If the Shoe Fits, Wear It: Candie’s in Surprise Deal To Buy Badgley Mischka

Mark Badgley and James Mischka, the purveyors of expensive evening gowns, have found a business partner right under their feet in Candie’s Inc.

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NEW YORK — Mark Badgley and James Mischka, the purveyors of expensive evening gowns, have found a business partner in an unlikely place: moderate footwear and jeans company Candie’s Inc.

The designers signed a deal on Friday afternoon with Candie’s, best known for its youth-oriented footwear, that will effectively rescue one of the most prominent high-end eveningwear businesses in U.S. specialty stores. After financial difficulties sidelined the Badgley Mischka label for the spring 2005 season, the designers vowed they would return with a collection for fall retailing next year.

Candie’s is expected to announce today that it has acquired B.E.M. Enterprises Ltd., the holding company for the Badgley Mischka business, from its parent company Escada U.S.A., which has owned the brand since 1992. Escada said in October 2003 that it had put the 16-year-old label, which had yet to become profitable, on the block in the wake of its own restructuring. While the exact terms of the sale to Candie’s were not disclosed, the final purchase price will be determined by how Candie’s stock performs in the next six months.

Badgley Mischka’s problems, which forced the company to seek out new backers this summer, have been endemic in the eveningwear industry. Those designers are typically dealing with a higher price point, as well as higher costs of production and materials, making their profit margins minimal at best.

In Badgley Mischka’s case, the designers had yet to establish a significant stable of licensed products that typically provide the royalties needed to support a runway collection. Considering their editorial appeal and celebrity following, the designers feel they are on the verge of reaching that threshold, a point on which Candie’s would agree.

“We pursued Badgley Mischka because we feel this is an amazing brand, and the more we looked at it, we just saw enormous potential to expand the product,” said Neil Cole, chairman and chief executive officer of Candie’s, in an exclusive interview, along with the designers, on Friday.

Candie’s is an unexpected player to enter the luxury apparel market, but the acquisition of the Badgley Mischka trademarks is the first step in its strategy to build a more diversified portfolio, said Cole, whose brother Kenneth Cole famously broke from the family business to found his signature company in 1982. Candie’s has also changed its business model in recent years by eliminating its own production and licensing the operations of its brands, Candie’s and Bongo, which together generate about $200 million in sales. This year, Candie’s footwear was licensed to Kenneth Cole Productions Inc. and Bongo to Steve Madden Ltd., while TKO Apparel Inc. is in the process of taking over the Bongo jeans business as a licensee.
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