the pg. 12 women’s wear daily † the re tailers’ …if you do not want to receive these offers...

WHERE THEY ALL WENT/4 DENIM STAYS STRONG/8Women’s Wear Daily • The Retailers’ Daily Newspaper • January 3, 2008 • $2.00

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It’s Only NaturalEco-conscious apparel is gaining momentum

for 2008, even in the denim market, where

environmentally friendly designers are making

strides. According to the charitable organization

Organic Exchange, sales of organic cotton are

expected to reach $2.6 billion this year. Here, from

Loomstate, launched by Rogan Gregory and Scott

Hahn in 2004, a cardigan, henley and jeans. For

more of spring’s green denim, see pages 6 and 7.

WWDTHURSDAYSportswear

See Challenges, 0

The New Year’s Blahs: Retail Shares Decline On Downbeat OutlookBy Jeanine PoggiIT’S A NEW YEAR, BUT THE SAME old stock market story.

On 2008’s first day of trading, retail shares fell sharply as oil prices reached $100 a barrel for the first time ever. And, after 12 months of steep erosion in the value of retail shares, this year is looking like it will be even more of an uphill battle.

But, as always, there are expected to be some standouts. Several analysts see companies such as Nike Inc. and Polo Ralph Lauren as stocks that will do well this year, and at least one retail consultant says Wal-Mart Stores is

Inside:Pg. 12

TheWWDList

Prime-time Product Placement

WWD.COM2 WWD, THURSDAY, JANUARY 3, 2008

WWDTHURSDAYSportswear

FASHIONDenim lines are in the forefront of creating collections around fashion’s latest buzzwords of organic, sustainable and natural.

GENERALOn 2008’s fi rst day of trading, retail shares fell sharply as oil prices reached $100 a barrel for the fi rst time ever.

The red carpet could still roll out at the Golden Globes, as the show’s owner said it is talking with striking writers about an interim deal.

While tourists and business travelers are still fl ying across the pond, the weak dollar has them suffering sticker shock upon arrival.

Retailers were pleased with the post-holiday sales and inventory levels, after a weak season, but concerns about consumer spending remain.

EYE: Celebrities took a respite from movie sets and recording studios during the holidays, but there was no vacation from personal style.

Last year was tough for businesses in how they safeguarded personal data, and they’re bracing for another rocky year in 2008.

Some two dozen designer boutiques, several cafes and an organic eatery have established a retail enclave in Tel Aviv’s Electrical District.

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● HONORABLE BRITS: Another round of British fashion fi gures has been honored in Queen Elizabeth II’s New Year Honors list. Stuart Rose, chief executive of Marks & Spencer, has been award-ed a knighthood for services to the retail industry and corporate social responsibility — putting him on an equal footing with the Arcadia and Topshop owner Sir Philip Green, who made an un-successful bid for M&S in 2004. “Naturally I am delighted, but it is as much for everyone at M&S as it is for me,” said a mod-est Rose. Meanwhile, Glenda Bailey, editor in chief of Harper’s Bazaar, was recognized as an Offi cer of the Order of the British Empire as part of the government’s diplomatic services and overseas list, for services to British journalism and British fash-ion in the U.S. Designer Jasper Conran also was made an OBE, along with designer Karen Millen and Romy Fraser, the founder of the health remedies brand Neal’s Yard Remedies. And Rose wasn’t the only British high street honcho to be honored: Maurice Bennett, who founded the British fashion chains Warehouse and Coast, was made a Commander of the Order of the British Empire — one level up from an OBE — as was Richard Bradbury, ceo of River Island, another high street chain in the U.K..

● KENNETH COLE DONATES: This month marks the 15th year of Kenneth Cole’s national shoe drive to benefi t HELP USA, which provides housing and services for the homeless. From Jan. 19 to Jan. 28, customers who donate gently worn shoes re-ceive 20 percent off their purchases at any Kenneth Cole New York store location. To date, Kenneth Cole has collected more than 1.5 million pairs of shoes for HELP USA.

In Brief

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WWD IS A REGISTERED TRADEMARK OF ADVANCE MAGAZINE PUBLISHERS INC. COPYRIGHT ©2008 FAIRCHILD FASHION GROUP. ALL RIGHTS RESERVED. PRINTED IN THE U.S.A.

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Golden Globes in Talks to Go OnBy Marcy Medina

LOS ANGELES — The Hollywood Foreign Press Association, owner of the Golden Globes, is in talks about a deal to let the award show proceed as planned on Jan. 13 despite the Hollywood writers’ strike.

The HFPA issued a statement Wednesday say-ing that it began discussions on Saturday with the Writers Guild of America to enter into an interim agreement similar to that which permitted Writers Guild members to go back to work writing for “The Late Show With David Letterman.”

“We hope and expect the WGA will agree to the same terms and ultimately permit the Golden Globe Awards to be broadcast as scheduled, with-out picket lines, on Sunday, Jan. 13,” said HFPA president Jorge Camara.

He pointed out that the Globes are not owned by NBC, which broadcasts the awards, thus avert-ing issues facing other television shows that are owned by networks.

The Globes, which are set to be shown live on TV, would suffer a huge blow if there were no red carpet or broadcast of the gala. Designers and fashion companies also would lose major market-ing opportunities if photographs and broadcast images of their wares were unavailable.

There has been talk in the entertainment in-

dustry of making the Globes a “private event” so that celebrities would feel comfortable attend-ing, meaning the arrivals red carpet could be scrapped and media banned from the dinner in favor of stars going from their limos directly into a reporter-free Beverly Hilton ballroom, thus avoid-ing picketers and journalists. That could still be an option if the HFPA fails to come to an agree-ment with the WGA.

But so far, fashion folk in Hollywood seem to be operating like last year, busily readying samples for stylists and planning events around the weekend to capitalize on celebrity attendance and buzz.

Van Cleef & Arpels plans to present its new high jewelry collection at a cocktail party in its Beverly Hills boutique on the Thursday be-fore the Globes; the next day, Coach will host an event to unveil its latest collaboration with Missy Davenport, and that night, Jimmy Choo plans to celebrate its new Rodeo Drive boutique. The night before the Globes, The Art of Elysium and Vogue will hold a fashion show and benefi t dinner hosted by Balthazar and Rosetta Getty.

While none of these events are billing them-selves as pre-Globes parties, they no doubt are hoping to capitalize on the heightened media at-tention of the week and snag celebrities otherwise in town to attend or present at the awards.

Americans Abroad Feeling the PinchBy Samantha Conti

LONDON — While the Brits, French and Italians race through U.S. department stores, flaunting their almighty pounds and euros and filling their shopping bags with bargains, Americans visiting Europe are feeling like paupers.

Although tourists and business travelers are still regularly boarding fl ights for Milan, Paris and London, the continued weakness of the dol-lar means they’re suffering sticker shock once they land. Most have begun pinching pennies, es-pecially when it comes to shopping and the little extras that make a trip special.

