social voice. The brand needs to be talked about. In the old days, people used to talk about ‘I bought this at Barneys,' or someone would ask ‘Where did you buy it?' and it was Barneys."

WWD: Accessories Propel Luxury's Rise

WWD | MARC KARIMZADEH & KATYA FOREMAN

From handbags to shoes to watches, accessories are generating the power that is driving luxury’s surge.

It’s a global trend — from the U.S. to emerging markets such as China, Brazil, India and the Middle East. When the final tally is made, the sales growth of luxury accessories in 2010 is expected to be 16 percent, compared with 8 percent for luxury apparel, according to a new worldwide study from Bain & Co., a strategic consulting firm. By comparison, sales of luxury accessories in 2009 contracted

1 percent versus 2008, with luxury apparel sales dipping 10 percent.

Customers are increasingly sophisticated, cherry-picking across categories, brands and channels for quality, style or value, the report said, with men showing the same spending patterns as women on leather goods.

Despite persistent high unemployment in many countries, concerns about European debt and a still-wobbly global economy, stock values are up this year, holiday shopping indicators for high-end goods have been positive and, in a period when product adaptability and value are essential, accessories are particularly appealing because they are a versatile, fast way for consumers to freshen what’s in their closets.

Pete Nordstrom, president of merchandising at Nordstrom Inc., said shoes and accessories have been “the strongest category for us in the last several years, before things got difficult, when things got difficult and now” as retail recovers.

“There is a lot of value in accessories and shoes,” Nordstrom added. “If someone buys a designer handbag, they can use it several times a week. If you bought a designer apparel outfit, you may wear it a few times a year. You get more use and that is a part of it.”

Karen Katz, president and ceo of Neiman Marcus Group, also cited the strength of shoes and handbags in reporting this month that NMG’s income tripled for the quarter ending Oct. 30. And the rest of the industry has echoed those results.

Luxury group PPR recorded a 12.9 percent rise in third-quarter sales that was propelled by demand for designer handbags, especially in emerging markets. Hermès International has forecast a record year, pointing to items such as silk scarves, leather bags and watches. LVMH Moët Hennessy Louis Vuitton, Coach, Bulgari and Tod’s SpA all reported significant gains in accessories, while Mulberry group plc reported profits more than tripled in the six months to Sept. 30 and said the wholesale order book for spring was at least 91 percent higher than last year.

To be sure, a sudden crisis would undermine the trend, but that doesn’t appear to be imminent.

Executives such as Sidney Toledano, president and ceo of Christian Dior, and Philippe Pascal, president of LVMH’s watch and jewelry group, have said sales of luxury timepieces are strong and they expect the growth will carry over into next year.

Since the beginning of the year, Louis Vuitton has seen double-digit gains in accessories worldwide. Bestsellers include scarves, such as the house’s cashmere Leo stole, small leather goods and men’s and women’s sunglasses.

Boosted by tourist flows, notably Chinese customers, Gucci in the third quarter saw strong demand for classic handbag styles and novelties such as the Gucci 1973, especially in Western Europe, where overall sales for the brand rose 27.7 percent in the third quarter, with France, Italy and the U.K. all posting solid gains. As the brand’s core business, leather goods represent well over 50 percent of total Gucci revenues, generating in excess of 1 billion euros in sales, or $1.3 billion at current exchange.

“We have been very pleased,” said Cody Kondo, group senior vice president of shoes, handbags and jewelry at Saks Fifth Avenue. “Shoes and handbags have been very well received by our customers. In light of the good run we have had in the stock market over the last 60 or 90 days, customers have a strong appetite for them again.

“They still want value,” Kondo said. “That feeling of recession has not totally gone away, so it’s not all pre-2008. The customer is still looking for a strong price-value relationship. A year ago, into spring, there was a trend in timeless and classic pieces. We have seen some of the more statement fashion pieces now selling quite well. We have seen a nice increase in the jewelry category.”

At Tory Burch, top sellers in recent weeks have been the Reva and Eddie ballet flats; the hiking-inspired Halima, Lyle and Howard boots, and small leather goods like clutches and bags in all sizes.

“Accessories are an entry point into a brand,” Tory Burch president Brigitte Kleine said. “They are often the first thing women buy because they are the easiest way to update your wardrobe, from a leather handbag to a shoe you can wear year-round.

“People are more conscious about how and what they are buying,” she added. “ They are looking for products with value and longevity. As opposed to buying a whole new wardrobe every season, they’ll update with accessories.”

Lisa Montague, ceo of the Spanish leather goods brand Loewe, which is owned by LVMH, said the label this year has seen a higher quality of sales, with buying patterns shifting up more to the top end of price ranges.

“That could be because the customer is feeling more confident,” she said. “Certainly, for our brand, we’ve returned to being true to what we’re good at [luxury leather goods], and that is resonating well with the consumer.”

Although Loewe has seen high growth rates in China, Montague said Japan is still proving a challenging market. Bestsellers include the brand’s lightweight Nappa line and its iconic Amazona bag collection. The entire Amazona family takes around 30 percent of the house’s bag sales, Montague said.

“We have seen a tremendous rebound in accessories, with shoes being the strongest of any fashion category, followed by handbags,” said Robert Burke, founder, president and ceo of the Robert Burke Associates consultancy. “The consumer is realizing it’s the easiest way to update their wardrobe, and consumers who have been forced to be more creative in their purchases realize they can shop [for apparel] in the contemporary category, or in more mass stores like H&M or Zara, and then splurge on a signature shoe, handbag or a piece of statement jewelry.

“There is also the aspirational consumer who will buy contemporary or more broadly distributed [ready-to-wear], and then save up for that signature shoe,” Burke added. “Runway designers have given shoes so much attention that the category almost has a life of its own.”

David Wolfe, creative director of trend forecasting firm the Doneger Group, said it is natural for accessories to lead the charge in retail’s recovery.

“Shoes and handbags represent what consumers think of as a better investment than a garment because they are going to get more use out of it,” Wolfe said. “It also eases their guilt from buying luxury brands. They think that by shopping accessories, they are justifying returning to their evil shopping ways.”

After steady double-digit growth in accessories sales over the past six years, Selfridges in London this year has seen its largest increase for the category yet — a 30 to 40 percent climb in sales year-over-year.

Sebastian Manes, accessories director at Selfridges, said the category is the store’s largest division.

“Women’s wear is up over last year, but won’t have the same increase as accessories,” said Manes, citing Mulberry’s Alexa bag, Louis Vuitton’s Speedy and Chanel’s Mademoiselle bags, among other bestsellers. “The increase we’ve seen this year is phenomenal.”

Ditto at Harvey Nichols. Pointing to a rise in volume over the past few seasons for scarves and jewelry, Helena Sotiriou, accessories buyer at Harvey Nichols, London, said the store this season has seen a resurgence of demand for the “must-have” handbag, with long waiting lists for bags by the likes of Proenza Schouler and Alexander Wang.

Harvey Nichols has experienced a 45 percent sales uptick in the category. Among the bestsellers are Proenza Schouler’s PS1 satchel, Alexander Wang’s Coco bag, Alexander McQueen’s box clutches and Stella McCartney’s runway Court shoe.

“This season, customers are willing to spend and invest in their wardrobe as long as they perceive it to be value for money — price by wear,” Sotiriou said.

Catherine Newey, director of accessories at Printemps in Paris, said luxury has had the strongest growth, particularly luxury leather goods, jewelry and timepieces. Accessories account for more than 30 percent of the store’s sales.

“Clothing is experiencing growth, but the real dynamism is coming from accessories,” Newey said. “Every brand has focused on developing accessories” because they allow consumers to follow trends without having to change their wardrobes. “Accessories have become more and more directional,” she said.

How will brands maintain the momentum?

“So many of the luxury brands bastardized their integrity when they were overexpanding and catering to the aspirational market, and that is the one that has now dried up,” said Wolfe of the Doneger Group. “The brands now have to reassure their customers that they still have the quality, integrity and authenticity.”

WWD: Julie Macklowe as Fashion Backer

WWD | EVAN CLARK

NEW YORK — Julie Macklowe has moved beyond the red carpet to the boardroom.

The hedge fund ex-pat and semireluctant socialite has returned to her family’s garmento roots, so to speak, and embarked on a new career as a fashion backer with a hands-on approach.

Online jewelry startup BaubleBar, her first investment, launches Thursday and marks the start of phase two of her fashion career. Macklowe has a board seat and is helping the company, founded by two recent Harvard Business School graduates, get off the ground. Accel Partners, a venture capital firm, is also investing in BaubleBar, although the size of the infusion has not been disclosed.

Macklowe is working on another startup she plans to run and hinted that “there are at least two apparel companies I’m looking at,” although she favors the fatter gross margins in the cosmetics, accessories and handbag sectors.

