The Candie's Plan: Exclusive to Kohl's, to Launch Sportswear

Kohl’s also will pay Candie’s an unspecified advertising royalty each year, which the firm must spend on national advertising supporting the brand.

Shares of Candie’s shot up 7.9 percent, or 41 cents, to $5.59 in Nasdaq trading Tuesday, while Kohl’s stock slumped 0.1 percent, or 4 cents, to $47.50 on the New York Stock Exchange.

Neil Cole, chief executive officer of Candie’s, said the brand, which has had annual sales of about $100 million, appeals not only to the young “iPod generation,” but also resonates with twenty- and thirtysomething consumers who were introduced to the brand when they were younger. Cole is brother to shoe magnate Kenneth.

“It’s very important to keep the Candie’s image, that’s one of the reasons Kohl’s was attracted to us,” said Cole.

But Cole admitted the brand might have to tone down its advertising some. Candie’s ads, which currently feature Ashlee Simpson, have in the past gone as far as to have Jenny McCarthy sitting on a toilet with her panties pulled down around her ankles, or a naked Destiny’s Child with the Candie’s brand projected onto their bodies.

“We’re now working with a ‘family retailer,’” said Cole. “We want to keep our edge; however, we don’t want to offend the Kohl’s shopper. We’re going to keep the consumer in mind. As a marketer, it’s challenging.”

Even with a broader distribution and perhaps tamer image, Cole said the brand will keep its “coolness factor.”

Edward Weller, analyst at Thinkequity Partners, said, “Kohl’s wants to sell whatever its customers want to buy. They’ve been doing well in the junior business. This deal will probably help them do better.”

Despite the move by Kohl’s to more exclusive, branded merchandise, Weller said the retailer was not taking a page out of Target’s playbook, which already includes deals for the Mossimo brand and with designers such as Liz Lange and Isaac Mizrahi.

“Customers want well-designed merchandise and if they can get it at good prices at Kohl’s, why not?” he said. “The results in the junior department suggest they could do more with brands.”