CALVIN KLEIN & WARNACO GROUP
Javier Romero-Requejo Ana Gonzalez de Castro Eugenio Sanjun Hinna Mohammad Stefan Mairegger Petra Mitterruztner
Index
1.
2.
3. 4. 5. 6.
Introduction Distribution practices and fashion retailing Jeanswear Category Background Calvin Klein Inc. And Mr. Calvin Klein Warnaco Group Inc. And Ms. Linda Wachner Details concerning the relationship
Introduction
&
Distribution Practises and Fashion Retailing
Department stores Chain Stores Mass Discounter
Speciality Stores
Off price reseller
Warehouse Clubs
Department stores
Superior product placement High consumer service High Quality products Premium Price Broad Assortment Shop in Shops Concept
Development of the department store concept
Innovators in the fashion business in the 1950s and 1960s
Rapidly growing throw growing suburban malls in the 1980s Time of crisis in the 1990s Shop in Shop Concept (calvin klein, ralph lauren) Own label merchandise Concept still under firer
Mass Discounter Store
Rapid growth at the expense of department stores Many well known brands at cheaper prices
Mainly self owned brands
Exclusive distribution, cooperation's with designer
Speciality shops
Rapid growth in the end of the 1990s Smaller Scale Trend right merchandise Target segment of costumers One brand shops with high services
Off prices retailers (Outlets)
Sold of brand name merchandise at lower prices Limited investments in sales associates, real estate, inventory, display and lighting Out of season branded fashion and split lines Great discounts to speciality shops
Warehouse Clubs
Started in 1976, clubs stores grew very fast during 1980s and 1990s
Wide Variety of merchandise, in which consumers are required to buy large, wholesale quantities. High quality, low-priced, branded products Stores are spare and service minimal (No frills concept) In and Out items
Jeanswear Category Background
1853 Levis Strauss introduced the first jeans Durable pants for gold miners American west image
Jeans evolved from utilitarian clothing to symbols of youthful rebellion Jeans became part of a unisex and basic look
Vanderbilt created a line of tightfitting, sexy jeans for woman Jeans became fashion
Early 90s jeans returned to basics cycle 1995 innovative silhouettes and washes became popular Many new brands were launched
1999 cK Calvin Klein had 27 % market share in womans department store jeanswear Department store status brand became stuck Discounters gained market share
Licensing Practices in the Designer Marketplace
In the 1970s the licensing took off as a low risk way to grow brands Distribution of fragrances, cosmetics, swimwear, footwear, furniture, cigarettes Licensing grew due to growth pressure Development of so-called diffusion lines- that made the designer accessible to the middle market
Licensing: designer received a percentage of wholesale sales volume in exchange for brand access rights. The degree of control and time horizons varied. Notable licensees
By the late 1990s fashion designers were reassessing licensing as a brand-building and revenue-generating tool
Many designers cancelled most of the companies licensed products Still licensing advocates remain
Calvin Richard Klein
19.11.1942, Bronx (NY) New Yorks High School of Art and Design
Calvin Klein Inc.: 1968 with Barry K. Schwartz Starting capital: 10 000$
Immediate success Vogue: ..a definitive picture of the American look..
1977/82 jeanswear and underwear line Fragrances and other categories; over 40 Image through taboo-breaking and norm questioning ads
Some campaigns banned
1990s debts almost bankruptcy
94 underwear business sold to Warnaco jeanswear license Hostile takeover by Warnaco bought company and cK Calvin Klein jeanswear license price decreases discounter distrubution From manufacturer to licensing empire: 90% of CKIs total revenue
No buyer for CKI -> taken off the market in
2000
92 cK Calvin Klein sub-brand as diffusion line/
bridge collection established
cK Calvin Klein Jeans: high awareness
Mind associations for Calvin Klein Brand
WARNACO GROUP, INC. AND MS.LINDA WACHNER
Originally named Warner Brothers 1960 more fashionable styles for upscale clientele, sportwear, hosiery and sweaters. 1986 hostile leveraged buyout by private group led by LINDA WACHNER. Company held licences such as:
Founded in 1874
Ms. Linda Wachner
Aggressive manager Started working at Macys in 1970s She introduced merchandizing measurement system for bra cup sizes, the Wonderbra, or the stretchy shoulder strap.
