Candie’s, Inc.

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Candie’s, Inc.

2975 Westchester Avenue
Purchase, New York 10577
U.S.A.
Telephone: (914) 694-8600
Fax: (914) 694-8608
Web site: http://www.candies.com

Public Company
Incorporated: 1978 as Millfeld Trading Company
Employees: 93
Sales: $93 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: CANDE
NAIC: 316213 Men’s Footwear (Except Athletic) Manufacturing; 316214 Women’s Footwear (Except Athletic) Manufacturing; 312219 Children’s Footwear Manufacturing; 422330 Women’s, Children’s and Infants’ Clothing & Accessories Wholesalers; 448120 Women’s Clothing Stores; 53311 Trademark Licensing

Candie’s, Inc., designs and markets a complete line of footwear, apparel, and accessories to young women. The Candie’s trademarked line of women’s products are sold in specialty stores and upscale department stores throughout the United States as well as in Canada, Brazil, New Zealand, and parts of Asia and Europe. Women’s products are also available under the Bongo brand, while children’s products are marketed under the Candie’s and Crayons trademarks. Candie’s also produces private label footwear, including men’s casual shoes and sturdy boots.

Candie’s Reputation Established

Candie’s, Inc., took its name from the Candie’s “slide,” a sexy, high-heeled shoe marketed by Charles Cole, founder of E1 Greco, Inc. In the 1960s Cole found a way to interconnect a mesh material to produce a zipper front go-go boot, which became a favorite. Cole discovered the slide while exploring manufacturing possibilities in Italy with his son Ken (who later formed his own shoe company, Kenneth Cole Productions). Charles Cole registered the Candie’s brand name in 1978, and placed it on his first order of 600 pairs of shoes.

The success of the Candie’s slide followed on the heels of the movie Grease, in which Olivia Newton-John played the role of a naive high school girl transformed into a sexy young woman. In the final scene, wearing tight pants and high-heeled shoes similar to the Candie’s style, Newton-John brought John Travolta’s character to his knees. The movie made the shoe style wildly popular, and Cole filled the demand. Advertisements reflected the brash style of the footwear, including a television commercial that featured college women scampering around a dormitory in various states of undress wearing Candie’s slides.

Cole used his established trade connections in the Midwest to bring the Candie’s slide into the market. Specialty stores, department stores, and independent chain shoe stores were more receptive to the low price, which was a result of low-cost Italian manufacturing. Sales exploded after Macy’s began to carry the brand, and better department stores followed. From 1978 to 1981, at the height of the disco craze, E1 Greco sold 14 million pairs of slides to women 14 to 30 years of age. Other shoe styles that E1 Greco made popular under the Candie’s brand name included the Chrissy sneaker and Jellies, plastic sandals in bright, translucent colors.

The fate of Candie’s footwear changed with new ownership. Sales declined steadily after Charles Cole sold a 60 percent majority interest in E1 Greco to U.K.-based Pentland Group plc in 1986. Sales dropped from a peak of $130 million in 1984 to $29 million in 1991, as the price for Candie’s footwear increased and marketing for the brand steadily decreased. Neil Cole, a son of Charles Cole who had played an integral role in the success of the Candie’s brand, saw an opportunity to revive it as 1970s fashions returned to the stores. Neil Cole’s firm, New Retail Concepts (NRC), purchased E1 Greco from Pentland in June 1991. Cole then licensed the Candie’s trademark to Millfeld Trading Company (MTC), which was to manufacture and market the brand.

Neil Cole and Barry Feldstein, founder and CEO of MTC, planned to reorganize MTC to make the Candie’s name prominent. MTC purchased a 75 percent interest in E1 Greco from NRC with the intention of renaming the company Candie’s, Inc. Neil Cole would become president and CEO of Candie’s, while MTC would become a wholly owned subsidiary of Candie’s under the name Millfeld. With Cole as interim president and CEO of MTC, it was decided that Millfeld would remain a public entity. MTC officially became Candie’s, Inc., with a public offering of stock in February 1993. Candie’s sold 1.5 million shares at $5 per share.