Macklowe, née Lerner, is something of a rarity in fashion. The granddaughter of a polyester king is well connected in New York’s social and fashion circles and is a familiar face on the party circuit. She counts Jason Wu as a friend and accompanied Calvin Klein’s Francisco Costa to the CFDA/Vogue Fashion Fund event last month. But she is also fluent in the language of business, having spent 12 years in finance, which culminated in a $250 million Millennium Management-backed hedge fund launched under her own name in early 2009 and shuttered in October.

Now she’s taking her own money and using her contacts and the strategic and management skills she picked up in the private equity world to invest in the changing fashion landscape.

Macklowe said the current crop of young designers are just starting to spread their wings, like Calvin Klein and Ralph Lauren in the Eighties. Many of these brands are looking for cash to expand, and seeking management expertise to take them to the next level.

“You’re going to see some really cool designers who make it big,” she predicted over tea at the Four Seasons in New York recently.

At first glance, it would be easy to underestimate Macklowe as more of a consumer of designer apparel than serious investor in brands. At 32, she is fit, blond, ready to smile and, for better or worse, sartorially adventurous. She’s just as likely to wear a Balenciaga blazer as leather pants for meetings, and strays to whatever strikes her fancy on the way to the numerous red carpets she walks down.

“She’s not afraid to take a fashion risk,” said Wu, describing her style as “very feminine.” Wu and Macklowe met through mutual friends and have no business relationship.

“Usually when we go out, she’s the one that orders the whiskey and I’m the one that orders the Champagne,” he said. “She’s the gutsy one, yet she’s wearing six-inch heels. It sort of balances out her personality. She’s just a lot of fun.”

But she’s also very direct and, in conversation, can talk as knowledgeably about the high unemployment rate as she can about Coco Chanel’s impact on how women dress.

Although she could easily spend her days on the party circuit, Macklowe is almost an antisocialite. “I’m doing things that are important to me,” she said. “I’m not running to go to every party.” She’s involved with New Yorkers for Children and The Metropolitan Museum of Art’s Costume Institute.

“I don’t know what it means honestly, I don’t know who coined ‘socialite,’” she said. “It’s really a bizarre term if you think about it. I don’t know. What is a socialite?”

In many ways, she’s an example of a new species of fashion investor.

“Where it used to be traditional bankers or hedge funds that were interested in investing, we’re now seeing people that are directly connected, whether it be angel investors or others,” said Robert Burke Jr., president and chief executive officer of Robert Burke Associates, who counts Macklowe as a former client and a friend. “It’s all more opportunity for the designer.”

Burke said Macklowe has the business acumen to follow through and help grow the companies in which she invests. “The biggest challenge today is that investors for maybe ego reasons, for self-promotion, invest in fashion and then realize that it’s a much more complex business,” he said. “It’s a sexy business to invest in. It’s not always such a sexy business to maintain and grow."

The fashion, business and consumer stars are going to have to align if Macklowe is going to back the next big name or get in on the next hot trend.

“You could be speaking with one of these companies for years,” she said. “It might just not be a time when they need money. And you need luck.”

So far, Macklowe has been pretty good at making her own luck. In just three years, she earned two bachelors degrees from the University of Virginia and a better-than-3.9 grade point average.

Jeffrey Walker, former ceo of J.P. Morgan Partners, hired her out of school in 2000 to work at what was then Chase Capital Partners. “She was unique because she was willing to take a risk,” he said, noting that Macklowe challenged hedge fund pioneer Julian Robertson when he came to speak at one of her classes.

“Here’s someone who was 20, who was going toe-to-toe, and Julian thought she was great because of that,” Walker said.

“It’s very easy to sit in one place,” Macklowe said. At Chase she shuttled between Seoul and Hong Kong weekly and squeezed in naps between meetings as she, at times, logged 22-hour workdays helping to structure leveraged buyouts.

“It’s very uncomfortable to put yourself in a place where you know no one on the other side of the world,” she said. “And I think it makes you a better investor and judge of businesses and character and people to put yourself in an environment where you are not necessarily comfortable.”

In 2002, she moved to New York and started working as an analyst at Metropolitan Capital Advisors.

“She was a moneymaker,” said Karen Finerman, president of Metropolitan, where Macklowe focused on retail. “She just seemed to have a combination of an interest and an aptitude for that space. She has a good sense of risk management, when it’s not working, when to get out. That’s very important.”

A colleague set her up on a blind date with Billy Macklowe, son of Manhattan real estate giant Harry Macklowe. The two have been together ever since.

Yet while she may have married well, she didn’t settle into an easy life. She joined investment firm SAC in 2006 and her profile in the fashion world grew as she invested in the retail and consumer market. She was eager to explore every new brand and retail concept in the sector, regularly making the rounds of conferences and openings to gain an investing edge.

“She’s a very savvy investor,” said Joe Gromek, president and ceo of The Warnaco Group Inc. “She does her homework. She has fun following the business and she appreciates the fashion side of it. She can see how a company is performing.”

But Macklowe yearned for a more hands-on approach.

“I wanted to feel passion about what I was doing and really work with companies in a more active role, which is hard to do while you’re buying and selling stocks,” she said, noting markets are being driven by investor psychology. “There’s a lot of super-irrational moves in the short term because of the sentiment and people. After everyone’s come out of such a hard time, no one knows exactly what to think of anything.”

Stepping back from the markets also afforded Macklowe more time with her three-year-old daughter.

“Nothing to me is better than taking Zoe to drop-off in the morning and watching the three-year-olds with their oversize backpacks running down the hall, excited to get to class,” she said.

Macklowe’s introduction to the fashion business began when she was near her daughter’s age.

Her great grandfather, Frank Lerner, came to New York from Russia in the early part of the last century and worked in the garment district.

On days when school was out, his son, Harold, was enlisted to help him carry his sewing machine to factories, according to Macklowe’s uncle, Michael Lerner, former chairman of Marisa Christina Inc.

But Harold nonetheless got a feel for the business and after World War II took the T-shirt firm his father developed and turned it into the women’s sportswear brand Fire Islander, which specialized in double-knit polyester in the Seventies and Eighties. At its peak the company had a very respectable volume of about $75 million and factories in what is now DUMBO in Brooklyn and in Bayonne, N.J.

“Some of my earliest memories are of walking the floors with people sewing and patternmaking,” Macklowe remembered fondly.

“I don’t know if it’s in the blood,” her uncle said. “But she’s always been fashion conscious. Hopefully some of that springs from her interaction with our designers.”

WWD: Footwear News Person of the Year: Christian Louboutin

WWD | ELISE ANNISS

He is unstoppable.

Even in a year when high-end retail struggled to recover, Christian Louboutin’s signature glamour was the force to be reckoned with. His unique grasp of luxury consumers of all ages was never more obvious than in 2010. While other designers were forced to cut staff and reduce their retail footprints, Louboutin expanded his red-soled empire across the globe.

The Footwear News Person of the Year raised the bar at a critical time in the luxury category, and the efforts have clearly paid off.

“Never has a red sole meant so much,” said Robert Burke, head of New York-based consulting firm Robert Burke Associates.

“It’s been Louboutin’s year for a couple of years now,” added Ron Frasch, Saks Fifth Avenue president and chief merchandising officer. “He’s become the king of the category.”

The designer himself admits that 2010 marked an important year of transition, when the brand went truly global with store expansion and new distribution. “The reality is that I now have a COO who is really organizing everything, and that definitely makes a difference,” Louboutin told FN. “But at the end of the day, it’s because the shoes are selling.”

In the last 11 months, the designer opened 12 stores in cities including Beirut, Dallas, Dubai, Jeddah, Madrid and Tokyo. According to COO and GM Alexis Mourot, the company saw double-digit growth this year, and retail sales exceeded $250 million for the year ending August 2010.

Despite his super-stardom, Louboutin remains humble, unconcerned about money and the trappings of fame. “I do what I do because I love it. I’m not doing it to make money,” said the designer over a breakfast of buttered crumpets and English Breakfast tea in London last month. “It has ended up being a [successful] company, and I’m not going to say it isn’t pleasant to make a living from your work, but my goal has always been to design pretty shoes and to see them on people who like them.”

No one likes Louboutin more than the luxury retailers who have cashed in on his fame. Even during the recession’s darkest days, the success of the brand left them thirsting for more of it.

“Christian’s red soles are a stroke of genius and the icing on the most delicious gateaux,” said Jonathan Joselove, SVP and GMM at Neiman Marcus. “His talent and his shoes have delighted us for years. Most important, his shoes have thrilled our customers, season after season.”

At Saks Fifth Avenue last month, 8,000 consumers voted his Maralena shoe the year’s sexiest in a contest sponsored by the department store and FN.