“Eighteen months ago, U.S. visitors were the biggest luxury spenders in London,” said Jamie Talmage, a business analyst for Visit London, the organization that promotes tourism in the English capital, and tracks visitor trends. Now, they’re lag-ging behind tourists from the Middle East, Russia, Nigeria and Canada — basically anyone with oil money. They’re still coming, but they’re cutting back on shopping, buying fewer souvenirs.”

John Oliboni, who owns a souvenir stall near Piccadilly, agreed. “I’ve seen a lot less Americans this year, because the exchange rate is so high,” he said.

But it’s not just souvenirs they’re cutting out.

“Do not, under any circumstances, go out to dinner in London,” said one tourist who visited the city during Thanksgiving break. “The prices are ridiculous. Now is not the time to visit London — unless you have family there, or you’re a hard-core traveler who can’t stay away.”

And while they may still be traveling to London, the number of American tourists is declining: In the fi rst six months of 2007, the number of U.S. visitors dropped to 1.1 million from 1.2 million in the corresponding period last year.

But it’s not only London where the Americans are feeling the pinch. Hoteliers in Milan said their clients are cutting corners for the fi rst time in re-cent history.

“Guests from the U.S. have changed their habits and pay more attention to fares and pric-es. They’ve also begun asking for special offers — which they have never done before,” said a spokesman for the Principe di Savoia, one of Milan’s top hotels.

The Four Seasons is reporting similarly fru-gal behavior. Business travelers, who are usually more immune to prices because of their expense accounts, have even started cutting corners.

“Those who used to stay in a junior suite now ask for a deluxe room,” said Olivier Gerber, mar-keting and sales director at the hotel, which is in the heart of Milan’s shopping district. “Many American guests also ask us to charge their credit cards immediately, in order to prevent larger cur-rency changes.”

In November, the Four Seasons saw the num-ber of its U.S. arrivals plummet 23 percent year-on-year. Similarly, the Carlton Baglioni hotel has seen a fi ve percent drop in U.S. tourists over the past six to eight months. “We expect the situation to worsen in 2008,” said Stefano Innocenti, sales director at the hotel.

In Paris, meanwhile, U.S. tourists seem to be increasingly shocked by the price of meals and entertainment. “Customers now ask if breakfast is included. You know they’re looking at prices care-fully,” said a spokesman for the Ritz in Paris.

A spokeswoman for the Paris Ile-de-France Tourist Information Center said a group of American tourists were shocked by the 100-euro price tag for a Moulin Rouge show. The prices haven’t changed in a while, she said, but the dol-lar-euro exchange is making them look expensive.

But one group of Americans that appears to be relatively immune to the collapse of the dollar abroad are the super rich. Indeed, some hoteliers said they were bracing themselves for a downturn in tourism but are witnessing just the opposite.

“We thought the Americans would be hit by the weak dollar, but we’re breaking record after record for occupancy,” said a spokesman for Claridge’s hotel, where the average room can cost 600 pounds, or about $1,200, per night. “And, they’re spending $21 on a cappuccino. We’re busy and we’re hoping it will continue.”

A spokeswoman for the Firmdale Group, which owns a clutch of hotels in central London, includ-ing the Covent Garden Hotel, the Soho Hotel and The Pelham, said they haven’t seen a decline in their American clientele. “People still need to travel. Americans are accepting the pound just as we do when we travel to Stockholm,” she said. Prices at the hotels vary but, for example, the Covent Garden Hotel costs between $400 and $600 per night.

Nevertheless, those in the tourist industry aren’t optimistic about 2008. “I think weakness in U.S. tourism is as much about the dollar as the state of the U.S. economy right now, and the fi rst half of 2008 doesn’t look good,” said Talmage of Visit London. “Things should im-prove in the second half, but don’t forget it’s an election year, and Americans tend to stop travel-ing in November.”

— With contributions from Chantal Goupil, Paris; Francesca Vuotto, Milan,

and Natalie Hughes, London

“Many American guests also ask us to charge their credit cards immediately, in order to prevent larger currency changes.”— Olivier Gerber, Four Seasons

WWD.COM3WWD, THURSDAY, JANUARY 3, 2008

By David Moin

Post-Christmas clearances and gift card redemp-tions have brought some relief to retailers’ holiday

hangovers.Many merchants said Wednesday that with the up-

tick, sales plans for the quarter were now attainable and inventories were under control. But there was concern that margins suffered and that consumers will tighten up even more in 2008, increasing the angst that seems to pervade the industry.

“It’s as if consumers feel they’re doing something wrong if they spend money,’’ said Lou Amendola, Brooks Brothers’ chief merchandising offi cer. “They’re almost afraid to spend. That’s what concerns me — this guilt factor.”

Presidential politics, the Iraq war, high gas prices, a volatile stock market and the housing slowdown are among the key economic factors that will continue to squeeze the apparel business and deter trips to the malls, experts said. Looking ahead, retailers are also worried about the early timing of Easter, which falls on March 23, compared with April 8 last year.

“Consumers are unsure of what 2008 is going to bring,’’ said C. Britt Beemer, founder and chairman of America’s Retail Group, a consumer research and mar-keting company.

Beemer characterized post-Christmas store traffi c as on par with last year and believes consumers will wait longer to redeem gift cards. “They’re just more frugal and cost-conscious,” he said.

As far as the past holiday season, “There were a lot of consumers that just didn’t get their Christmas shop-ping done,” he said.

“Consumers flocked to stores to take advantage of post-Christmas sales and to begin redeeming gift cards, which was defi nitely a welcome sight for retailers,” Bill Martin, co-founder of ShopperTrak, which monitors con-sumer traffi c, said in a statement.

However, as one department store executive noted, “Whatever business retailers got came at a very high mark-down rate.”

Several executives noted that while gift cards made gains, they weren’t as robust as last year.

Standard & Poor’s Equity Research Services said retailers will post 3 to 3.5 percent holiday sales increases, though the range from other analyst and trade groups ranges from less than 3 percent to 4 percent.

“While lackluster holiday sales this season have led to the belief that it could be the worst in fi ve years, we believe all hope is not lost, and gift cards could provide a silver lining,” Mark Basham, consumer discretionary retail analyst for S&P, said in a statement. “Gift cards are increasingly becoming part of holiday shoppers’ plans, and this year the trend continued.

In fact, while the number of cards given may not have risen, the overall value is expected to increase this sea-son,’’ Basham stated. “Although in-store buys may be off, gift card spending may pick up the slack, in our view, as items are purchased that complement these redemption sales and prolong the season.”

Michael Gould, Bloomingdale’s chairman and chief ex-ecutive offi cer, said: “Our business since the Friday before Christmas has been particularly strong. The upscale busi-ness is extremely good. We’re [somewhat] optimistic.”

