What to Watch: The Future of Calvin Klein, Sans Simons

All eyes will be on Calvin Klein Inc. this year to see what moves the company makes now that its high-profile chief creative officer Raf Simons has exited.

On Friday night, Dec. 21, a few days before the Christmas holiday, Calvin Klein Inc. revealed that Simons was leaving the firm, a mere 28 months into his tenure and eight months before his three-year contract was due to expire. The company said Klein has decided on a new brand direction that differed from Simons’ creative vision. The company declined to elaborate. Consequently, Klein will not show during New York Fashion Week, where Simons had been scheduled for Feb. 12 at 8 p.m. — diminishing the New York scene.

PVH Corp., parent company of Calvin Klein, had invested between $60 million and $70 million in Calvin Klein 205W39NYC, the renamed designer collection, over the past three years, and had not seen a return on its investment.

The news of the Belgian designer’s departure left observers with many questions, among them: Who might replace him, whether the firm would even hire somebody in that capacity, whether Klein would design a fall collection, will it ship a spring 205W39NYC collection, what happens to the Collection store on Madison Avenue, and can Klein flourish without a high-end collection at all? Also, what will happen to Steven Shiffman, chief executive officer of Calvin Klein Inc., and Michelle Kessler-Sanders, president of Calvin Klein, who were both big proponents of Simons’ hiring? And what’s next for Simons, who returned to Antwerp? (Simons, who continues to design an eponymous men’s wear collection and will show in Paris on Jan. 16 at 8 p.m., posted New Year’s greetings on his Instagram account Wednesday).

These are all questions that hopefully will be answered in the coming months. Klein officials had no comment Wednesday.

What can be expected in 2019 is a more commercial jeans line and a lot more digital marketing for all the Calvin Klein products, which in 2017 generated $9.1 billion in global retail sales.

According to sources, Klein renewed its lease on its Manhattan flagship (the bright yellow space designed by Sterling Ruby) at 654 Madison Avenue in February 2018. The company occupies 18,000 square feet there over three floors, and pays $852 per square foot, said sources. It will be interesting to see what the store will be filled with come fall, or if the company will need to sublet the space or fill it with other Calvin Klein or PVH merchandise.

Some industry observers believe that Klein should find a successor for Simons, but it shouldn’t be in as all-encompassing a role. They believe that having a collection provides a “halo” effect for the brand, and sets the tone and direction for the licensed products, which represent the lion’s share of the business. Others, such as Morris Goldfarb, ceo of G-III Apparel Corp., which has the Calvin Klein license for better-price ready-to-wear, accessories, outerwear, swimwear and dresses in North America, said last month that a “halo” isn’t really necessary and his business can flourish without it, as reported. What’s more important is aggressive spending on the marketing side, he said. Market sources estimate that G-III’s Calvin Klein business, which has healthy distribution in major department stores, was expected to generate some $1.2 billion in sales in 2018.

“I think to a large degree, having a ‘halo’ collection is the ego part of a brand owner’s need. Though it supports a brand to some degree, I think in many cases, consumers couldn’t care less,” Andrew Jassin, founder and managing director of Jassin Consulting Group, said Wednesday. “Whether it was [Francisco] Costa, or any other designer, they [consumers] don’t know. What they do know is if there’s a fragrance that’s being sold in a department store, which is really important. So little of a fragrance business has to do with what a designer does, it has to do with the advertising agency. The halo of a lot of brands is really created through the license of fragrance or beauty, which makes it very important for a long time.”

Further he said, “Having a halo effect of having an important designer to get the press is important, but it’s really for one group of consumers. But in the main, where the consumer businesses lie, where you’re trying to do volume, I’m not sure the connection really exists.”

When Simons was hired in August 2016, he was given oversight of all the brand’s categories, from the signature collection, which he renamed 205W39NYC shortly after arriving to lower-price apparel and accessories, including jeans, underwear and fragrances — the cash cows of the brand — as well as home goods. In addition, Simons oversaw all aspects of global marketing and communications, visual creative services and store design.

Sources indicated Simons spent heavily on the collection, fashion shows, many front-row celebrities such as Nicole Kidman, Gwyneth Paltrow and Julianne Moore, advertising, marketing, the made-to-measure dress collection and redesigning the flagship.

However, in September, Klein reportedly reduced some of Simons’ responsibilities, and it was decided that certain areas of the business, such as store design, visual merchandising, e-commerce, public relations and communications and corporate responsibility, would report to Marie Gulin-Merle, chief marketing officer, rather than Simons. This reportedly created tension between Simons and Klein, and was a roadblock for any future contract renewal. Market sources familiar with the situation said Simons alleged a breach of contract on PVH’s part.

News that things weren’t going well between PVH and Simons first surfaced in November, when Emanuel Chirico, chairman and chief executive officer of PVH, said in rather blunt terms on the company’s earnings call that the reimagined Calvin Klein — under Simons’ direction — was not working. He said the collection, renamed 205W39NYC, needed to become more commercial and that investments in the collection and advertising would be shifted elsewhere. Further, Chirico said that the redesigned Calvin Klein Jeans — also under Simons’ direction — was a “fashion miss,” telling investors, “From a product perspective, we went too far, too fast on both fashion and price. We are working on fixing this fashion miss, and we believe that our CK Jeans offering will be much more commercial and fashion-right beginning in 2019, especially for the fall 2019 season.”

Soon after the earnings call, Klein sent out communication saying that starting in February, it would stop doing print advertising and would shift those dollars to digital media. Over the Christmas holiday, in fact, digital ads were prevalent, particularly in such categories as underwear.

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