Joined Marketing department at Warnaco She was recluited from Warnaco to mastermind Maxfactor. When she heard that Warnacos CEO was planning to take his company private, she started a bidding war for the firm. She prevailed and purchased Warnaco in 1986 for $46,50 a share, or $550 million
Warnaco Group, Inc.
She focus the company on its two mainstays: intimate apparel and menswear. The group jettisoned Dior which commanded a significant licensing fee. The companys debt was cut by 40% and doubled cash flow Wachner took Warnaco public in October 1991. New license deal with Fruit of the Loom. One of Wachners most notable business successes involved cK Calvin Klein underwear line:
Warnaco Group, Inc.
It was at the time of the 400 license and trademark 300 acquisition. 200 Wachner moved to expand distribution across geographic 100 0 and channel bounds. (Asia, United States) She included the J.C Penneys chain and played in the demise of the Halston brand in 1983.
350
55
1994
1999
Sales ($ million)
Warnaco Group, Inc.
Business model was replicated with other brands (Oscar de la Renta, Speedo, Ralph Lauren, etc), which were grown from niche contenders to mass-market leadership positions through channel-expansion strategis and fashion flair. Wachners strategy in handling the Hathaway mens dress shirt brand wasnt successul because of limited advertising support, expanded distribution and general declines in product quality stremming from the use of cheaper fabric blends and slimmer fits.
Hathaway brand was sold in 1996 Warnacos licensing agreement terminated in 1994
Warnaco Group Sales History, 19861999
Year In the years leading up, 1999 to the CKI v.Warnaco case, 1998 Wachner focused on 1997 diversifying beyond 1996 innerwear and 1995 1994 championed 1993 acquisitions. 1992 THE STRATEGY INCREASED 1991 COMPANY DEBT 70% MARKET 1990 CAPITALIZATION IN 1999. 1989
Net Revenues 2,114.2 MM 1,950.3 MM 1,435.7 MM 1,963.8 MM 916.2 MM 788.8 MM 703,8 MM 625.1 MM 562.5 MM 548,1 MM
518.1 MM
425.0 MM
1986
Calvin Klein & Warnaco Group
In 1996 Designer Holdings sold the license The jeanswear license created a growing business and mutual interdependency situation
800 600 400 700
472
200
0 1996 1999
Wholesale volume cK jeans (m$)
Calvin Klein & Warnaco Group
License Agreement
$-Attention of point of sale
Growth and Change Innovation Improvement Ck Business
We expect from Warnaco to follow the same strategy as with underwear and to protect our brand
$-Deeper penetration within point of sale
$-Expanding fixturing shop in shop
$-Protect the brand
$-Change in distribution channels
-Control of merchandise
Calvin Klein & Warnaco Group
Details concerning Jeanswear relationship
Ck allowed the sale of jeans to Costco for value of 32,5 milllion $ in order to output the excess from previous seasons After a 40 million $ investment improving cK stores total profits amounted from 400 to 700 millions $
Calvin Klein,inc. Vs. Warnaco Group, inc.
In 1999 Warnaco reports talk about a profit of 150 m$ through companies as
DISTRIBUTION CHANNELS
*Sues to Warnaco *Merchandise not authorized by Ck *Unnaproved distribution discount outlets
*Ck is throwing stones at Warnaco *Distract the focus from highly deteriorated business state of Ck
Calvin Klein & Warnaco: End of the litigation and reaction
Both of them have a lot to lose, while klein is fighting for his identity, Wachner is fighting for her survival
Klein, himself appeared on CNNs Larry King Live shortly after the suit was filed and stated these practices have been taking place since Warnaco acquired the license three years prior.
The suit was settled in 2001 and sealed with a "fashionista air kisson the steps in front of a New York courthouse.
Calvin Klein and Warnaco Group
THANK YOU!