“He stands apart because of his innovation in design and originality with use of materials,” said Tracy Margolies, VP and DMM of women’s footwear for Saks.

While he’s been making some serious noise for the past several years, Louboutin built his business quietly for the first decade. He opened his first flagship Paris store in 1992. Early on, in New York, he showed his shoes above Diane von Furstenberg’s studio on 12th Street, and she has since become a mentor.

“My second career and his first started at the same time,” said von Furstenberg. “Christian is like my younger brother. We talk, we travel together, we have the same partners in places like Russia, we are friends and soul mates and I adore him. He is talented, incredibly smart and curious and also competitive. His success is no accident: He has clarity and is talented and intelligent.”

For his part, Louboutin credits von Furstenberg with helping him develop his brand’s direction. “She’s very specific on shoes,” he said. “She gave me very important advice: She told me I should always have classics. I was always changing the collection and never thought about classics that go back to previous collections. She was the one to say, ‘You have to do classics. You have them, why do you get rid of them?’”

It was with the addition of Louboutin’s second New York store, at 59 Horatio St. in November 2004, that his U.S business really took off. In an interview with FN in 2005, Louboutin said the shop gave him greater exposure to a younger, hipper customer.

The store locations reflect Louboutin’s long-held interest in far-flung places. As a boy in France, he would pick up brochures and books from a nearby travel agency and plan imaginary trips. Now, his genuine enthusiasm for people and places has made the designer a big hit with his international accounts.

“He always manages to take time to explore, is very familiar with parts of China and Indonesia and has made great friends in these places,” said Peter Harris, president of Pedder Group.

“The fact that he has fun shows up in his shoes,” said Erin Mullaney, buying director at Browns in London. “There’s a sense of playfulness in the collection. Also, unlike some other designers, he is happy to be the face of the brand and enjoys it.”

But you won’t find Louboutin clamoring for the spotlight.

“The type of celebrity I am — if you can call it celebrity — is perfectly easy [to live with],” he said. “When people refer to your name, it is totally different [than recognizing me]. I would really have a hard time having the kind of celebrity that actors do, where people are stopping you all the time. It’s not about me; it’s about the shoes.”

That mindset has only increased his appeal in Hollywood.

“There is no one like him,” said Gwyneth Paltrow. “His shoes are playful, sexy and full of joy.”

And though he doesn’t go out of his way to court the famous, Louboutin considers his popularity to be extremely rewarding. “I take a lot of pride in the fact that with all the choices in the world, celebrities still choose my shoes,” he said. “Shoes are objects of desire. I’m not going to throw tons of shoes at someone so that they’ll wear them. [The desire] has to come from the person.”

So what does the future hold for the designer? On that topic he is non-committal: “There may be a moment when I get fed up and want to try something else, which I can completely conceive. My impulses are very important to me. I never say no forever, but I never think that a yes is forever either.”

WWD: Masstige Gains Power

WWD | MILES SOCHA

PARIS — The idea that expensive, designer fashions are the most desirable seems so last-millennium.

More and more marquee designers are applying their creativity to lower-priced apparel on a temporary or full-time basis, with Karl Lagerfeld the latest to join the masstige movement.

“Fendi and Chanel are so established, you cannot compete with them,” said Lagerfeld, who last month unveiled plans to shift the focus of his signature ready-to-wear line to access-pricing — and online selling — starting next fall. “You can’t dance at three parties the same evening.”

And in Lagerfeld’s estimation, the masstige party — which he really got going in 2004 when he teamed up with Swedish fast-fashion giant H&M on a one-time collaboration — is the one to be at today.

“I think it’s the only modern way to do it,” Lagerfeld told WWD. “We live in the age of jeans.

“It’s funny for a person who has money to buy something inexpensive and it’s great for a person with not so much money to be able to get something by a designer,” he continued. “It’s the new snobbism.”

Designers, executives and other observers agreed, saying the democratization of design, weakened spending power and shifting consumer preferences are giving lower-priced “designer” fashions a higher industry profile — and a bright future.

“It’s no secret that the designer and high-end market has become crowded in this economy, and people are looking at new ways of doing business,” said Robert Burke, head of the New York-based Robert Burke Associates consulting firm. “The old rules of defining the consumer and defining the price point — and the idea that you can play in only one category — are passé.”

Indeed, designer-led projects in lower-price categories continue to multiply, from Olivier Theyskens’ new contemporary range for Theory and Stella McCartney’s just-revealed partnership with PPR’s La Redoute on an affordable children’s wear collection to Lanvin’s forthcoming one-off line — from evening dresses to lipstick — for H&M.

What’s most intriguing are designers shifting permanently downstream, as Jil Sander did last year when she joined Japanese fashion giant Fast Retailing Co. Ltd. and launched her new +J brand for its flagship Uniqlo chain.

“Today, we are in a different phase of fashion history,” Sander said. “I took part in the transformation of fashion from a couture craft into a contemporary industry. We are much better equipped to realize quality on a much larger scale.

“To me, luxury has nothing to do with high prices, but a lot with enlightened taste and the possibility to be in step with your age, to feel at ease in your body, and to project a confident image of yourself,” she continued.

According to Jean-Jacques Picart, a Paris-based industry consultant, big-name designers cannot ignore a strong, worldwide trend toward more eclectic dressing, with lower-priced elements a key ingredient.

“A modern girl doesn’t hesitate today to mix quite expensive clothes and affordable-priced pieces: say, shoes by Christian Louboutin, a skirt by Diane von Furstenberg, a T-shirt from H&M, a vintage handbag and a belt she bought at a market in Istanbul,” he said. “What Karl did with H&M pushed up to the top level of prestige any co-branding between big names and popular names.”

Concetta Lanciaux, principal of Switzerland-based Strategy Luxury Advisors, also ties the rise in masstige — accessibly priced products with some prestige elements — to economic factors, principally a “sharp decrease in standards of living that has hit the mainstream middle class who used to buy entry-level luxury products or second lines.”

Changing tastes play a role, too. “The new generation is much more fashionable than the jeans-and-T-shirt Generation X-ers born after the Seventies that loved Gap — the antidesign, accessible brand,” Lanciaux said. “For those born after the Eighties, looking fashionable in a personal way is cool, and they mix and match styles to achieve a more adult look while adults dress generally younger.”

Lanciaux said celebrity lines, mostly accessibly priced, have “given a new impulse to this trend,” while Gap is morphing into a more design-driven brand, evident in collaborations with young American designers and, coming in November, a capsule collection by Valentino available in Europe only.'

Burke highlighted the popularity of Target’s tie-ups with designers such as Isaac Mizrahi, Zac Posen, Alexander McQueen, Anna Sui, Rodarte and Jean Paul Gaultier. Designer names “speak to the consumer” more than a “nameless, faceless masstige brand,” he said.

In a recent report, Bernstein Research analyst Luca Solca asserted that mass retailers like Inditex, parent of the Zara chain, and H&M are changing the apparel industry from the ground up. “Their short design-to-market lead times, compelling fashion content and superior scale are allowing them to gain market share across the world and push traditional apparel retailers aside.…Even high-end designer fashion is feeling the pressure,” Solca wrote.

“The customer is clever,” added Margareta van den Bosch, creative adviser at H&M and the former head of design who launched its annual designer collaborations with Lagerfeld, subsequently teaming up with Viktor & Rolf, Jimmy Choo, Sonia Rykiel and others. “He or she wants the best of all things, and mixes and matches from all different kinds of offerings and brands. It’s something that we encourage: Fashion should be about finding new ways to express yourself, at a reasonable cost.”

Van den Bosch said consumer interest remains high in the retailer’s designer collaborations, helping the fast-fashion giant widen its reach.

“Since we started doing collaborations, we have seen new types of customers that normally did not shop at H&M. For example, Comme des Garçons attracts a different type of customer than Roberto Cavalli,” she said. “And from what we can see, we have also kept them.”

Colette, the ultrahip Paris boutique, has also been a hot spot for launching and popularizing masstige products — an Azzaro range for cataloguer La Redoute being the most recent on the floor last month — amidst the crème de la crème of designer creations.

“Our philosophy is to introduce anything we like, so it can go from a luxury brand to a special mass market collection we would get in advance,” explained Sarah Lerfel, Colette’s creative director and buyer. “For sure it opens our door to many customers who are usually not coming to our boutique, so that’s positive. The downside would be the mess it can generate, but that’s a positive mess, too!”

Lerfel said the accelerating speed of trends, no doubt fuelled by the quick-turn fast-fashion players, means “you always want something new, but with quality and a good price to update your wardrobe fast.”

Christian Lacroix — now focused on stage costumes and industrial design projects since his couture and ready-to-wear house was shuttered last year — said the financial crisis and exaggerated runway styles have undermined the appeal of designer fashions in recent years.