Lisa Rhodes, executive vice president and chief merchandising offi cer for Maurices, the 600-plus unit juniors chain, predicted “some healthy spring business out here, but the customer will be a bit more selective. Items that are multipurpose will be very dynamic. If it’s a top that someone can wear dressy to a club or dressed down with a pair of jeans, those kind of looks will be re-ally, really strong.”

For spring, Maurices is selling lots of lace trim tank tops, priced $16 to $20, and three-quarter-length sleeve knits in patterns and solids, priced around $20, and eco-message screened Ts, at $18.

At Brooks Bros., post-Christmas has been the stron-

gest part of the season. It’s when the company breaks its semiannual sale.

“It was the fi rst week where we saw signifi cant double-digit comps over last year and the fi rst week we exceeded sales plan,” Amendola said.

The Dec. 26 through Jan. 4 period will represent more than 45 percent of the month’s business, he said.

“Inventories are very much in line mainly because on the men’s side, 60 to 70 percent is basic, replenishable inventory,’’ Amendola said. “On the women’s side, 95 percent is fashion but women’s had a huge acceleration between Christmas and New Year’s.’’

Brooks Bros. started to deliver spring merchandise to stores in warm areas last week, and has done well

with cotton sweaters from $69.50 to $148, and men’s dress shirts, ranging in price from $79.50 to $200.

“We are on track to make our plan for the quarter,” said Ken Lakin, chairman and ceo of Reading, Pa.-based Boscov’s department store chain.

Asked about spring, he responded, “Consumers are nervous. They don’t want to pile up too much debt. Some already have too much. There are mortgage issues, con-cerns about jobs, infl ation, a sense of uncertainty and the unknown,” regarding who will be the next president and how long the war will last. “That usually doesn’t translate into a lot of consumer confi dence. But it’s also kind of exciting, too, that there is a young black man and a woman in the race.”

Lakin said traffi c last week was good, gift card sales were about even with last year, and among the bestsell-ers were diamonds, watches, cold weather merchandise, dresses, shoes, men’s casual slacks, better sportswear, comforters, fl annel sheets and vacuum cleaners. He sin-gled out Tahari women’s suits, Lauren sportswear and Hannah Montana girls’ merchandise.

At Maurices, business two weeks before Christmas was slower than anticipated, partly because of winter storms, but the week after Christmas was stronger than anticipat-ed, Rhodes said. It proved to be the second biggest week of the month, next to the one leading up to Christmas. She acknowledged that managing the business through the season was trickier than in previous years.

Fall inventory levels by the beginning of February will be less than 15 percent of total inventories. “My guess is that a lot of other retailers won’t be there,” she added. “If you were heavy in fall winter inventory going into December, it could really hurt profi tability.”

At Ron Herman in Los Angeles, “We sold more gift certifi cates this year,” making post-Christmas a busy time, said John Eshaya, vice president of women’s wear. “It was an easy, trendy thing to do this year. Nobody wants to think about what to gift.”

Now shoppers are coming in with an eye for them-selves rather than stressing over gifts. Eshaya noted that tourists are buying sweatshirts from JET and Free City, while locals are purchasing dresses from Jill Stuart and

3.1 Phillip Lim.Fraser Ross, the owner of Kitson in Los Angeles,

said that although Christmas 2007 was down from 2006, four of the six days after Dec. 25 were busier than last year. “After-Christmas is just as strong as the pre-Christmas business, especially in our type of store where we do have a lot of younger customers getting gift cards,” he said. “They are eager to spend them. Ross described contemporary apparel as “fl at” and “weak” post-holiday. However, jewelry and scarves from CC Skye, Missoni and Echo Designs were strong. One Of A Kind’s red string bracelets with gold ham-sas for around $40 also sold briskly. But in apparel, “There was nothing new to get the consumer excited,” Ross said.

In the week between Christmas and New Year’s, National Jean Co. sold many sequin minidresses and wide-legged pants for New Year’s Eve events, said Steve Simon, co-owner. Madison Marcus, Graham & Spencer, Geren Ford and J Brand were key labels.

Intermix on Boston’s Newbury Street reported steady business last week, clearing out sale pieces from Chloé, Stella McCartney and Helmut Lang, said fl oor merchan-dise coordinator Matthew Pidge. Resort has been sell-ing well, in particular Missoni bikinis, Jamison sweaters and Diane von Furstenberg dresses. He said inventory is low because of strong sales and that customers are responding to bright, clear colors, notably blue, yellow and orange.

Ed Bucciarelli, president and ceo of Henri Bendel, said business changed dramatically after Dec. 25 from gift-giving to self-purchasing. New resort products, in-cluding bright cashmere sweaters, some with stripes and patterns, and bright exotic handbags spurred much of the activity.

“Obviously, [fall] cashmere continues to sell tremen-dously during January,” he said. “It’s on promotion, 40 to 50 percent off. Clearly, we’re in a big clearance mode. But we’re relying less on promotional activity for cash-mere.” Bendel’s introduced resort in November and December. “Resort sales have been brisk, Bucciarelli said. “It’s nice to see that the customer is responding to something new and fresh even though the other [dis-counted product] is there.”

Bob Mitchell, president of Mitchells, Richards and Marshs in Connecticut and Long Island, said post-holi-day traffi c was lighter than normal and that many luxury customers were still on vacation.

“We still ended up with an increase for the holiday time period,” he said, noting the gain was driven by women’s jewelry, shoes and luxury sportswear. “During the post-holiday time period, the combination of returns and sale has not been gangbusters. We found that dur-ing the holiday there was even more self-purchasing of high-end apparel and jewelry. The break of our sale has not been super strong. We’re not a big gift card store.” However, resort collections and unique products have been selling, he added.

— Contributions from Marcy Medina and Rachel Brown, Los Angeles; Kate Bowers,

Boston, and Sharon Edelson, New York

“It’s as if consumers feel they’re doing something wrong if they spend money. They’re almost afraid to spend.”

— Lou Amendola, Brooks Brothers

Anxiety Persists Despite Post-Christmas LiftPost-Christmas traffi c at International Plaza in Tampa, a property of Taubman Centers.

Selling well at Maurices, a spring cami, $20, and hoodie, $28.

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WWD, THURSDAY, JANUARY 3, 2008

The jet set may have taken a respite from movie sets or design studios during the holidays, but it seems there’s no such thing as a vacation from personal style (save, perhaps,

a be-snorkled Linda Evangelista). While some hit the beach in bold patterns and piled-on accessories (à la Eve), others — such as perpetual minimalist Jennifer Aniston — went back to basics. Meanwhile, at the opposite end of the thermometer, Valentino and Antonio Banderas stuck to the skier’s maxim: wear bright against white. But perhaps no member of the fashion fl ock advertised a less-is-more ethos as plainly as Giorgio Armani, who left

little to the imagination while lounging in the Caribbean. The 73-year-old designer outdid even the buffest bods on the sand by showing off his gym-sculpted frame in

what amounted to little more than a pair of tighty whities. It’s not the fi rst time Armani has bared it in public. He once posed in tiny running shorts (more like a loincloth, really) for an Italian glossy — which just goes to show

that sometimes even the most sartorial of the pack need to let it all hang out.

