Calvin Klein Inc.

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Calvin Klein Inc.

founded: 1968

Contact Information:

headquarters: 205 w. 39th st., 5th fl.
new york, ny 10018 phone: (212)719-2600 fax: (212)730-4818

OVERVIEW

As the fashion industry has progressed, it has grown and transformed into an icon. One of the most influential designers in that movement is Calvin Klein. His designs and ideas brought fashion into a new realm that took on its own personality. With products ranging from clothing to bed linens to perfume, people around the world are familiar with Calvin Klein, and his name has become synonymous with couture fashion. Calvin Klein's products are high quality and have price tags that reflect it. His products are displayed and sold in top notch department stores such as Dayton Hudson's and Saks Fifth Avenue, as well as in the 30 Calvin Klein retail stores operating worldwide.

COMPANY FINANCES

Calvin Klein's approximately 400 in-store shops earned $5.1 billion in revenue during 1997, approximately 28 percent of which was earned in Europe. The company expects revenues to increase 15 percent during 1998. Calvin Klein hoped to add between 650 and 700 new shops in department stores during 1998 in order to better compete with rivals DKNY Jeans and Tommy Hilfiger.

HISTORY

Calvin Klein started his self-titled company in 1968 with company Chairman Barry Schwartz. He began designing coats and later ventured into sportswear. Introduced in 1980, Calvin Klein jeans helped lead the company to success during the designer blue jeans craze. His unique designs were appealing to the population at large and brought in a substantial profit. It was during the early 1980s that the company made the decision to adopt a form of advertising that would really grab the attention of consumers. Klein hired Richard Avedon to head up the campaign, and it was he who filmed the famous television ads featuring Brooke Shields. Klein continued to utilize provocative advertising since it generated a tremendous amount of revenue. During the late 1980s, the company released several ads for its Obsession perfume as well as for Calvin Klein's underwear line. The ads were pretentious and erotic but were always discussed among consumers and store buyers. Klein usually disregarded attacks by those who disagreed with the ads because it was these displays that turned Calvin Klein into a household name.

The ads brought in profits for Calvin Klein and also helped accelerate the careers of several actors and models, including musician Marky Mark and model Kate Moss. Even with the popularity of the ads and products, Calvin Klein experienced a loss at the expense of lower-priced retailers such as The Gap. In order to ease some of the financial strain, record producer David Geffen purchased $60 million of the company's junk bond debt in 1992. In 1993, Calvin Klein was the subject of a biography that portrayed him as a drug addict during the Studio 54 designer jeans years. This book, titled Obsession, was disputed by many within the company but published nevertheless. The controversy surrounding Calvin Klein ads did not cease. In August 1995 the company decided to withdraw ads shot by Steven Meisel; these television and print ads were seen as possible child pornography. This was looked into extensively, but no formal charges were pressed against Calvin Klein or the company, and the company continued its provocative advertising.

STRATEGY

Advertising used by the company was influential in circulating its products. Ads usually showed scantily clad men and women wearing only certain pieces of Calvin Klein clothing. Whether it was underwear or a simple pair of blue jeans, the billboards and magazine ads were eye catching. The most famous clothing ad was one of the company's first—a television ad featuring actress Brooke Shields uttering the statement, "You know what comes between me and my Calvins? Nothing." Ads like these helped increase sales worldwide. The company continued to enjoy much success and continued to release new products for the public to devour.

During the late 1990s, Calvin Klein was planning to build up its brand's "tops" business, adding fleece tops, woven shirts, T-shirts, and active wear in a wider range of colors than was offered in previous years. It also added more styles to its jean line, including "skateboard" and "carpenter" styles, dark denim, and stretch denim. New products and new shops would be launched with extensive advertising campaigns focused on depicting healthy adults in active, outdoor lifestyles.

Another strategy used by Calvin Klein to extend its product reach was the licensing of the Calvin Klein name to foreign companies. One such example was its agreement to license its home furnishings line to Crown Crafts, Inc. Another example was Calvin Klein's latest deal to extend its menswear partnership with GFT, SpA. The two companies signed a long-term international licensing agreement covering Europe, the Middle East, and the Asia/Pacific region (excluding Japan). The two companies have worked together since the early 1990s building a highly successful men's line in the United States with hopes of extending it to other major regions of the world. The product line is planned for launch in Europe in the spring of 1999, supported by advertising and public relations campaigns. A complete lifestyle collection is to be designed and sold under the Calvin Klein label; distribution will be limited to high-end specialty retailers, department stores, and Calvin Klein Collection stores.

