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CKI’s Latest Deal: Inks Collection Licenses With Vestimenta

NEW YORK — The future of Calvin Klein’s designer collection business is continuing to quickly evolve since the completion of the company’s...

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A look from Calvin Klein’s fall collection

A look from Calvin Klein’s fall collection.

Photo By WWD Staff

NEW YORK — The future of Calvin Klein’s designer collection business is continuing to quickly evolve since the completion of the company’s sale to Phillips-Van Heusen two weeks ago, with a new production and distribution pact announced Thursday that will transfer its operations to the Italian-based manufacturer Vestimenta SpA.

This is the second time in four years that Calvin Klein Inc. has looked to outsource the manufacturing and distribution side of the designer business, while maintaining control over design and marketing from its headquarters in New York.

A former licensing deal with the Mariella Burani Fashion Group, which once operated under the name Selene SpA, had initially been conceived in 1999 as a means to improve the collection’s quality of construction and its European presence, but Klein bought back that license two years later during a campaign to regain centralized control of many of the company’s brands.

"The whole key to this is that we are forming a strategic partnership with someone who specializes in a very specific business," said Tom Murry, president and chief operating officer of CKI. "We’ve done a pretty good job at production since bringing both the men’s and women’s businesses in-house. The quality and the execution in-house is good, but there’s no way we can do the kind of job that Vestimenta can do."

The new agreement, which should be formalized by mid-March, was described by the companies as a long-term strategic partnership to manufacture and distribute the Calvin Klein women’s and men’s designer apparel collections on a worldwide basis, and the partners have also broached the subject of a similar arrangement for the production of Calvin Klein accessories.

The women’s and men’s designer lines are said to have sales in the $40 million to $50 million range, and act as a foundation for more than $3 billion in sales of licensed products.

The partnership would officially begin on Jan. 1, 2004, but prior to that, Vestimenta is expected to manufacture Klein’s fall collection, which was shown in New York on Feb. 14.

The terms of the arrangement made clear that CKI would retain all responsibilities for design, marketing, advertising and public relations, as well as control over distribution, with management of the partnership to be overseen by Murry, and Vestimenta gradually taking over more responsibilities during the coming year.
A second phase planned for the fourth quarter of 2003 calls for a supply agreement with Vestimenta, meaning that the Italian company will handle all product development, as well as manufacturing, Murry said. CKI also plans to manage sales through the spring 2004 collections, but as of January 2004, Vestimenta will take responsibility for all functions except design and marketing.

"Design will stay in house and we will continue to produce and fund two major fashion shows for women’s and two for men’s each year," Murry said.

Klein, who turned over creative control to PVH with the sale of the company, said in a statement: "This strategic partnership, with Vestimenta’s diversified structure and consistent ability to produce the finest in both soft and tailored clothing that Italy offers, will help us achieve our global strategy."

Murry would not quantify the impact on CKI personnel in New York as a result of the deal, other than to confirm that some support functions will transfer over time to Vestimenta’s facilities in Milan or to new factories built exclusively for the production of Calvin Klein products.

"As far as the sales and merchandising organization, they remain intact and on our payroll through the end of this year," Murry said. "Over the next few weeks, Vestimenta’s management will evaluate their long-term strategy as it relates to that personnel."

Although the deal comes on the heels of the completion of the sale of CKI to PVH, Murry said it would have likely come to fruition regardless of the change in ownership. Giovanni Bassetti, chairman of Vestimenta, added from Milan that the companies had been talking even before PVH took control of Calvin Klein earlier this year.

"This was an incredible opportunity for us," Bassetti said. "Calvin Klein is one of the most known labels in the world and we believe that there is great potential to grow the brand," noting that there remains an enormous potential to develop the collection businesses in Europe and Asia.

Burani had similarly hoped to build the Calvin Klein collections in Europe, but was never able to successfully establish its presence there.

"We have had a lot of licensees and partners over the years and some work and some don’t," Murry said. "There has to be a philosophical alignment between the two companies, particularly in the designer business, because the quality has to be the top available in the world. Some of the licensees in the past were unable to deliver that level of quality for various reasons."
Vestimenta has a strong reputation with American retailers with its signature label and its history with Giorgio Armani’s Borgonuovo collection, as well as the recent introduction of the women’s collection being produced for Emanuel Ungaro.

"For sure, it’s going to be a core business for Vestimenta," said Ron Frasch, chairman of Bergdorf Goodman, and a former licensing partner of Calvin Klein during his tenure at GFT. "It’s a brilliant move from a manufacturing point of view."

Murry said there is also a long-term opportunity for opening additional freestanding Calvin Klein stores with Vestimenta in Europe and Asia.

"In those markets, specifically, Calvin Klein’s share is modest compared to its high name recognition," Bassetti added. "Obviously, we want to increase distribution there, but we also want to further develop the brand in the U.S."

While the impending deal covers only ready-to-wear, Bassetti said that the two companies were also discussing Calvin Klein’s accessories collection and that a similar license for accessories could follow.

"We’re both very open to future developments," Bassetti said, adding that a joint venture, similar to the one Vestimenta shares with Giorgio Armani, could also one day develop with Calvin Klein.

Vestimenta, the longtime licensee of Giorgio Armani, formed Borgo21 with the designer in 2001 for the production of Armani’s signature women’s and men’s collections. Armani controls 60 percent of the entity and Vestimenta the remainder.

"There’s always a possibility for a similar project to come about with Calvin Klein," Bassetti said. "Of course, we want to secure the first couple years of the licensing agreement."

The Calvin Klein license is the latest in a series of moves taken by Vestimenta to transform its image and beef up its bottom line. In January, Vestimenta signed a licensing agreement to produce Trussardi’s men’s wear collection and last year tapped up-and-coming Italian designer Nicola del Verme to modernize the image of the venerable Italian tailored clothing label. Vestimenta also produces the Emanuel Ungaro women’s collection and controls a 50 percent stake in the men’s wear label Piombo.
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