The Ones That Got Away

Valentino with Naty Abascal

in Gstaad, Switzerland.

Giorgio Armani in the Caribbean.

Real Madrid soccer player Raúl González and son Jorge in Miami.

Russell Simmons and Porschla Coleman in St. Barth’s.

David Arquette with daughter Coco in Mexico.

Elisha Cuthbert in Miami.

Princess Stephanie of Monaco in Mauritius.

Princess Stephanie of Monaco in Mauritius.

Philip Green and daughter Chloe in Barbados.

Jennifer Aniston in Mexico.

Linda Evangelista in St. Barth’s.

Antonio Banderas in Aspen, Colo.

▼

Linda Evangelista in St. Barth’s.

Real Madrid soccer player Raúl González and son Jorge in Miami.

Jennifer Aniston in Mexico.

Eve in Miami.


More Data Safety Issues Expected in Year AheadBy Denise Power

Last year was an embarrassing one for business in terms of safeguarding person-

al data, and companies, including retailers, are bracing for another rocky year in 2008.

“My guess is that it will be worse,” said Paul Stephens, director of policy and ad-vocacy for Privacy Rights Clearinghouse, a San Diego-based nonprofi t organization that tracks data breaches. More than 67 million records containing sensitive infor-mation on customers and employees were put at risk for fraud through theft, improper disposal or just lax security in the United States last year, according to Privacy Rights Clearinghouse.

The organization has not yet fi nalized its data breach count, but it’s clear 2007 will go on record as the worst 12 months since it began tracking incidents following the ChoicePoint debacle in 2005. (ChoicePoint Inc., a national provider of identifi cation and credential verifi cation, was the victim of criminals posing as legitimate businesses who obtained personal information on some 140,000 of ChoicePoint’s consumers.) And, added Stephens, retailers that discovered breaches late last year may choose to wait until after the holidays to disclose them, as TJX Cos. Inc. did in January 2007, when it revealed that up to 45.7 million customer accounts were put at risk.

One industry source said another major retailer, which he declined to identify, is currently dealing with a signifi cant data breach and had not yet announced it.

“I am pessimistic because 85 percent of all retail locations are not secure,” said one retail chief information offi cer, who re-quested anonymity.

Stephens said a growing vulnerabil-ity he’s observed involves credit and debit card swipe terminals at the cash register, which can be easily removed, modifi ed and returned to transact business without any-one’s notice, all the while capturing PIN, or personal identifi cation numbers, for data thieves. The technique is called “skimming” and while it does not constitute an intrusion to a retailer’s central database, it does yield data that can be sold for identity theft, often to organized crime outfi ts overseas.

Another growing threat to data secu-rity is increased use of mobile devices like memory sticks, laptops, cell phones and per-sonal data assistants, according to a survey by Ponemon Institute released last month.

Although 87 percent of technology em-ployees surveyed said they know company policy prohibits copying data to a memory stick, 51 percent of them admit doing it any-way. Some 39 percent of respondents said they lost a mobile device containing corpo-rate data and most — 72 percent — failed to report it immediately.

More than half of respondents, 56 per-cent, believe their employer could never determine the type of data that was stored on a lost device. The survey was conducted on behalf of RedCannon Security.

The costs of recovering from a data breach are on the rise, up 8 percent in 2007, and that follows a 43 percent surge the previous year, according to a separate Ponemon survey. This second survey polled companies in 15 busi-ness sectors that lost confi dential data in 2007, and asked them to quantify their breach-re-lated costs. Broken out as a group, retailers said their cost was $145 for each record or credit card account exposed to risk and that covers legal, technology and administrative expenses as well as lost business. Lost busi-ness accounts for 65 percent of the total cost and respondents said customer churn rates blamed on a breach event were 2.67 percent in 2007, up from 2.01 percent in 2006.

Also on the rise are breaches blamed on third-party companies, which are typically more costly than lapses that are self-infl icted. In 2007, 40 percent of breaches were traced to outside parties versus only 29 percent of incidents blamed on outsiders in 2006, ac-cording to the survey, which was released in November and sponsored by security soft-ware companies PGP Corp. and Vontu.

Minnesota Bans Mercury From Cosmetics, ScentsBy Evan Clark

WASHINGTON — Taking the better-safe-than-sorry route, Minnesota is banning mercury from cosmetics, toiletries and fragrances.

The state law, which took hold Tuesday, could result in fi nes of up to $700 for retailers who knowingly sell goods with mer-cury and up to $10,000 for manufacturers. It also might be used as leverage to get information on mercury use in the industry.

The toxic element, which in the past was used as a disinfec-tant and preservative, can accumulate in the body and injure the nervous system.

“The use of mercury preservatives has been discontin-ued by the industry,” said John Bailey, chief scientist of the Personal Care Product Council in Washington. “There are other preservatives that are better.”

Mercury is already more or less banned from cosmetics, except for small amounts in goods used near the eyes, which are sensi-tive to certain microorganisms that mercury fi ghts. Occasionally, however, mercury is found in lightening skin creams, said Bailey, though it is an illegal and very dangerous practice.

“[The Minnesota law] is really saying things that have al-ready been done either at the federal level or in practice with-in the industry,” he said.

But that’s not enough for the North Star State, which this year adopted new restrictions on the use of mercury across a number of products.

John Gilkeson, principal planner at the Minnesota Pollution Control Agency, said the beauty industry would not disclose its use of mercury, even at legal levels, and that federal laws prohibit states from legislating labeling requirements. “The only avenue that’s open to states in this area is to prohibit their sale,” said Gilkeson. “We don’t know what products con-tain mercury. We don’t know if there are cases where you have manufacturing practices that aren’t up to snuff. You could po-tentially have a product with a very high level and there’s no oversight. There’s no testing. It’s kind of an honor system.”

The concern is a timely one, given the recalls in 2007 of Chinese-made toys bearing lead paint, a product of poor sup-ply chain control and unscrupulous subcontractors.

Gilkeson said the state would see what information it could get from the Personal Care Product Council and then perhaps proceed with testing products for mercury.

“If we do fi nd a violation, we’re going to have a different perspective if the industry is being forthcoming with us,” said Gilkeson. “We’re really trying to take the preventative ap-proach here. People don’t need organic mercury around their eyes. That’s going to be absorbed. It’s not an inert substance. It’s an unnecessary, avoidable exposure.”