INFLUENCES

Much opinion concerning Calvin Klein, as an individual and about his advertising strategies, was negative. Critics saw Klein as a fiendish drug addict with little self-control, and controversy surrounding his advertisements was intense. In the beginning, there was some argument regarding the sexual undertones in the ads, and the problems grew. In 1996, Calvin Klein Industries produced a series of television commercials showing a series of baby-faced models wearing very little clothing, usually just a tee shirt and a pair of Calvin Klein blue jeans. Models were then questioned by a person the viewer never saw but sounded as though he was a mature, older man. According to writer Carolyn Christenson, Calvin Klein exploited the sexuality of the younger generation in order to sell his products. Christenson felt that Klein was completely aware of the controversy that would surround his ads but went ahead with them anyway. In the mid-1990s the company continued to draw criticism for using models that looked anorexic, underaged, and drugged. New advertising in 1998 focused on a more wholesome lifestyle and included healthier looking models in outdoor settings.

Calvin Klein was also impacted significantly by counterfeiting in the fragrance industry. The company, along with the Colombian government, participated in an ongoing investigation into the problem. More than 6,000 counterfeit units of CK One, Escape, Eternity, and Obsession were found in an April 1998 seizure alone. The problem was also uncovered in September of 1997 in Panama, where another seizure took place. Counterfeit containers were made so that those purchasing the bottles believed they were buying authentic Calvin Klein products. According to Jennifer Owens' article in Women's Wear Daily, Calvin Klein was one of the fragrance industry's leaders in attacking the counterfeiting problem.

CURRENT TRENDS

Calvin Klein adopted a strategy in the late 1990s that made its clothing and fragrances as recognizable in Europe as they were in the United States. Moving toward this goal, in mid-1998 the company announced a summer 1999 menswear collection. The collection included a new couture line for the European market that was produced and distributed by GFT, SpA, an Italian manufacturer that has produced the company's black-on-black label in the United States since 1992. It would be the first time a top-of-the-line Calvin Klein line was made widely available to the European market—until the agreement with GFT, the Calvin Klein men's couture collection was only available in a Calvin Klein store in Paris. The new line was scheduled to be in stores in the spring of 1999 for distribution to upmarket retailers through GFT showrooms in Milan, Madrid, Paris, Dusseldorf, and London. A roll-out across the Middle East and Asia was planned sometime after the line's initial release in Europe.

FAST FACTS: About Calvin Klein Inc.

Ownership: Calvin Klein Inc. is a privately owned company.

Officers: Barry K. Schwartz, Chmn. & CEO; Calvin Klein, VChmn., 50; Gabriella Forte, Pres. & COO; Lawrence C. DeParis, Sr. VP, Finance & CFO

Employees: 900

Chief Competitors: Calvin Klein is one of the most recognized designers and marketers of apparel and fragrances. Primary competitors include: Donna Karan; The Gap; Gucci; Guess?; J. Crew; Jordache Enterprises; Liz Claiborne; Nautica; Nike; Levi Strauss Associates; OshKosh B'Gosh; Oxford Industries; Polo/Ralph Lauren; and Tommy Hilfiger.

Calvin Klein not only introduced several new clothing lines, cosmetics, perfumes, and eyewear but also developed products outside of the fashion realm. In November 1996, in conjunction with Mattel, Inc., the company produced a Calvin Klein Barbie doll. This collector's edition doll was dressed from head to toe in Calvin Klein apparel. She wore a denim skirt with the company's logo and a gray crop top covered by a denim jacket. The doll also wore Calvin Klein undergarments. Also included with this edition were several accessories featuring the Calvin Klein name, including a windbreaker, baseball cap, and sneakers. The Barbie originally retailed for $70 and was sold exclusively at Bloomingdale's.

Calvin Klein's latest scent, Contradiction, became one of the best-selling women's scents in the United States (ranked fourth in sales), according to a May 1998 article in Women's Wear Daily. It also received The Fragrance Foundation's FiFi award as one of the industry's top perfumes. Building on the new product's success, Calvin Klein planned to add a line of body and bath products, as well as Contradiction for men. Aggressive marketing campaigns were planned for both new product areas. The men's campaign targeted the "virile young father," according to the company. The ads feature a 26-year old model and father of three, portrayed wearing a suit and appearing "healthy and happy" and "full of self-confidence." Since Escape was launched in 1993, Contradiction was Calvin Klein's first introduction of a men's scent—the company would reportedly spend $11 million on advertising and marketing for the product's launch.