Candie’s in the Early 1990s

Neil Cole planned a $2.5 million marketing campaign to revive the Candie’s slide for launch in August 1992. Advertising outlets included television, radio, trade publications, and fashion magazines. The ads targeted the 20-year-old woman with the hope that girls as young as ten and women up to 50 years old would also be attracted to the products. The ads reflected women’s increased independence 15 years after the shoe’s original launch, with one television commercial featuring two women traveling across the country in scenes reminiscent of the women’s adventure movie Thelma and Louise.

The new Candie’s product line offered contemporary styles in a variety of categories, priced at $10 below competitive products. In addition to fashion shoes, the line included footwear that drew on NRC’s and MTC’s areas of experience: comfort, hiking, athletics, boots, vulcanized leather, and “athleisure.” The footwear received favorable reviews at trade shows in Las Vegas and New York, and the company received orders from specialty stores, chains, department stores, and junior store chains.

The company also extended the Candie’s brand to other products for women as well as a line of footwear for children. Candie’s signed licensing agreements for handbags, small leather goods, hosiery, sleepwear, hats, T-shirts, and women’s apparel. A line of baby shoes, launched in February 1993, included durable outdoor ankle boots, suede fashion booties, and styles with faux jewels. A ten-year licensing agreement with Brown Group, Inc., involved the manufacture and distribution of girls’ footwear. The 1994 back-to-school launch of girls’ footwear included casual, outdoor, and athletic shoes, as well as a Western mid-height boot, all priced from $25 to $35. The two companies hoped to attract young mothers who remembered the Candie’s brand from its heyday and wanted high-quality, fashionable footwear at a reasonable price.

Candie’s sought to maximize the efficiency of its shoe production by adding other footwear brands to its operations. Candie’s obtained a license to produce and distribute women’s and children’s footwear for the Bongo brand in 1995.

Marketing Sizzle in the 1990s

In 1996, with the company on sound financial footing, Cole orchestrated a full-scale revival of the Candie’s slide through collaboration with well-known fashion designers. Targeting upscale women from 25 to 50 years of age, Candie’s signed partnership agreements with four fashion designers who did not already include shoes in their collections. The designers, Betty Johnson, Nicole Miller, Anna Sui, and Vivienne Tarn, created distinctively different styles. Betty Johnson designed footwear in wild colors with a hip, urban flair in thick-soled or sleek, sexy styles. Anna Sui followed classic lines, while Vivienne Tarn added an Asian flair to Western classics in new fabrics. The shoes carried each of their designer’s names along with the Candie’s trademark.

Marketing for the designer shoes included a $1 million advertising campaign. The February issues of Elle and Vogue magazines included a five-page advertisement featuring the shoes and a photograph of the four designers, while advertisements in Marie Claire, InStyle, and Allure magazines featured the group picture. The designers also featured the shoes in runway fashion shows in October 1996. The project opened the doors of better department stores to the Candie’s brand, including Nordstrom, May Company, Dillard’s, and Federated.

Marketing to young women from 15 to 25 years of age required a different approach. A survey had shown only 30 percent of this group to be familiar with Candie’s. To reach that market, the company engaged Jenny McCarthy, the former co-host of the MTV program Singled Out. One print ad showed McCarthy applying fingernail polish, while another showed her singing into a showerhead, scantily clad in a glittering red dress. A controversial ad featured McCarthy seated on the toilet with her underpants down at her Candie’s slides. Elle, Glamour, Allure, and Marie Claire accepted the ad for their April 1997 issues; Vogue and Cosmopolitan refused to run it at all; and Spin ran a nude version that garnered increased sales for that issue. The $2 million advertising campaign coincided with the launch of the Jenny McCarthy Show on MTV.

Another $5 million marketing campaign followed in the summer of 1997. Glamor and InStyle rejected an advertisement in which McCarthy, wearing a saucy red dress, lounged on the pool table in a stuffy men’s club with a roll of toilet paper stuck to the sole of her shoe. Vogue and Cosmopolitan accepted that ad, but rejected a kitchen scene in which McCarthy sat on the sink—wearing casual, ankle-high shoes—and checked out the plumber crouched under the sink with low-riding jeans exposing part of his backside.