Lancôme Taps HathawayLancôme said Tuesday that it has named Anne Hathaway as

its latest brand ambassador and the face of its new wom-en’s fragrance.

This confi rms a report in WWD on Oct. 17.

In this role, Hathaway — the 25-year-old American actress who rose to prominence playing the title role in the 2001 fi lm “The Princess Diaries” and later cemented her fame with 2006’s “The Devil Wears Prada” — will repre-sent the brand, with one of her chief du-ties for 2008 being promoting the as-yet-unnamed women’s scent that Lancôme will launch globally in September.

“Anne Hathaway is a radiant young woman who perfectly embodies modern femininity,” said Odile Roujol, president of Lancôme International, in a statement. “We know she will por-tray all the passion and excitement of our new fragrance.”

Lancôme has signed several of Hollywood’s heavy hitters over the last year, naming Kate Winslet as the face of its Trésor wom-en’s scent in June and inking a deal in January 2007 with Clive Owen to serve as the face of Lancôme Men.

Hathaway, unavailable for comment Wednesday, has two mov-ies slated for release this year: the long-awaited movie version of the vintage TV series “Get Smart,” and “Passengers,” in which she stars with Dianne Wiest. She is also in postproduction of “Dancing With Shiva,” tentatively slated for a late 2008 release, and in preproduction on “Bride Wars,” expected out next year.

— Julie Naughton

FORGET IOWA, LOOK AT KANSAS: The Iowa caucus today makes it offi cially an election year, and over at Vogue, that means ramped-up political coverage. The fashion title has a long history of covering politicians and the people attached to them, such as Condoleezza Rice and Elizabeth Edwards, but what about Sarah Palin and Kathleen Sebelius? The governors of Alaska and Kansas, respectively, will be featured in Vogue’s February issue, shot by Jonathan Becker, with stories written by Rebecca Johnson and John Powers. Palin, a Republican who has been in offi ce for about a year and is rumored as a potential vice presidential candidate, was photographed at her home in Wasilla, Alaska, wearing Ralph Lauren and MaxMara. A Palin spokesman noted that the photographs represent the fi rst pictures of the governor taken without her glasses. Sebelius, a Democrat, wore Oscar de la Renta and Carolina Herrera during a shoot in the governor’s offi ce and in the Kansas Senate Chambers. The issue hits newsstands later this month. — Amy Wicks

FAST MOVER: Though it may seem like Portfolio is running out of talent to poach, competitors aren’t done luring people away. Fast Company has hired Jana Meier, Portfolio’s senior associate art director. “Losing a designer of Jana’s calibre is rotten news,” wrote design director Robert Priest in a memo to staff. Fast Company, which is staffi ng up to fi ll those spiffy new World Trade Center offi ces, also has hired Mark Borden as senior editor. He was a reporter for Fortune (where he profi led Marc Jacobs and Robert Duffy) until 2002, and more recently has been writing for The New York Times Magazine, The New Yorker and Sports Illustrated. Anya Kamenetz, author of the acclaimed “Generation Debt,” has signed on as a staff writer. — Irin Carmon

NO LAW FOR NOW: On Wednesday, London’s Daily Telegraph

reported that Jude Law might play Halston in an upcoming Weinstein Co. fi lm — but it’s apparently too soon to name Law as the lead. “While it’s an interesting idea, there are no plans for Jude to play Halston in any upcoming fi lm project,” said a spokesman for the actor.

According to industry sources, Weinstein Co.’s documentary is still in the early stages of development and hasn’t been cast yet. It’s believed Law might be attached to another Halston project being made by Killer Films, although that company told WWD to “call back in two weeks for more information.” Weinstein Co., together with Hilco Consumer Capital LLC, purchased the Halston brand in March from Neema Clothing Limited. When Harvey Weinstein revealed the acquisition, he spoke about his plans to make a documentary about the designer and his heady Studio 54 lifestyle, alongside his plans to revive the clothing brand under the creative direction of Marco Zanini and chief executive Bonnie Takhar, with Tamara Mellon and Rachel Zoe as creative consultants. — Nina Jones and A.W.

Anne Hathaway

BEAUTY BEAT

MEMO PADPH

OTO

BY S

TEVE

EIC

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Halston Jude Law

6 WWD, THURSDAY, JANUARY 3, 2008

Green DayOrganic, sustainable and natural — they’re the latest buzzwords in fashion. Though the processes are not

yet perfect, here’s what a few noteworthy denim lines are doing to live up to that billing. — Kim Friday

Levi’s Eco: Levi’s fi rst green line, Naturals, debuted in 1991. These organic cotton shorts are sold in recycled-paper packaging printed with soy-based ink. $38 retail.

Del Forte Denim: Part of the label’s Project Rejeaneration, this corset is made from recycled organic cotton denim jeans.$299 retail.

Nfy: Nfy’s chemical-free cotton denim is dyed with vegetable indigo and dried in the sun. $212 retail.

Eairth by Melissa Dizon: Indigenous tribes in the designer’s native Philippines use indigo berries to create this line’s rich colors.$320 retail.

Ruby Organic: These cotton jeans were made without using chemicals, pesticides or harmful toxins.$195 retail.


PHOT

OS B

Y RO

BERT

MIT

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Green Label by J Brand: These jeans are part of

J Brand’s debut organic collection, launching for

spring ’08. $227 retail.

Habitual Organic: Habitual’s limited edition, organic cotton jeans feature recycled zippers and paper hangtags embedded with wildfl ower seeds. Ten percent of all proceeds will go to Al Gore’s theclimateproject.org. $297 retail.

Greencaste by Earnest Sewn: Air-dried and resin-free, these cotton jeans are washed with natural surfactants, including peroxide and ozone. $230 retail.

James Cured by Seun Dry Aged Denim: The chalky patina of these jeans comes from rinsing the denim with old newspapers and recycled cement particles.$167 retail.

Sharkah Chakra: Chakra uses fair trade organic cotton harvested in Africa, handwoven in India, then dyed with natural indigo and trimmed with recycled gold rivets.From $350 retail.

Aristocrat Denim:

Aristocrat uses dyes without

enzymes, tallow and phosphate,

and washes the cotton in

purifi ed water. $160 retail.

By Ross Tucker

Specialty stores saw no evidence of a consumer slowdown when it came to premium denim this

holiday season. Despite widespread discounting at department

stores, specialty retailers found that consumers were more than willing to pay premium prices for a range of denim styles. Brands such as True Religion, Seven For All Mankind, Citizens of Humanity and Paige Premium Denim proved top performers at retail and further solidifi ed their positions as market leaders in the cat-egory. However, as those brands become more widely distributed, some shoppers are looking to smaller, less-er-known labels.

“I’ve noticed a lot more educated consumers com-ing in and looking for more obscure brands,” said Lawrence Scott, owner of Pittsburgh Jeans Co. Among Scott’s top performers were True Religion and Paige, but he also saw brands such as PRPS, Aristocrat and Dittos perform well.

