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POLISHING THE BRAND

RETAIL STORES ARE BECOMING LUXURY BRANDS’ FAVORITE FASHION STATEMENTS

By Molly Knight

Virginia Woolf famously said in 1929 that all a woman really needs is money and a room of her own. Now, 78 years later, the same could be said about upscale retail brands. The number of stand-alone stores belonging to luxury fashion companies rose 12 percent in 2006, says a study done by Ernst & Young in conjunction with Milanese business school SDA Bocconi and Italian fashion cartel Altagamma. The opening of these stores is stores is currently the chief driver of growth in the luxury sector, insiders say.

In the U.S. the Phillip Van Heusen Corp. announced plans to open 100 new U.S. stores for its Calvin Klein brand. The company, which currently operates about 400 full-price stores worldwide, including a flagship on Madison Avenue in New York City, intends to open five new boutiques by the end of this year and five more next year in some of the most posh malls in the U.S. The announced locations for these units include Beverly Center, in Los Angeles; Cherry Creek, in Denver; and The Mall at Partridge Creek, in Clinton Township, Mich. (opening in the spring), all Taubman Centers properties, as well as General Growth Property’s Natick (Mass.) Collection and Simon Property’s Lenox Square, Atlanta. The stores will average 10,000 square feet.

The expansion is part of Phillips Van Heusen’s plan to grow the Calvin Klein business by $2-3 billion annually within the next five years, with a goal of doing $7.5 billion per year worldwide. “This initial test will allow us the opportunity to refine our product offerings and develop market-specific merchandising strategies that appeal to the specialty retail client base,” said John Walsh, president and CEO of Calvin Klein’s retail division, in a press release. The stores will feature exclusive merchandise not sold in department stores or boutiques, he added.

Though the first test stores will be in malls, Calvin Klein president and COO Tom Murry told Women’s Wear Daily the retailer would consider Main Street and open-air locations for the larger rollout.

Other well-known brands are going through major expansion as well. Coach credits its success for the quarter ended March 31, during which it posted a 30 percent year-on-year net sales increase to $625 million, to the seven U.S. stores it opened over the period.

The trend goes beyond just the big-name brands. In January designer-denim upstart True Religion announced plans to open 11 units by the end of next year. Before last November the company had only one store and relied largely on sales through department stores such as Nordstrom or Macy’s.

And the trend is gathering steam as more private equity firms invest in and outright purchase European luxury brands with the intentions of opening stores to boost sales volume and revenues. British jeweler Garrard, Italian couture house Valentino, lingerie chain La Perla and footwear retailer Jimmy Choo are just a few of the brands with new backing from private investors. A slew of other fashion brands, including Prada and Versace, are planning initial public offerings and will likely use the money raised to open new stores, observers say.

These upscale names are turning from department stores in favor of their own units because they get more space and heightened control over the way the products are sold, sources say. “It offers customers a more complete line,” said Christine Szalay, director of marketing at NorthPark Center, in Dallas. “A department store is never as complete as a boutique. In your own stores you have an opportunity to have your accessories near your clothes and really solidify your brand. Diesel, for instance, is known for denim, but their fashion is phenomenal. They’re able to show that off in their boutiques as they expand.”

Stand-alones also give companies the chance to offer exclusive products. When Bulgari re-opened its renovated flagship on New York City’s Fifth Avenue in April, the limited-edition items it was selling included python twist bags, and necklaces with coin pendants.

Szalay says she has noticed an influx of luxury brands seeking to open their own stores, and that upscale centers like NorthPark are opening their arms to them. Giorgio Armani, Max Mara, and True Religion will be opening stores next month, Cartier and Free People will do the same in October, and Abercrombie & Fitch and Arden B. are to follow in November, Szalay says. Additionally, Valentino and Betsey Johnson are preparing to open stores soon, though no dates have been announced.

“As they begin looking to open their own boutiques, we reach out,” said Szalay. “We look for the best and most creative stores in each sector. Our customer has come to expect that from us, so it’s important we deliver. Plus, these boutiques are looking to go where the co-tenancy is strong.”

One such place where the client roster is particularly strong is The Shops at Columbus Circle, in New York City. Sales per square foot there are well above $1,500, center officials say. “The demand for luxury goods right now is stronger than ever,” said R. Webber Hudson, executive vice president of Related Urban Development, a subsidiary of the New York City-based Related Cos., which operates Shops at Columbus Circle. “For us these stores have become less of a bonus and more of a requirement.”

Some fashion brands feel likewise, experts say. “You can control the shopping experience when it’s your store, from the type of music that’s playing, to the colors used in the displays, to the lighting and how your salespeople are dressed,” said Robert K. Passikoff, president of Brand Keys, a New York City-based retail consulting firm. “It’s like the old saying goes, ‘I am captain of my fate and master of my soul.’ It’s hard to be able to say that in someone else’s store.”

Passikoff says the impetus of these brands to expand their freestanding stores is vital to their survival. “A lot of companies, like Calvin Klein, are feeling the pinch in trying to avoid becoming well known but undifferentiated,” said Passikoff. “Who cares if people know who you are, but not what you are? You definitely want to be able to define yourself in the minds of consumers. A name isn’t enough.”

And for landlords constantly seeking to provide their customers with pleasant surprises, a new take on an old brand might be just what the mall directory ordered.

“People aren’t surprised to go to Nordstrom or Macy’s and find a Ralph Lauren,” said Passikoff. “But walking by a Ralph Lauren store in the mall might be enough to get someone’s attention. To a certain degree, because of the exclusivity of that occurrence, it moves the brand more upscale, and it makes the customer feel like they’ve stumbled on something special.”

Whereas special used to mean having a prime location in the right department store, now that is not quite good enough. These retailers want a place to call their own.

Woolf would have understood.