Key Dates:

1978:: Candie’s “slide” popular with young women.
1986:: Candie’s brand sold to Pentland Group plc.
1991:: Neil Cole acquires Candie’s brand.
1996:: Jenny McCarthy featured in ad campaign.

Whatever opinions the advertisements aroused, history repeated itself as Candie’s regained popularity. The high volume of sales at Macy’s led the store to add a 500-square-foot Candie’s shoe boutique at the front entrance of its Herald Square store in New York City. New accounts in 1997 included Foot Locker and Pacific Sunwear. Journeys specialty stores featured Candie’s with a defined display area within its stores. Candie’s also began to experiment with three company-owned and -operated retail stores in the New York City area. In 1997 sales rose to $93 million, which was more than double the 1996 revenues of $45 million.

International expansion came through a distribution agreement with Bata Shoe Pte. Ltd. (BSP). The agreement allowed BSP to distribute Candie’s branded products, including handbags and apparel, in its 300 retail shops in Singapore and Malaysia, as well as through its distribution partnerships. BSP also hoped to open a 400- to 500-square-foot Candie’s boutique in Singapore. The company reused the McCarthy advertisements in Asia, sparking demand for personal appearances.

In 1998 Candie’s brought the classic slide into alignment with contemporary fashions with lower heels and a rougher, chunkier look. This time Cole selected three award-winning jewelry designers to create four styles each for the slide. Barry KieselsteinCord’s work relied on animals and nature; Angela Cummings conveyed the impression of flowers, ocean life, and architecture; and Robert Lee Morris contributed clean, sculpted styles.

Company sponsorship of conceit tours led to a partnership agreement with singer/songwriter Lisa Loeb, whose hit song “Stay” was featured in the Generation X movie Reality Bites. The agreement involved sponsorship of her 30-stop American tour with shoe store promotions, radio advertising, and giveaways for concert tickets and backstage passes. The tour kicked off at Macy’s at Herald Square in February 1998 with a live performance in the Candie’s shoe boutique. Loeb also made personal appearances for Candie’s in Singapore, Malaysia, and Germany.

Candie’s expanded its use of musical performers for advertising in its summer 1998 campaign. Advertisements in fashion, teen, and music magazines featured country singer Shaina Twain, rap singer Lil’ Kim, and R&B singer Brandy in addition to Lisa Loeb. Some of the ads, which showed the singers performing to an atyplcal audience, were rejected as being too controversial. Cosmopolitan rejected an ad that featured Lisa Loeb holding a large pink guitar strategically placed to give the impression of nudity, in front of an audience that appeared to be wearing only spectacles. Brandy, age 19, performed in front of punk-looking senior citizens, while Shaina Twain sang to an audience of wild babies. Wearing a yellow bikini and a blonde wig, Lil’ Kim danced above a crowd of nuns who looked rather apprehensive.

In addition to its international distribution in Germany, Brazil, and parts of Asia, Candie’s added four international distribution agreements in August 1998. Candie’s trademarked products were to be distributed by Sports Odyssee in Canada, Vanocca Industries in Hong Kong, and Platts Europe Ltd. in Switzerland. In New Zealand Hannah’s began to distribute Candie’s brand products in its 65 retail stores. Candie’s planned to use existing advertising to appeal to consumers who made up the MTV market outside the United States.

New Products, Even Hotter Campaigns in 1999

Candie’s began to expand into the jeanswear market with the acquisition of Michael Caruso & Company, maker of Bongo Jeans, in 1998. The acquisition included the Bongo brand name and related trademarks, as well as licensing agreements for children’s apparel and plus-size jeanswear. Candie’s entered into a 50/50 joint venture with Sweet Sportswear LLC, a subsidiary of jeans manufacturer Aztec Production International. Unzipped Apparel LLC held the licenses to produce jeans under the Bongo and Candie’s trademarks. Candie’s took responsibility for design, sales, marketing, and merchandise, while Sweet Sportswear took responsibility for manufacturing, distribution, operations, and administration. The company placed the Bongos line in the $20 to $30 price range and Candie’s branded apparel at $30 to $50. Candie’s also added its own handbags division to design and produce a line of Candie’s branded purses.