“Lately, with a lot of the bigger guys, they’re starting to overdistribute,” said Scott. “I’m seeing a lot of people come in who say, ‘I can get these at this place or that place.’ The obscure brands are really starting to pick up now because of distribution issues.”

Thomas George, owner of E Street Denim in Chicago,

experienced a similar trend. Seven For All Mankind, Citizens, Paige, True Religion and Joe’s Jeans were top sellers, but several smaller brands carved out their own niches. J Brand con-tinued to have success with its skinny styles and George had high praise for the consistency of Hudson Jeans.

“In the ability to have a good jean on a timely basis in a nice direction, Hudson is always en-joyable to have,” said George. “I think they’re one of the ones that puts a consistent smile on your face.”

While premium denim is performing well, George noted the lack of a clear trend being offered to consumers poses diffi culties to retailers and con-sumers alike. Skinny, boot-cut and fl ared-leg styles are all selling well and customers seem to be rotat-ing through each depending on the season.

“The market is all over the board because the woman is all over the board,” said George.

As a result, brands are trying a little of every-thing. “It’s like we’re trying to overanalyze what this woman wants to do,” said George. “She’s waiting for us to tell her and we’re waiting for her to tell us. That’s why people are throwing so much against the wall.”

Helen Kim, director of operations for National Jean Co., said holiday sales results showed women were buying across the range of denim styles.

“Skinnies, because of the high boots, have done well, which makes sense,” said Kim. “Wide legs have also been good because they tend to be a little bit dressier. They can be good for little dinner parties around the holiday season.”

National Jean Co. saw momentum build head-ing into the holiday season, driven by the open-ing of its fi rst store in Manhattan and a relaunch of its Web site earlier in the year. As a result, Kim said holiday sales were “really strong.”

As with other retailers, Kim saw smaller brands fl ex their muscles. J Brand was one of the strongest sellers, but Anlo and Raven emerged, as well.

“Anlo is a great something that they can work in and wear out everyday — it’s a good crossover jean,” said Kim.

With brands offering ever-wider selections

of styles and washes, Kim said editing assortments at retail is becoming an even bigger challenge. Customers are easily overwhelmed by too many options, she said.

“You need to be able to offer the very best washes and best fi ts, so you need to be very clean in what you’re offering,” she said.

Retailers uniformly attributed the extra services they offer in helping to get people in the best-fi tting brands for their bodies as a key factor helping them maintain sales.

“The denim market is not like it was before, but we really haven’t seen a negative effect when it comes to our store,” said Patria Peguero, store manager at Charlie’s Jeans in Philadelphia. “We specialize in jean fi tting, so people know that and come to us.”

Anlo and Union were two of the smaller brands that performed well this holiday season, along with Citizens, Seven For All Mankind, J Brand and Chip & Pepper. Wide-leg and high-rise styles were still selling, but Peguero noted that skinny styles have established themselves as more than a fad.

“It’s going to be a necessity for the fall and winter because people like to show off their boots,” she said.


Denim ReportWWD.COM

NEW YORK — Hae Yong is making the transition from denim manufacturer to pre-mium label owner with the launch of Pur Premium Denim.

Yong has more than 15 years of experience in the denim industry, working in production and manufacturing positions with brands such as Pepe, Bongo, Lucky Brand and Blue Cult. But it was her experience manufacturing denim for other brands over the last fi ve years that convinced Yong to venture out on her own.

“With the beginning of the premium business, I saw our whole business change,” Yong said.

As new brands fl ooded the market seeking to cash in on the trend, the level of quality sub-sequently fell and consumers were faced with product that didn’t stand out.

“I could see almost two years ago the con-sumer was going to be tired of bad product,” Yong said. “I kept hoping I was wrong, but from last year up to now the denim business has been really fl at. I believe it’s not about the denim. The consumer isn’t tired of denim, they just have nothing new to buy.”

Yong’s commitment to quality products pushes Pur into the higher levels of the premium denim spectrum, with retail prices starting at $200. Much of that cost can be attributed to fabric.

“The base cloth must come fi rst,” she said. “A lot of people don’t like to spend a lot of money on the base cloth and it’s a mistake.”

The collection, which will launch at next week’s Intermezzo trade show here, consists of more than 70 pieces. The majority use Candiani denim. The line’s basic collection consists of two fi ts, each produced in slim, boot-leg and fl are styles. Yong used herself as the fi t model for the Scarlett, crafted for a petite woman with smaller thighs and hips.

“She’s only maybe 15 percent of the denim public, but because of her body type she’s ex-tremely loyal,” Yong said.

The second fi t, called the Bardot, was de-scribed by Yong as the “all-American fi t” de-signed for a more curvy woman. Pur will also have fashion pieces, such as dresses, skirts

and a catsuit. Detailing includes embroidered images of a phoenix and a signature stitch shaped like a bolt of lightening.

Yong understands retailers are reluctant to try new brands without a proven track record, but feels boutiques will look to offer something new and different to compete with department stores.

“With the market being this fl at, it’s almost time for the next ‘It’,” she said. “When something hits in this climate it will hit big.”

Yong said Pur could generate as much as $10 million at retail in the fi rst year. A men’s collection will also launch at the Blue show on Jan. 20.

— R.T.

Holiday Season Proves Positive for Premium

Yong Makes a ‘Pur’ Play

Seven For All Mankind, True Religion, Citizens of Humanity and Paige Premium Denim drove holiday sales at specialty stores.

Smaller brands such as Anlo

and Hudson alsoperformed well.

Looks from Pur Premium Denim.

Smaller brands such as Anlo

and Hudson alsoperformed well.

By Julee Kaplan

Josh Sparks had a full plate but that didn’t stop him from launching a new business.Sparks, who took Sydney-based contem-

porary label Sass & Bide from $5 million to $30 million in fi ve years as chief executive offi cer, purchased the Imitation of Christ brand from former owner and designer Tara Subkoff in October. Sparks also runs the brand’s contemporary diffusion label, Imitation, which is sold in stores such as Barneys New York, Saks Fifth Avenue and Nordstrom. The Imitation brand launched in the spring and is on course to reach $4.5 million in wholesale volume for the fi rst year, with projections of $25 million in three to fi ve years, Sparks said.

Now, Sparks, who resides in New York, has opened the Rockwood Management Group, a consultancy for the contemporary and young designer fashion industry with of-fi ces at 28 West 36th Street in Manhattan.

“We fi rst came up with the idea for this consultancy to provide the best services pos-sible for Imitation,” Sparks said. “When we were doing this, we began to think about all of these great creative designers out there who have to compromise on support when building their brands simply because they can’t afford it.”

Sparks hired experts in fi nancial plan-ning, production and distribution, market-ing, Web design, technology services and graphics. Clients can set up the entire busi-ness end of their company with Rockwood, or establish one element. For example, if a company is lacking on the production side, Rockwood can create and manage the fi rm’s entire production end.