Meanwhile, “real people found their own style tricks and pleasure through eBay, low-priced shops, vintage and secondhand, Internet, flea markets or all these chains such as Zara, H&M etc., which are so clever interpreting runway styles into more edible products,” he said. “That’s why designers are more and more attracted by lower-priced products if they don’t want to lose the connection with their audience.”

In Lacroix’s estimation, there’s an “enormous space for these lesser-priced lines — if they are right and connected with street desires. And this space is stolen from deluxe fields.”

Said the consultant Burke: “If you can offer good design at a great value, you get a customer. It’s that simple.”

Most observers agreed that high-end designers can dabble in masstige without risk, so long as the latter projects are not overexposed or too derivative of their high-end offerings. Burke mentioned Vera Wang as a good example since her Simply Vera Vera Wang line at Kohl’s has not hampered her draw as a go-to, luxury bridal designer, as Chelsea Clinton’s July nuptials attested.

Lanciaux warned that while embracing masstige “would mean slow death for a luxury brand, it becomes particularly interesting for clever designers and marketers capable of offering design, functionality and a decent quality at a low price. In a way, it could replace the income from licenses and secondary lines.”

Alber Elbaz, creative director at Lanvin, said he had initially spurned invitations from H&M to collaborate, but he was ultimately seduced by the “democratic” nature of the project.

“We thought it was a very relevant move. High-street fashion is really becoming stronger and more important,” he said. “We were always doing high fashion and I thought it would be interesting to understand this market.”

“The business requires innovation and evolution,” agreed Andrew Rosen, president and co-ceo of Link Theory Holdings (U.S.) Inc., which just launched the Theyskens’ Theory collection by the former designer of Nina Ricci and Rochas, someone famous for couture-like creations with nosebleed prices. While the new Theory line is hardly mass, and is described as “high contemporary,” it is more democratic.

“I think designers are very forward and innovative thinkers. Clearly their reach can be much more than at the luxury end,” Rosen said. “I don’t think clothes have to be expensive to have value.

“You don’t get to be Jil Sander, Karl [Lagerfeld] or Olivier [Theyskens] if you don’t have a special point of view,” he continued. “And if you have a point of view, it’s relevant at any price or in any category. At the end of the day, I don’t think someone is going to buy an Olivier Theyskens jacket because they can get it for $600. They’re buying it because it’s really special.”

McCartney, who rose to fashion fame as the designer of Chloé, launched her brand as a joint venture with Gucci Group in 2001, and her accessibly priced forays have included a one-time collaboration with H&M in 2005 and her ongoing partnership with Adidas.

“I don’t really believe in elitism for the sake of it,” said McCartney. “I think it’s really important and modern and contemporary if you can make clothes that are affordable and accessible, but with still a great quality attached to them and timelessness.

“I think our brand isn’t snobbish and that’s why we started looking into this early on,” she explained. “It comes very natural to us.…We are a brand that can appeal to many different demographics of people, and so we’re interested in playing on that and testing that and pushing that within the brand.”

While most designer forays into lower-price zones have centered on women’s apparel, observers agree other categories, such as men’s wear, could be further developed.

“There is a strong tendency toward a less frivolous lifestyle. You find people of style on all levels of income: quality and attractiveness wins over snobbism,” noted Sander. “I see many possibilities in my cooperation with Uniqlo. I am very interested in accessories, and I would also consider doing optics, fragrances, homewares and even watches. I guess I would draw the line at jewelry.”

In Lanciaux’s estimation, accessible products with a designer edge will remain “a valuable choice for consumers formerly buying secondary lines and mass” as long as this slow-growth economic cycle lasts.

“But nothing is eternal,” she said. “In a new economic cycle, the same consumers will be buying higher because the aspiration to luxury — of which quality is a key element — is definitively stamped in the DNA of the new generations.”

WWD: Lincoln Center Gets an 'A'

WWD | ROSEMARY FEITELBERG & MARC KARIMZADEH

New York Fashion Week’s move to Lincoln Center earned generally favorable marks from designers and retailers, although the packed schedule and its hither-and-yon schedule drew complaints from many buyers.

“Lincoln Center was a triumph,” said Carolina Herrera. “The way it was constructed, the entrance, and the outside gardens, it was all fantastic.”

Mark Badgley said, “It just felt like New York. It was good for fashion, good for designers and good for the city. I know the first time is always a novelty but all the people we invited — socialites, celebrities and industry — they were really into it.”

Isaac Mizrahi was another fan of the uptown digs. “There was something elegant about it and I think it was a little more organized than Bryant Park. Also, somehow it felt less anxiety-provoking by not being in the center of town.”

Pleased as he was, the designer is not committing to a second consecutive season just yet. “I may show there again next season, but I can’t be sure because I like to change things a little from time to time,” he said. “I would definitely show there again in the future.”

Lela Rose was also at ease with how everything worked out for her Sept. 12 show and to have fashion showcased in a hub for the arts. However, she did hear “a few grumblings about the GPS system for seating, but I suspect all kinks will be worked out by next season.”

Prabal Gurung was also high on the location’s cultural significance. “The magnitude of the place itself, the buildings, what it represents historically…you don’t feel it until you go there,” Gurung said. “It’s a perfect home for fashion. There was this incredible energy. It was easy to navigate and to find, traveling back and forth was easier also. There weren’t any crazy traffic jams. I think it worked out perfectly.”

While the new check-in system for guests was lauded by many, some thought the check-in desks, screens to direct people to the right venue, and little white printouts with seating information were reminiscent of airport terminals — environments usually lesser known for high-fashion statements.

“It’s like being on Jet Blue,” Marjorie Gubelmann said. “I love it.”

Robert Burke said he started the show season feeling “very skeptical,” but thought the set-up was “well organized,” especially the check-in system. In addition, the layout resulted in “less riffraff looking on than usual,” he said.

Ken Downing, senior vice president and fashion director of Neiman Marcus, pointed to the mall’s outdoor plaza as a welcome extra. “There is some room to maneuver and breathe, and gather yourself and your team,” he said. “Now, if we could only get the schedule to be less uptown, downtown…it would be very helpful if there is an attempt to schedule blocks of shows in one part of the town. Think of how much more ecologically correct we would be.”

It was a common complaint about store buyers, who felt they spent a large part of the week in taxis or Town Cars shuttling from one end of Manhattan to the other. “I thought Lincoln Center worked,” said Nicole Fischelis, group vice president and fashion director of Macy’s Inc. “What didn’t work is that there are still too many collections all over the city.”

Barbara Atkins, vice president and creative director of Holt Renfrew, was even more vocal. “The venue felt very spacious, but it wasn’t very convenient for buyers. We’re all over the city, running to see showrooms in between shows. It seems that fewer designers were showing at Lincoln Center. Most were downtown. The travel was very difficult. It felt like a trade show.”

Overall, though, buyers were pleased with the new locale, as summed up by Bergdorf Goodman’s Linda Fargo, who gave it a two thumbs-up. “If I had four, five or six hands, the thumbs would all go up,” she said. “It’s efficient. We underestimate how when things are well organized, it relieves stress. Fashion week is stressful enough.”

WWD: Defining the New Luxury

WWD | MILES SOCHA

Luxury for all? Not like it used to be.

So-called aspirational customers — who helped lift the luxury category to unprecedented heights during the boom years — seem to be sitting on the sidelines in the postrecession period: still aspiring, but spending less.

“The concept of luxury has restricted again,” said Concetta Lanciaux, principal of Switzerland-based Strategy Luxury Advisors, describing a shift in consumer priorities favoring heritage luxury brands or — at the other extreme — masstige retailers. It makes business more challenging for players in the middle and products that “look like luxury but it’s not luxury.” For example, designers’ second brands are “not doing as well as before [People] prefer to buy less, but a little bit higher,” she explained.

“There are consumers that overreached, and during the recession they had to go back to a more appropriate spending habit,” agreed Michael Burke, chief executive officer at Fendi in Rome, noting that was particularly the case in the American market, hard hit by the financial crisis. “The market has become more polarized: either it’s entry price or true luxury….The middle has hollowed out.

“You either have to be resolutely upscale, or you’re battling it out on prices,” he continued. “[Luxury goods] is not a democratic product category.”

Pam Danziger, president of the Stevens, Pa.-based research firm Unity Marketing, said scores of American consumers who reached beyond their means into the luxury sphere during the boom years pre-2008 have since simply “dropped out” because of the recession.

Danziger estimates consumers with household incomes in excess of $250,000 — the top 2 percent in the U.S. — spend three to four times more on luxury goods than the next affluent tier, those in the $100,000-to-$250,000 range.

What’s more, given a choice between buying the “best of the best” or “better and occasional best,” the richest consumers preferred the latter option in her most recent research.