PRODUCTS

Calvin Klein produces several items that are extremely popular with the public. The company's clothing line includes blue jeans, tee shirts, blouses, skirts, dress pants, and men's dress shirts. All of its items are high in quality and priced at the higher end of the spectrum. The company also put its name on eyewear and an extensive line of cosmetics. (Formed in 1985, the Calvin Klein Cosmetics Company was a division of the Unilever Corporation.) Calvin Klein consistently develops innovative products that have significant impact on the fragrance industry, such as Obsession, Eternity, Escape, CK One, CK Be, and Contradiction. Each fragrance has its own line of body products. These brands are honored several times for the success of the fragrance as well as for the advertising, design, and marketing campaign.

CORPORATE CITIZENSHIP

Though the company did not discuss its donation publicly, the Calvin Klein Foundation provided $5,000 toward a controversial exhibit on the history of garment sweatshops at the Smithsonian's Museum of American History. Other apparel companies and associations have reportedly declined sponsorship fearing they may be too closely associated with the sweatshop image as a result.

GLOBAL PRESENCE

In March 1998 Calvin Klein opened a new store in Rome's shopping district near the Spanish Steps. Located in a former Gianfranco Ferre boutique, the company restored the building and preserved its entire exterior—the building is a historic site protected by the Italian government. Following its opening, Calvin Klein planned to move south, opening shops in Sicily and Catania, and already has one shop in Milan. Overall, Italy represents approximately 25 percent of the company's business in Europe. Calvin Klein also operates shops in London, Barcelona, Lisbon, Moscow, Tel Aviv, Kuwait City, and the Saudi Arabian cities of Jeddah, Riyadh, and Dubai.

HE'S HIP, HE'S COOL

He started designing and selling women's apparel in 1968, and now Calvin Klein sits upon the fashion-world throne like a king of coats, a top-dog of tank-tops, an undisputed ruler of underwear. Whereas he once sold clothes, he now sells a lifestyle.

His clothing fashions are generally noted for their clean, simple, minimalistic styles, and this stands in direct contrast to the often controversial advertising campaigns designed to sell those clothes. The designation "designer" is used to sell anything from jeans to fragrances, and it is intended to make Calvin Klein customers stand out from the crowd. As Calvin Klein says, "People who wear cK (Calvin Klein) are very real. . . they're about today."

Calvin Klein is about attitude, techno detail, hip packaging, and complexion enhancing colorations. It is, in a nutshell, the celebration of style. And it sells like hotcakes.

Calvin Klein has offices in Asia and Europe. In May 1998, it was announced that Crown Crafts, Inc. entered into a long-term international licensing agreement with Calvin Klein, Inc. to manufacture and distribute Calvin Klein soft home furnishings. The agreement included the Calvin Klein Home bed, bath, and table linen collections and the company's new Home Khakis line entitling the company to distribute products in the Americas, Europe, and the Middle East. According to Calvin Klein president Gabrielle Forte, "With our Calvin Klein businesses growing around the world, we are confident that this new partnership with Crown Crafts will help us to realize the full worldwide potential for our Home Collection in the coming years." Design and marketing activities, including advertising and public relations, continued to be administered by Calvin Klein, Inc. in New York and Milan. The company's most recent agreement, signed in June 1998, will also extend its international reach—Calvin Klein's licensing agreement for its menswear line with GFT, SpA was extended to Europe, the Middle East, and the Asia/Pacific (excluding Japan). The deal was expected to complement the company's existing international licenses, such as those with Stefanel SpA for cK Calvin Klein apparel in Europe and the Middle East and The Fratini Group for cK Calvin Klein Jeanswear in Europe, the Middle East, and Asia.

SOURCES OF INFORMATION

Bibliography

aktar, alev. "contradiction adds a bath and body line." women's wear daily, 1 may 1998.

born, pete. "calvin's new contradiction." women's wear daily, 12 june 1998.

calvin klein barbie—limited edition exclusives, 1 april 1998. available at http://www.barbie.com.

"calvin klein, inc. signs letter of intent with gft s.p.a. to launch menswear collection in europe beginning spring 1999." calvin klein inc. press release, 30 june 1998.

christenson, carolyn. "calvin klein ads: art or pornography?" the bucknellian online, 14 september 1995.

clark, jennifer. "calvin klein unveils new european line in milan." reuters, 1 july 1998.

conti, samantha. "buon giorno, roma, from calvin klein." women's wear daily, 6 april 1998.

"crown crafts enters international agreement with calvin klein, inc. for calvin klein home." pr newswire, 26 may 1998.

"fifi honours the world's fragrant stars." cosmetics international, 25 june 1998.

owens, jennifer. "klein fakes seized." women's wear daily, 24 april 1998.

ramey, joanna. "smithsonian gets $5,000 from calvin for exhibit." women's wear daily, 18 november 1997.

socha, miles. "rebuilding calvin's jeans." women's wear daily, 5 march 1998.