Sparks has enlisted Irine Blyumin, for-merly of Ernst & Young, to handle chief fi -nancial offi cer services; Spike Hubbard, who worked at the French design fi rm M/M (Paris), for graphic design, art direction and creative ser-vices, and Christopher Antonelli, who had stops at fi rms such as Betsey Johnson, Burberry and French Connection, to oversee all production management, operations and lo-gistics services.

Sparks also draws on consultants, as needed. If a client needs help developing its denim business, for instance, Rockwood turns to Mark Wiesmayr, the ex-ceo of Ksubi, for-mer denim director at Sass & Bide and senior designer at Levi Strauss & Co., to work with them.

He has just signed his fi rst outside client, Whitley Kros, a new contemporary label based in Los Angeles.

“We have met with a series of very talented designers, but we really only choose those brands that we truly believe in,” Sparks said. “On the business end, we do everything for Whitley Kros.…They are simply freed up to be creative, which is what it should be about.”

Sparks said he has a strong desire to work with emerging brands. The fi rm’s overall mission is to provide “founders of high-potential fashion with expert strategic and tactical services to support the realization of their creative vision, on a fl exible and cost-effective basis,” he said.

Rockwood may also consider taking a stake in a particu-lar brand.

“We are open to equity participation after the fi rst 12 months, though our preference is for a cash retainer initial-ly,” Sparks said. “The working relationship between a brand’s founders and the Rockwood team is critical to our decision to

take an investment stake in a brand. Working on a retained fee basis allows both sides to enjoy an extensive ‘due dili-gence’ process, thoroughly understanding the best way to partner together on an ongoing basis. Rockwood would only be interested in an equity stake in those brands where the fi t is ideal. Being so particular benefi ts both sides.”

Meanwhile, Sparks said he wants to grow Imitation of Christ slowly and carefully, investing about $2.5 million over the next few years.

“One of Tara’s major issues with the brand was delivery — it was a real challenge for her and I think that caused a lot of problems with retailers,” Sparks said. “When we pur-chased the label, it was only being sold on a made-to-order basis at Tracy Ross in Los Angeles.…It’s amazing that it’s so well known without having any real distribution.”

Sparks has already put the brand name on a small collec-tion of eyewear, and he sees Imitation as a global brand.

“But I do realize that it will never work in certain parts of the world, like in the Middle East, for example, where some may fi nd the name offensive,” he said.

WWD.COM9

“We have met with a series of very talented designers, but we really only choose those brands that we truly believe in.”— Josh Sparks, Rockwood Management Group

WWD, THURSDAY, JANUARY 3, 2008

The Beat

NEW YORK — Betsey Johnson will have no problem keeping warm this fall.The designer, known for her quirky contemporary style, has signed a licensing

agreement with The Levy Group here to produce a full collection of outerwear that will include rainwear, fake fur items, active jackets, down coats and wool coats. The line is scheduled to hit department and specialty stores for fall retailing.

While prices haven’t been set, executives at the fi rm said they will be competi-tive in the better designer areas in coat departments. Designs are still being fi nal-ized, but company executives stressed that Betsey Johnson outerwear will stay true to its namesake by using a palette of the designer’s favorite colors, such as pink, turquoise and orange, in addition to black and white. Also included in the line will be signature print linings, such as Betsey’s leopard; baby rosebud, and lace and Betseyville rose, together with construction details including zipper pulls and neck chains in the form of the lightning bolt icon or rosebud charm. Snaps and buttons will be found in the shapes of hearts and roses.

“We wanted an unmistakable, original identity,” said Donald Levy, president of The Levy Group, which produces outerwear under such labels as Liz Claiborne, Dana Buchman, Esprit, Braeten and Donnybrook. “Betsey Johnson’s aesthetic com-bines contemporary, punk, pretty and glamour. We’re excited to add her name to the coat department where many sportswear names are thriving.”

This licensing agreement is the designer’s fi rst since she sold a majority stake in her company in August to Castanea Partners, a private equity fi rm based in Boston.

“We are growing slowly as planned, but continue to look for growth in licensing,” said Chantal Bacon, chief executive offi cer of Betsey Johnson. “Currently, we are look-ing for partners in denim, T-shirt dressing and cosmetics. Those are the priority.”

Bacon said she is also looking to expand in Japan, where the brand already does well. In the U.S., she said the company is slated to open six stores this year, which will add to the brand’s 52 freestanding locations nationwide.

Currently, Betsey Johnson generates a little more than $200 million in retail volume through its freestanding stores and wholesale distribution. With this new partnership with Castanea, Bacon said she hopes to grow that number even more through more licensing agreements and 10 to 12 more freestanding store open-ings a year.

— J.K.

Betsey Bundles Up

Lending Contemporary Brands a Hand

Whitley Kros launched its fi rst collection on the

runway at Los Angeles Fashion Week in October.

A marketing image for Imitation,

designed by Rockwood

Management Group.

Josh Sparks in his New York offi ce with Imitation of Christ’s lead designer Kasia Bilinski.

WWD.COM

Continued from page onein the midst of a massive turnaround, especially since macroeconomic factors appear to be heading in the discounter’s direction.

On Wednesday, though, stocks were mired in red. The S&P Retail Index dropped 2.1 percent to 401.39, while the Dow Jones Industrial Average shed 1.7 percent, to 13,043.96, and the broader S&P 500 slid 1.4 percent, ending the day at 1,447.16.

Analysts cited concerns over higher fuel prices as the main catalyst for the day’s retreat. Concerns of rising fuel and energy costs held back retail shares during the second half of 2007, pushing many shares to new, 52-week lows. Analysts are worried that higher energy costs will eat even more into consumer spending after a disappointing holiday shopping season. Consumers have been the engine of the U.S. economy for the past decade, and any indication of a slowdown in consumer spending would have grave consequences for growth.

Meanwhile, a tally of the 175 retail, apparel and footwear stocks tracked by WWD showed 132 de-cliners and 43 gainers for 2007. The data were compiled by Data Network from Dec. 31, 2006, through the last day of trading in 2007. The bulk of the declining shares saw losses of between 15 and 40 per-cent. Still, there were some big winners last year, most notably J. Crew Group and Aéropostale.

For the near term, analysts see retail and apparel stocks facing some challenging times. For apparel stocks, a changing retail environment likely will force many vendors to rethink their strategies this year.

“The majority of companies in our universe [of apparel and footwear vendors] have issued a cau-tious outlook on the remainder of 2007 and fi rst half of 2008, driven by concerns over the housing mar-ket, gas prices and weaker U.S. consumer spending,” said Kate McShane, analyst at Citi Investment Research, in her outlook report.