Based on a survey of some 1,200 affluent consumers in the U.S., conducted last month, Danziger is predicting “cautious behavior” even among elite consumers whose “pent-up demand” for luxury goods led to a spree early in the year that is unlikely to continue.

Lanciaux also foresees a tougher second half, noting European luxury brands were buoyed in the first two quarters by a “huge restocking,” plus a rise in the value of the U.S. dollar against the euro that has since eased.

To be sure, luxury has come roaring back compared with the doldrums of 2009, with most European firms posting strong double-digit sales gains in the first two quarters of 2010 (albeit against low comparisons the year before).

While there are detractors, many executives, consultants and analysts agree the change in fortunes is largely thanks to elite consumers — and emerging markets — rather than a broader buying public.

In a recent report, Bernstein Research analyst Luca Solca said “overseas markets will represent the future driver of luxury growth in the medium and long term. Although the two largest luxury markets — the United States and Japan — make up the majority of current overseas luxury demand, we expect the growing importance of emerging markets to become increasingly pronounced as these markets mature.

“This should bring overseas luxury markets to 66 percent of total demand by destination (versus Europe at 34 percent) in 2020, with emerging markets representing nearly one half of the total overseas portion,” Solca wrote.

Coach’s 34.1 percent bump in fourth-quarter income, reported Tuesday, was also deemed encouraging, suggesting the “ ‘affordable luxury segment’ is also well oriented,” according to a research note by HSBC analyst Antoine Belge.

“We are not saying that everything is rosy for luxury in the U.S., but brands which engage the luxury (or affordable luxury) consumer with products offering clear ‘perceived value’ should continue to do well in our view, even in a jobless recovery phase,” he wrote.

Guy Salter, deputy chairman of Walpole, the association that represents British luxury goods firms, argued the recent rebound in sales in luxury is “not only due to the very wealthy shopper but to other consumers as well. The luxury goods houses have come out with more accessibly priced lines, and the brands that have positioned themselves in the ‘affordable luxury’ space have done well. Links of London, for example, has had very strong results, and all sorts of brands are doing well in that space. I think affordable luxury as a category is maturing.”

Salter noted the crisis forced consumers to change the way they shop. “I think they will continue to buy classic products from high-end brands because they feel they are getting value for money in the long term,” he said. “What they have dropped is the irrational shopping — having to have a certain number of shoes each season or a certain bag because it’s so ‘in.’ The frothiness has been stripped away. To that point, the affordable luxury brands — like Coach — have played the value card by offering classic, well-made products at affordable prices.”

Fendi’s Burke pointed out that fortunes in luxury goods are closely correlated to the stock market, suggesting the core customers are those with financial assets. “We all do very well with that core, elite segment,” he explained, noting the Roman firm’s business remained buoyant through the recession in Europe and Japan, and that furs in the 50,000-to-100,000-euro, or $66,000-to-$132,000, range continue to sell strongly. Meanwhile, the brand’s most expensive leather goods, the Peekaboo range, continue to garner the longest waiting lists. “In luxury, we shouldn’t be in the instant-gratification business,” he said.

Burke noted that Italy remains the one market in the world where the aspirational business has not diminished, thanks to wealthy parents who continue to indulge their adult children with high-end leather goods and fashions, even through the 2009 downturn. “We’re taking market share in Italy,” he noted.

Robert Polet, president and ceo of Gucci Group, said “impulse buying” of luxury goods, seen during the boom years, has decreased. Meanwhile, appreciation for higher-quality, timeless and discreet products has risen, giving a competitive advantage to “reference” luxury brands, he said.

In disclosing first-half results last week, PPR chairman and ceo François-Henri Pinault echoed the sentiment, saying Gucci Group would move away from logos, “adjusting to this new perception of luxury, which is more subtle, more sophisticated.”

“The whole trend we are seeing — from fashion through to beauty — is antimass, antifaux, antibling,” said Marigay McKee, fashion and beauty director at Harrods. “What customers are looking for is heritage, provenance — and embellishment.”

The landmark London department store said recent bestsellers include 10,000 pound, or $15,825, embellished Balmain jackets and 1,400 pound, or $2,215, Balmain jeans. She said fragrance and beauty sales are tracking in a similar way, with Tom Ford, Creed and Bond No. 9 fragrances — all with price points of 150 to 200 pounds, or $237 to $315 — driving fragrance sales. She said customers on the whole are looking for outright luxury and/or unusual ingredients that make a product unique — signals for a healthy trend of trading up.

“The trigger point is always desirability,” said Gucci Group’s Polet. “People aspire to belong to the world of a brand.”

But how many today can afford the admission price?

“There were more aspirational customers prerecession than there are now,” said Robert Burke, head of the New York-based Robert Burke & Associates consulting firm. In his view, sharply priced handbags, shoes and clothes were beneficiaries of the downturn — particularly from contemporary and designer second lines — and will continue to be so.

However, aspirational customers will still save up to buy iconic luxury products, especially from blue-chip brands such as Chanel, Hermès and Louis Vuitton. “I see heritage brands only getting stronger and more desirable to the aspirational customer,” the consultant Burke said. “Consumers are more discerning and more selective in what they buy. I don’t see the market switching right back to where it was.”

During the economic crisis, even well-heeled customers accustomed to designer labels experimented with mixing price points. “I think there’s more opportunity launching contemporary and below price points than launching designer right now,” said Burke. In that vein, he noted the success of American labels such as 3.1 Phillip Lim and Alexander Wang, priced under traditional designer brands.

Lucian James, founder of strategic consultancy Agenda Inc., based in New York and Paris, said luxury was not only impacted by the economic crisis, but a “crisis of meaning” as well.

“Consumers spent some time away from luxury products, and the spell was — to some extent — broken,” he explained. “The recession was a time when consumers really connected to discount and fast-fashion brands and found them surprisingly good.”

To win shoppers back in the postcrisis period, luxury brands “need to create more powerful messages, not just evoke aspirational lifestyles and expect consumers to be seduced….They need to explore ways that they can connect the brand to emerging consumer lifestyles and emerging consumer moods,” James said.

He noted the clientele for luxury today is less tied to income levels than to which brands consumers choose to adorn themselves with, counterfeit or otherwise. “People don’t reach up en masse to luxury brands. They go to the ones that are meaningful for them,” he said.

According to Danziger, the postrecession period creates opportunities for premium brands, and will compel luxury players to put “luxe back into luxury,” the theme and title of her next book.

Luxury players “need to recognize that people are being cautious and figure out ways of bringing additional values to premium brands,” she said. “If we look at the luxury department stores, they have asked their vendors to offer lower opening price points.”

Even affluent men now brag about bargains they scored in Danziger’s focus groups, a first. “That’s the next level of shopping: Being the smarter shopper, finding the better deal and bragging about it,” she said.

In Lanciaux’s view, luxury players will have to adapt to changing spending patterns in mature markets like Europe and Japan, where travel, technological products, art and entertaining are attracting more discretionary dollars. “Luxury brands need to cautiously but surely enter these new territories more tied into cultural lifestyle if they want to continue to grow,” she said. “In addition, they may eliminate licenses that dilute their brands.”

The consultant James suggested Europe’s luxury players lessen their dependence on the “old grammar” of luxury and look beyond heritage. In Japan, meanwhile, brands should look for ways to “connect to a nervous economic culture where security is more important than status.”

Meanwhile, emerging markets like China offer chances for masstige or aspirational brands, positioned at the opening price points for luxury, to write a new luxury grammar. James noted that Coach, for example, recently opened a store in Shanghai and invited young artists to customize bags, leveraging Chinese culture to tap into new generations of high-end consumers. The vodka brand Absolut also successfully introduced a premium product that taps into the Chinese mentality.

Brands such as Nike and Puma, which are perceived as premium but “not weighed down by outdated codes of luxury” also have an advantage in the fast-growing region, James noted.

WWD: Reason No. 1: Luxe Lust

WWD | FN STAFF

During the height of the recession, retail pundits declared that the days of the $800 shoe were over. How wrong they were.

Led by Christian Louboutin, who posted double-digit increases last year, many of the luxury shoe stars have continued to shine, from the red carpet to the oval office.

“I don’t think shoes have ever been as dramatic or as extreme as they are now,” said Robert Burke, former fashion director at Bergdorf Goodman and founder of the consulting firm bearing his name.

And even as more ready-to-wear designers dive in to the footwear game, shoppers continue to gravitate to the footwear specialists. In a recent survey conducted by the Luxury Institute, Christian Louboutin and Manolo Blahnik were ranked No. 1 and No. 2 for designer shoes, while Jimmy Choo came in fifth on an extensive brand list spanning Giorgio Armani to Versace.

“It’s like consuming candy when you were a little kid,” said Milton Pedraza, the Luxury Institute’s CEO. “These are beautiful, attention-getting shoes that make you feel really special and great.”