With Candie’s jeanswear still under development, the Bongos line of junior apparel launched in early 1999. The advertising campaign featured Jennifer Esposito, co-star of the ABC sitcom Spin City and the 1998 movie I Still Know What You Did Last Summer. Entitled “let me b,” the advertisements circulated from March through June 1999 in fashion and teen magazines, targeting young women in what was known as “Generation Y,” from 15 to 25 years of age.

Jeans and apparel under the Candie’s trademark launched in fall 1999 in conjunction with other Candie’s trademarked products. The product line included sunglasses and optical eye wear by Viva International and socks and legwear by Ben Berger LLC. Liz Claiborne Cosmetics also launched a line of Candie’s and Candie’s Men fragrance products. The fragrance line included perfume, soap, and body mist for young women and cologne, aftershave, and a hair-and-body-wash for young men.

Liz Claiborne Cosmetics (LCC) had approached Candie’s to license the brand as a means to attract young women from Generation Y into department stores. The fifteen-year licensing agreement gave LCC rights to formulate, manufacture, and distribute fragrances and cosmetics. Due to financial difficulties at Candie’s, related to its SEC filings, LCC funded the marketing campaign for the fragrance products. LCC allocated $10 million for print, television, cable television, and cooperative advertising and $10 million for promotional items such as catalogs and scented temporary tattoos.

The media campaign, entitled “Anywhere You Dare” and created by Candie’s in-house marketing staff, generated controversy as some viewed the ads as too sexually provocative. Alyssa Milano, of the TV sitcom Charmed, starred in a print ad in which she has just opened a large medicine chest full of condoms with a bottle of Candie’s fragrance on the bottom shelf. The ads tended to be banned by local television networks and magazines for teens. Several women’s fashion and music magazines, as well as GQ, Details, and Maxim published the print ads, while several cable television stations, including MTV, VH-1, and Comedy Central, aired the commercials.

Just before filing for divorce, Carmen Electra and Dennis Rodman posed for several advertisements featuring the couple in ardent poses, which some media outlets refused to print. Vogue, Vibe, Maxim, Cosmopolitan, Glamour, Jane, GQ, Penthouse, and Premiere did publish them. In one ad the two lounged in satin sheets with Rodman’s hand on Electra’s breast, while bottles of Candie’s and Candie’s Men sat on a side table. The campaign included a three-page poster in Rolling Stone, and a billboard on Seventh Avenue in New York City. In those ads Electra sprayed Candie’s fragrance down the boxer shorts of a shirtless, tatooed Rodman.

With a Web site reconstruction in progress, Candie’s placed the ads on the site at www.candies.com. The Web site attracted 100,000 visitors in the first few days. The redesigned Web site launched in October. New features of the Web site involved surveys, a chat room, contests, product displays, a personality quiz, and a page with the advertisements.

New footwear in 1999 included a line of “street surfer” shoes, a cross between sandals and athletic styles based on surfer footwear. With neoprene uppers, the shoes came in such colors as yellow, lime, aqua, and periwinkle, and incorporated easy on-and-off snap buckles and buckle straps. Advertisements featured the platinum-selling country group the Dixie Chicks and Grammy-winning performer Brandy. Shown in offstage settings, the Dixie Chicks lounged in a hotel room reading Playgirl magazine and ate fast food in a limousine. Brandy sang jingles written by Ray J, her 16-year-old brother, which appealed to audiences on both MTV and Nickelodeon. The videos also played in Kids Footlocker stores.

Candie’s opened two 3,000-square-foot showrooms in New York City in 1999, one for each of the Candie’s and Bongo brands. Each showroom offered the full product line for its brand, including Candie’s fragrances and eyewear. Monitors in the showrooms displayed Candie’s television commercials and print advertisements. The location of the showrooms near other clothing showrooms, such as DKNY and Liz Claiborne, rather than near footwear showrooms, reflected the company’s expanded product line.