WWD: As Luxe Would Have It: The High-End Market Rebound

WWD | JEAN E. PALMIERI

For a long time, luxury labels were above it all. Brands aimed at the most affluent sliver of the market were simply immune to recession, they had long maintained. So it caused a minor stir this spring when Kiton, the renowned Neapolitan tailored-clothing company, introduced a lower-priced line called CIPA 1960 at Bergdorf Goodman Men.

Everything remains relative. Although CIPA is pronounced “cheap-a,” the new collection is anything but. It includes beautifully tailored suits for $5,500, stitched entirely by hand, but made with fine archival wool or linen fabrics instead of Kiton’s usual cashmere blend. This helps shave about 30 percent off the typical $8,000 price of a classic Kiton suit—a meaningful saving for the upscale shopper still skittish after the Wall Street meltdown of fall 2008. And if the economic crisis has taught luxury marketers and retailers one lesson, it’s this: The old notion that they are recession proof is a myth.

Leaders in the luxury field are quickly adapting to a seismic shift in the market, one that affects not just pricing, but also consumer attitudes, shopping patterns and the very definition of luxury. As Gregory Furman, founder and chairman of the Luxury Marketing Council, puts it, “The luxury shopper has changed and will continue to be changed as never before.”

Ron Frasch, vice chairman and chief merchant of Saks Fifth Avenue, sees opportunity for those who respond to this rapidly evolving consumer. The Great Recession, he says, was a “wake-up call that significantly changed what we do. And perhaps it was long overdue.”

The shake-up stems in part from a significant decline in the size of the core luxury market. According to the 2009 World Wealth Report by Merrill Lynch Global Wealth Management and Capgemini, the world’s population of high-net-worth individuals—defined as those with investable assets of more than $1 million—shrank 14.9 percent to 8.6 million people in 2008, as their combined wealth fell 19.5 percent to $32.8 trillion. The ultrahigh-net-worth population—individuals with assets of $30 million or more—saw an even steeper decline of 24.6 percent.

And the market didn’t improve in 2009. According to the global consulting firm Bain & Co., last year was the worst ever for the global luxury goods business, with sales falling 8 percent—albeit from a very lofty perch.

Lately, there have been hints of a rebound. Sales began to regain some strength by holiday 2009, and Bain forecasts a 4 percent increase for 2010. “We’re seeing now that consumers are going back into stores,” says Claudia D’Arpizio, lead author of the Bain study.

Cara David, senior vice president of corporate marketing and integrated media for American Express Publishing Corp., also reports a “modest resurgence” in the luxury sector. “We’re seeing a little slack in the guilt and angst over purchasing luxury products,” David says. According to Amex Publishing, 45 percent of affluent consumers now say they feel guilty buying luxury goods, down from 54 percent last year, and David says this attitude adjustment will have an estimated $28 billion net impact on the luxury market, or a gain of 6 to 8 percent.

But even if luxury has begun to bounce back, the profound shift in the consumer mind-set is expected to endure. Jim Brennan, a principal at McKinsey & Co., predicts an ongoing emphasis on value and values that could last five to 10 years. Consumers will buy fewer pieces at lower prices, he says, and they will favor products they consider iconic or authentic. Brennan notes that luxury shoppers have returned to buying jewelry, watches and other “statement pieces that can be handed down to their kids.” Apparel has not rebounded as quickly.

But America’s luxury retailers have already set out to change that.

Saks is “resetting our ways,” says Frasch, “particularly in tailored clothing, dress shirts and shoes.” While offering more goods at opening price points, the store is creating exclusive products and brands to distinguish itself from the competition. “We’ve enhanced our good, better, best model,” Frasch explains. “In the past, our assortment of ‘good’ was OK; our ‘better’ offering, brands like Corneliani and Canali, was respectable, and we had a fine ‘best’ offering, with Zegna, Brioni, Armani and Kiton. But our ‘good’ model has really grown.”

The core suit price is now around $1,500, down from $1,700 in 2008, as Saks lures new customers with younger silhouettes and lower prices from brands such as Michael Kors, Hugo Boss, Z Zegna, Versace, Calvin Klein and Burberry. The retailer has also scored with its new Saks Fifth Avenue Men’s Collection, a comprehensive assortment of modern classic men’s wear with sharp prices. Suit separates, for example, retail at $695 for jackets and $195 for pants.

As Frasch tells it, the men’s luxury shopper is “looking for a quality product at a fair value, not low price.” He cites the “tremendous resurgence of made-to-measure” as evidence the customer is willing to pay a premium for products with clear intrinsic value. Frasch sees potential in luxury sportswear, as well. “As bad as last year was, we had a good year with Brunello Cucinelli, which can never be called volume pricing,” he says.

Russ Patrick, senior vice president and general merchandise manager of men’s wear at Neiman Marcus, acknowledges the luxury retailer “took a hit” during the recession. “So we worked to get our inventories in line,” he says. “With less open-to-buy, there was less room for error, so we had to be spot on. It required us to be better editors.”

“We worked closely with our important vendors to adjust costs on specific ranges of fabrics so we could retail a portion of their suit offering under the $2,000 price point,” said Patrick. “In addition, we introduced two lines, Z Zegna and Caruso, this year, which offer a full collection of suits under $1,500.”

The strategy is paying off: Sales have improved across all categories as shoppers respond to fresh offerings. Still, the Neiman’s customer will continue to be “more mindful about shopping,” Patrick says. “So we have to remain focused on product, challenge our vendors for newness and give him things so he can continue to update his wardrobe.”

One of the ongoing challenges in the luxury field is the aspirational consumer, who has pulled back, according to Pam Danziger, president and founder of Unity Marketing. Danziger defines this segment as households with income of $100,000 to $249,900—23 million households in the U.S., compared with only 2.5 million with incomes of more than $250,000. “The buoyancy in the luxury market prior to the recession was due to aspirational shoppers trading up,” she says. “But now, they’re simply not participating.”

As Danziger sees it, future luxury-market growth will depend upon attracting “ultra-affluent consumers” who “will demand higher quality and more value in luxury purchases.

They also demand more information. Although the affluent consumer remains willing to pay a premium for quality, he now insists on knowing why a product costs what it costs—a phenomenon that Furman, of the Luxury Marketing Council, calls “connoisseurship.” According to Furman, 90 percent of luxury shoppers started out in the middle class. Luxury brands, he says, must “not assume they understand the underlying value of a product.”

That gives an edge to brands that convey “craft and heritage,” says Robert Burke of Robert Burke Associates, citing classic clothing labels such as Kiton, Brioni and Zegna. “The consumer is happy to invest in long-term pieces, but they’re not spending frivolously,” he says. Nor are they spending at the same rate as they did in the past. “It doesn’t feel or sound right today to buy 14 custom suits,” Burke says. “They’re buying luxury in a quieter way.”

Bergdorf Goodman has responded by bringing in key classifications at a “more gentle price point,” says Margaret Spaniolo, senior vice president and general merchandise manager of men’s. “There were men who took a couple of seasons off, but we felt our customer still wanted the brands that we carry in our store,” she says. That desire for luxe brands minus the sticker shock prompted Bergdorf to bring in Kiton’s CIPA 1960 suit collection and other accessible offerings.

“It worked,” Spaniolo says. “We saw the customer come back in shopping.” But not in the same way he did in the past. “The consumer psyche has changed,” she explains. “All of us used to just buy what we liked without thinking about it. Now we think about what we’re spending. If this didn’t wake us all up, I don’t know what it’ll take.”

Tom Kalenderian, executive vice president and general merchandise manager of men’s at Barneys New York, says shoppers have acquired a “more measured” perspective—and more price consciousness. “We’ve consistently dropped tailored clothing prices 5, 10, 15 percent,” Kalenderian says. “We’re selling more value, and that isn’t going away. The customer is supersmart, and our clients know which manufacturers failed to rise to the challenge.”

What the new luxury consumer really wants is “a variety of price points,” according to Bob Mitchell, co-president of the Mitchells Family of Stores, headquartered in Westport, Conn. “He still wants luxury, but he wants to mix in some other pieces, primarily in sportswear.” The Mitchells have paid increased attention to what they call “approachable” pieces, such as cashmere sweaters for $300 to $400, or denim-friendly sport coats and shirts. At the same time, luxury brands that have “repositioned their suit prices are getting traction,” says Mitchell. That includes Brioni, which came in under $5,000, and Zegna, with some basic models for $1,995 or less. Canali offered $1,495 suits, down from $1,900. “That kind of choice had vacated the market before,” Mitchell says.

Robert Ackerman, president and chief executive officer of Ermenegildo Zegna’s North American business, says, “Broadening the assortment of suits helped the business.” The brand also has seen an uptick in its sportswear sales, along with shirts and ties—smaller-ticket items that can “freshen a wardrobe,” Ackerman says.

Mitchell, meanwhile, sees the spreading of price points as an opportunity for additional sales. “There’s potential for us to get more closet share,” he says. “They’re buying Cucinelli, but they’re also picking up a $195 sweater they can play golf in.

“We drank our own Kool-Aid,” Mitchell adds. “Even in the [luxury] heyday, they bought other stuff, they just bought it elsewhere. We’re better merchants today, having that breadth.”

WWD: Stores Lure Back Luxury Male Shopper

WWD | EMILIE MARSH & JEAN SCHEIDNES

Welcome back, department stores.

Luxury retailers say they have experienced a strong start to 2010 and expect continued improvement in the second half of the year, buoyed in part by men returning to stores, as well as inventory control and focus on gross margin. Men’s buyers are heading to Pitti Uomo in Florence next week, followed by the Milan and Paris men’s ready-to-wear shows, in search of enticing product at fair prices.

“We feel that confidence has returned and that men are back in the store at full force,” said Kevin Harter, Bloomingdale’s vice president of men’s fashion direction. “The biggest surprise is how strong the tailored business is. Men are definitely dressing up, and they are coming to Bloomingdale’s to update their suits and accessories that go with them, such as ties, shirts, etc.”

In the U.K., Selfridges’ business has been “consistently strong” this year with contemporary fashion and edgy designer labels such as Alexander McQueen and Balenciaga leading the way, according to David Walker-Smith, director of men’s wear and beauty. “We expect the second half of the year to also be robust,” he said, adding that good management of inventories has been key to the store’s ongoing success.

Although their recovery has trailed that of brands’ own stores, department stores across the globe have reported increased sales for the year to date.

At Liberty of London, “sales have been on fire this year” with total first-quarter sales up 30 percent and men’s wear performing “even stronger” than overall sales, according to buying director Ed Burstell. “As we have been able to increase market share this past year, we are aggressively looking to grow men’s wear this fall, with the budget increased by 15 to 20 percent.” The size of the men’s wear department will also increase by 20 percent.

Chastened by the recession, department stores have made top-to-bottom adjustments to stimulate sales and improve margins: tighter-edited collections, careful assortments of brands, balanced price ranges, more employee training, locally targeted marketing, in-store events, revamped men’s spaces, enhanced loyalty programs, exclusive product (especially private label collections) and perhaps, above all, inventory discipline.

Harvey Nichols “experienced strong double-digit growth” in men’s wear sales for the first half on significantly reduced inventory levels, said Richard Johnson, men’s wear buying manager. “Our more contemporary designer collections and casual sportswear collections have seen the most rapid growth. This has allowed us to keep sale periods short and focus customer attention on full-price product. It is of the utmost importance that we retain the integrity of the products we offer and premium position of brands whom we partner with,” said Johnson.

At the same time, luxury brands have grown increasingly dependent on their own stores, eroding the dominance of the wholesale business. In the latest quarter for Polo Ralph Lauren Corp., for example, retail sales jumped 31.4 percent, while wholesale declined 2.6 percent. The trend will likely continue, as the company has deep cash reserves to spend and has identified international retail and e-commerce initiatives as top priorities for investment.

As a brand grows more international, the balance of distribution shifts even more toward freestanding stores. China, for example, simply does not have department store networks for wholesale distribution that the U.S. has, so brands looking to expand rapidly there must open stores.

Calvin Klein Inc., which operated 67 CK Calvin Klein stores worldwide at the end of 2009, plans to ramp up to 151 by the end of 2012, and about 60 of those will be in China alone.

“The freestanding stores are really important because they present the lifestyle and they’re a branding platform,” said Tom Murry, chief executive officer of Calvin Klein.

Luxury consumers sometimes want to see the largest possible assortment from a brand, said Robert Burke of the fashion consultancy Robert Burke Associates.

“Also, because of all the inventory reductions and economic instability, sometimes department stores had played it very safe. And what we’ve found is safe product is not motivating the customer to spend….People who had a strong store presence realized during the last two years that they could control their own stores, but they couldn’t control the department stores.”

Indeed, brands have not quite forgiven retailers for the great discounting panic of 2008.“We will be more selective in the future, proceed with more caution and control and put limitations where necessary,” said Pier Luigi Loro Piana, ceo and deputy chairman of Loro Piana. “That said, we don’t want to lose the sense of competition department stores offer. They play a key role in determining how your merchandise fares compared to others.” With wholesale comprising 20 percent of sales, Loro Piana eked out a 1 percent sales increase in 2009.

For their part, department stores say they don’t discourage vendors from opening stores, which add credibility to the brand, ultimately benefiting everyone who carries it.

Besides, if brands are out to reduce their dependence on retailers, the feeling is mutual, since department stores are aggressively ramping up their private label businesses that afford them maximum control over the margins, the flow of goods and the floor space. As they head to Pitti Uomo next week, one of their top priorities will be to find manufacturing partners for their private labels.

“Our men’s collection has pretty quickly become our largest brand,” said Ron Frasch, Saks Fifth Avenue president and chief merchandising officer. “We have very, very aggressive plans for it, and we’re investing aggressively in it from all angles — store staff, brand management, product development, real estate, visual, marketing, every aspect. And we think it has a big number attached to it, with a very high margin.”

Private label has also gained a foothold in Europe, with department stores looking to invest in their own brand names, which more often than not predate that of the labels they carry.

“Historically, private label’s share of the market has increased over time, especially during recession, and almost a quarter of all consumer goods sales in the U.S. are private label,” said Umberto Angeloni, citing Harvard Business School professor John Quelch. Angeloni co-owns Caruso, which manufactures tailored clothing for such brands as Dior Homme, Lanvin, and Ralph Lauren, as well as a handful of private label brands. “I view the exercise as that of building a retail brand…a brand that they can totally control and thus will never betray them or compete unfairly. Stores realize that sometimes their most valuable asset is their own name.”

To wit, Harvey Nichols said it would launch private label product in selected core categories later this year.

And Paris-based Printemps is gearing up to introduce a cashmere collection for both men and women, priced between 95 and 120 euros, or $114 to $144 at current exchange, under its own banner in September.

“We are positioning the collection at a very affordable price point while maintaining a premium quality and style quotient,” said Tancrède de Lalun, general merchandising manager for men’s and women’s apparel.

Liberty is taking the strategy a step further, with plans to wholesale a contemporary men’s line it created with licensee Slowear Group, banking on the cachet of the retailer’s own heritage. The 200-piece line, which marks Liberty’s first licensing pact, will bow in Milan for next spring, and sales in six years should reach 30 million euros, or $38.6 million, Liberty said.

“It’s a clear margin-building strategy where we can control the product so it does not conflict with anything else we carry,” Burstell said, adding the store’s 135-year history and heritage provided the ideal background.

Brands with perceived heritage continue to enjoy a competitive advantage, and playing up history — in the form of origin myths, legacy stories, reverence for forefathers, founding dates and artifacts — is now front and center of many marketing strategies. Retailers are embracing the trend as well.

From a merchandising standpoint, “I see stores being much more edited and selective. That’s a fine line, because you want to take a specific point of view but you also want to have a breadth of product and especially unique and high-positioned product,” said Burke.

Despite tensions with brands that also have retail strategies, Burke added, “It’s important to be able to grow the department store business, because there’s a customer who doesn’t want to shop in a specialty store, particularly a men’s customer who wants a one-stop-shopping situation.”

Brands and retailers still have plenty of common ground. All parties want to provide distinctive product that will inspire consumers to buy. While no one wants to relive the nightmarish overstocks of the recession, vendors say it’s time for stores to loosen the purse strings a little.

“We’re not seeing this recovery as much in Europe as in Asia and the U.S., but what I’d like to see [in the healthier regions] is more aggressive purchasing. They were so cautious and gun-shy during the downturn. Now I’d like to see more confidence in the recovery,” said Calvin Klein’s Murry.

Indeed, buyers said they had to “chase inventory” for most of the spring. But that doesn’t mean they’re about to abandon their newfound discipline.

“The budgets are up, and we’re feeling confident but cautious,” said Frasch of Saks. “I don’t want the inventory to outpace the sales growth. We learned we could improve our margins significantly with targeted investments and very disciplined inventory management. We’re not going to walk away from that.”

Alluring product offerings go hand in hand with alluring environments and, to that end, many stores have revamped their men’s spaces to lure shoppers in.

Barneys New York, which has identified men’s contemporary sportswear as a category with significant growth potential, last month revamped the fourth floor of its flagship to seize the opportunity. Le Bon Marché is making room for Balthazar, its men’s department, to devote more space to high-end tailored brands and shoes. The LVMH Moët Hennessy Louis Vuitton-owned department store on Paris’ Left Bank will unveil a revamped 44,000-square-foot men’s wear space in September.

“Men’s wear is a growth sector for the store,” said Le Bon Marché deputy ceo Bruno Villeneuve. “We intend to go higher end.”

Meanwhile, Andrew Keith, president of Joyce, said men’s wear will find a new home in the brand’s Canton Road store in Hong Kong in August.

“We are seeing an increased level of confidence from our male customers. They are responding to new brands and key trend items well,” said Keith.

By managing inventory levels and chasing early deliveries, inventory is down 35 percent from last year, and it has delayed season-end discounting by nearly a month. Exceptional levels of service, such as home-shopping visits, tailoring services and personal orders for top clients, have also helped to entice shoppers.

“We have been caught short a little by the strength of customer reaction to certain key items [that] in certain cases we have had to do multiple reorders on. We now have male customers putting down deposits on fall 2010 runway,” said Keith.

Vendors complain that when buyers scramble for inventory too late in the season, everyone loses.

Polo Ralph Lauren told analysts that with production mostly offshore involving requisite lead times, it might be difficult for suppliers to react as quickly as some stores would like. Roger Farah, Polo’s president and chief operating officer, said, “Retailers will need to learn what is realistic and what is not.”

WWD: Young Designers Build Overseas Sales

WWD | MARC KARIMZADEH

NEW YORK — “If I can make it there, I’ll make it anywhere.”

Where once designers used to live by the iconic Liza Minnelli lyric and come to Seventh Avenue to build their businesses in New York and the U.S. before tackling opportunities abroad, the city’s young designers are now thinking globally almost from the moment they launch their labels.

And these days, they see the biggest potential in the East — from China to South Korea, India to the Middle East, including the Emirates and Lebanon. Many said Europe and Russia remain challenging, given their economic turmoil, while markets such as Brazil are still relatively untapped even though major luxury brands are flocking there.

To build their overseas presences, designers have either partnered with sales showrooms in other fashion capitals or started to go to Paris during the city’s fashion weeks to show and sell their collections to buyers who don’t make the trip to New York.

Jason Wu, for instance, plans to travel to Paris in July during the couture season to present his resort collection to European and Asian stores in town at the time. Currently, 30 percent of his sales are overseas and, of those, London, where he sells to Browns, Selfridges, Harrods and Net-a-porter, and Japan, with stores like Estination and Designworks, are the largest, accounting for 10 percent each. And Wu takes these markets as seriously as his American business. For instance, the designer just created a limited edition T-shirt collection for Tokyo’s Designworks with prints from his fall 2010 collection.

Asked about his fastest-growing market, Wu, who had wholesale sales of $10 million last year and projects $14 million for this year, pointed to China, “especially Beijing. It’s an emerging market in terms of demand for luxury goods. In designer clothes, it has always been the big players like Chanel and Louis Vuitton. Young designers are a new thing for China, whereas they are not as new for Japan or Korea.”

Alexa Adams, who designs the Ohne Titel line with Flora Gill, concurred. “China has a whole new group of people with money that can afford to buy designer clothing, and they are open to new designer labels,” she said.

Robert Burke, head of the Robert Burke & Associates consulting firm, works on projects in China, the Middle East, Brazil, Kazakhstan and Korea, and said there has been interest from all those countries in emerging American talent. “They see the talent coming out of the U.S. as a potentially very strong business, and the young designers see opportunities there,” Burke said. Within them, “Korea and China are the two that seem to be the most focused in the sense of interest in buying from young designers.”

And these designers are eager to sell to overseas stores — partly because they have little choice if they want to survive. The worldwide recession hit the U.S. retail sector particularly hard, prompting stores from Saks Fifth Avenue to Neiman Marcus to cut their number of vendors or the amount they buy from individual designers. In addition, a slew of specialty stores, long a launchpad for young talent, went out of business.

So, left with little choice, they got on a plane.

“American designers, for a long time, had difficulty breaking into international markets,” said Elana Posner, Peter Som’s business partner. “I think this generation of designers learned from that.”

Wen Zhou, chief executive officer and president for 3.1 Phillip Lim, said, “Especially with the crisis in the economy, you have to be in as many countries as soon as possible in order to have a viable business. It’s no longer this idea that a designer comes out with a collection and makes it in the U.S., and then in the rest of the world. The world is much smaller now, and you have to almost build a global brand instead of a U.S. brand from Day One.”

When 3.1 Phillip Lim launched in fall 2005, the line was sold in 27 countries. Today, it is sold in 49 countries, and the designer projects wholesale sales of $50 million for this year. International accounts for 45 percent of the designer’s total business, of which Japan and the U.K. represent 10 percent each. Lim also has a significant business in the Middle East, selling to stores such as Plum in Beirut, Beymen and Harvey Nichols in Istanbul and Boutique One in Dubai.

“The Middle East is the fastest growing for us,” Zhou said. “In Europe, Italy is our other fastest-growing market. Italy has many small towns, and in every single town, there is that beautiful boutique that people go to locally and they embrace fashion. While Italy is not huge, the amount of boutiques available for us is interesting.”

With its Singapore partner, Club 21, 3.1 Phillip Lim is planning to open a freestanding store in August. Zhou added China is expected to grow into one of the most important markets for Lim in the future, and to that end, the designer is planning to stage a fashion show in Beijing in October to present the spring 2011 collection.

Posner at Peter Som agreed that Asia is among the fastest-growing markets. “Japan and Korea have always been strong, and Taiwan and Singapore are starting to be strong,” she said, adding that, in China, “main brands have opened their stores, and now specialty stores are starting to open and they will want European and American brands.”

Maria Tomei Borromeo, Thakoon’s ceo, said that, since launching the collection in 2004, the business has been roughly evenly split between domestic and international. Overseas accounts for 45 percent, while the U.S. represents 55 percent. By region or country, Asia accounts for 14 percent, which includes “a significant business” in Japan, Hong Kong, the Philippines and Korea. Russia and the Middle East are about 10 percent of Thakoon’s business and Europe is 21 percent. “A lot of focus and attention are being paid to what is going on in New York, and our brand is coming up at a time when a lot of interesting things are happening in New York,” Tomei Borromeo said of international demand for the brand.

Many designers also cited developments on the Web as another instigator for global growth. It not only allows potential overseas customers to familiarize themselves with emerging U.S. talent through the click of the mouse, but also makes it easier for designers to communicate with their international stores through e-mail, Skype, BBM and other tools of online communication.

“Because of technology, five years ago, if you were a young designer, wherever you were based, it was very much about growing there slowly, and eventually international people caught up,” designer Prabal Gurung said. “But because of such things as Facebook, Twitter, the way the shows are going viral, information is instant. When you do a runway show, or a celebrity wears your clothes, it can be picked up by everyone around the world.”

Brian Reyes said, “I think the world is so focused on fashion now, through the Internet or entertainment at large, that the idea of American style has penetrated more markets.”

Stephanie Cozzi, president of Brian Reyes, agreed that technology played a key role in changing the perception. “It wasn’t as easy five years ago, when no one had a BlackBerry,” Cozzi said. “Until very recently, it was really the specialty stores that drove overseas business and it was all about relationships. Now you can BBM your buyer in London as easily as your best friend around the block. Technology has really taken down the barriers.”

That said, there are still benefits and hurdles for American designers looking to build their businesses abroad.

Joseph Altuzarra, who designs in New York and Paris, said he benefits from doing business in Europe.

“We produce in Italy and all of our fabric mills and all of our suppliers are in Italy, as well as some in France,” he said. “On a practical level, we pay everything out in euros, so building a euro business outside of the U.S. is a priority for us because it helps us balance what we take in versus what we pay out.”

Doo-Ri Chung said, “[With] the amount they mark up with the duties [in Europe], you can’t be as competitive. You don’t really have that problem in the Middle East, and so we are able to open up more freely. For us, the emerging market had been Russia, but we felt that, with the recession, a lot of accounts have gone out of business, or had their budgets slashed. The Middle East market has remained stable for us.”

For Iranian Behnaz Sarafpour, her native Middle East represents the largest overseas region, and she sells to countries such as Dubai, Saudi Arabia and Kuwait, followed by Russia. She also has seen growth in Turkey and Korea. “There is interest in American fashion from other countries, regardless of the issues there are with exporting American goods,” said the designer.

Sometimes, however, styles need to be adjusted for local preferences and religious considerations, particularly in Saudi Arabia, where many designers have to lower the hems of their dresses to adhere to local dress codes. But if it gets them more business, so be it.

“It’s a huge playing field, with countries like India and China and a lot of other Asian countries and the Middle East,” Gurung said. “It’s not just domestic. You can’t just focus on domestic and think you can be successful.”