McShane expects apparel vendors to face many of the same challenges in 2008 as they did in 2007, but on a larger scale. Vendors face ongoing pressure from department stores as the channel reassesses brand assortments with a focus on private label while pushing back aggressively on mark-down allowances. As a result, McShane said traditional moderate brands such as Liz Claiborne and Phillips-Van Heusen are most at risk.

While consumer spending is likely to slow in the fi rst quarter of 2008, Steve Wieting, Citi’s econo-mist, expects it to bounce back in the second half of the year.

“Our management team recently asserted that the U.S. consumer remains ‘resilient’ during the current period of economic uncertainty, but is being more selective about brands, quality and value,” McShane said. “Indeed, we expect [apparel] companies with stronger brand portfolios, diversifi ed sell-ing channels and well-market value propositions to outperform in 2008.”

Nike, Polo Ralph Lauren and VF Corp. are McShane’s top picks.Of the top performers for 2007, Deckers Outdoor, maker of Teva and Ugg shoes, took the

lead spot with a 158.6 percent surge in share price. Despite sluggish footwear sales this holiday, Ugg continued to post solid sales at full price.

Gaiam, an eco-friendly retailer of home goods and fi tness apparel, took the second place spot by gaining 116.96 percent for the year — proving there is potential in the green market. And, although not included in the WWD stock list for 2007, Lululemon’s stock has soared more than 69 percent since its July 2007 initial public offering.

Other top gainers included premium denim maker True Religion with a 39.5 percent jump in shares, and Aéropostale and J. Crew, which grew 28.8 percent and 25.1 percent, respectively, for the year.

True Religion evolved into a “stock to watch” in late 2007 following softening sales in the high-end denim space. Analysts see the company’s lifestyle positioning as a strong positive as other brands’ sales slow. Another stock to keep an eye on is Aéropostale.

“Aéropostale has been a real success story, even more so than Abercrombie & Fitch,” said Craig Johnson, president of Consumer Growth Partners, a consulting and research fi rm. “And Aéropostale has moved in such a diametrically opposite direction than American Eagle. I hear all of the teens say American Eagle is ‘so over.’”

American Eagle Outfi tters dropped 33.5 percent for the year.Johnson credits Aéropostale’s success to the arrival of Mindy Meads, new chief mer-

chandising offi cer, in April. “Within six months of her arrival, we have already seen improvements in the merchandise,” Johnson said.

On the M&A front, the eyeing of Saks Inc. as a possible acquisition target by Icelandic fi rm Bauger Group drove up shares of the high-end department store 16.5 percent for the year to $20.76. Financial sources are keeping close tabs on the retailer’s perfor-mance during the holiday shopping season. The share price offer hinges on Saks’ suc-cess, sources said.

Other notable gainers in 2007 were Guess, Urban Outfi tters and Abercrombie & Fitch, which showed gains of 19.5, 18.4 and 14.9 percent, respectively.

Urban Outfi tters’ success is driven by its Anthropologie division, according to analysts. Another notable gainer was Gap Inc., with a 9.1 percent increase for the year. The

specialty retailer, which has been struggling with sluggish sales and merchandise miss-es, has managed to gain some control over inventories and merchandise margins under new chief executive offi cer Glenn Murphy.

Retail giant Wal-Mart saw a modest 2.9 percent increase in its stock price for the year, while it’s competitor, Target, dropped 12.4 percent in 2007.

Wal-Mart may be in the middle of one of the largest turnarounds in retail history, achieving a stronger-than-expected holiday season, according to Johnson. “Unlike the continued decline at Macy’s and Sears, Wal-Mart appears to be in a remarkable turnaround,” Johnson said. “Although unnoticed by the Street — and with apparel and home still a work-in-progress — Wal-Mart has undergone a true transformation over the past year, from top to bottom.”

Target, meanwhile, appears to have hit a bump over the holiday season. Target lowered its December sales forecast to the range of down 1 percent to up 1 percent after experiencing lower-than-expected traffi c. Management originally expected same-store sales of between 3 and 5 percent.

Of the declining stocks in the retail sector, Coldwater Creek showed the steepest fall with a 72.7 percent drop to $6.69 from $24.52. Merchandise misses and a change in its executive ranks over the past year likely pushed away investors.

Still, other Baby Boomer and misses’ retailers experienced heavy declines, with Talbots falling more than 50 percent for the year and Chico’s FAS dropping more than 56 percent.

Analysts are watching Talbots closely this year as the company goes through a repositioning effort under the leadership of its new ceo and president, Trudy F. Sullivan.

In the department store sector, the accumulative fall in share price for 2007 was startling. J.C. Penney, Sears Holdings Corp., Kohl’s and Macy’s fell 43.1, 39.2, 33.1 and 32.2 percent, respectively.

Weighing the sector down were concerns in the fourth quarter of a retail spending slowdown, sag-ging consumer confi dence and a retreat of the aspirational shopper.

For a complete list of 2007 retail, apparel and footwear stock performances, see WWD.com.


Challenges Ahead For Retail Stocks

CLOSE ON CLOSE ON AMOUNT PERCENTRANK COMPANY 12/29/06 12/31/07 CHANGE CHANGE1. Deckers Outdoor 59.95 155.06 95.11 158.65 2. Gaiam 13.68 29.68 16.00 116.96 3. Fossil 22.58 41.98 19.40 85.92 4. Joe’s Jeans 0.70 1.25 0.55 78.57 5. Gildan Activewear 23.32 41.16 17.85 76.54 6. Crocs 21.60 36.81 15.21 70.42 7. PriceSmart 17.91 30.06 12.15 67.84 8. Chattem 50.08 75.54 25.46 50.84 9. Cost U Less 8.05 11.73 3.68 45.71 10. True Religion 15.31 21.35 6.04 39.45 11. Warnaco 25.38 34.80 9.42 37.12 12. Culp 5.15 6.96 1.81 35.15 13. LaCrosse Footwear 13.27 17.54 4.27 32.18 14. Costco 52.87 69.76 16.89 31.95 15. LJ International 4.35 5.72 1.37 31.49 16. Nike 49.52 64.24 14.73 29.74 17. Aéropostale 20.58 26.50 5.92 28.77 18. J. Crew 38.55 48.21 9.66 25.06 19. Avon 33.04 39.53 6.49 19.64 20. Colgate Palmolive 65.24 77.96 12.72 19.50 21. Guess 31.72 37.89 6.18 19.47 22. Urban Outfi tters 23.03 27.26 4.23 18.37 23. Tiffany & Co. 39.24 46.03 6.79 17.30 24. Saks 17.82 20.76 2.94 16.50 25. Hanesbrands 23.62 27.17 3.55 15.03

SOURCE: COMPILED BY DATA NETWORK, HUNTINGTON, N.Y. NOTE: INFORMATION AND DATA HEREIN IS BELIEVED TO BE ACCURATE BUT IS NOT GUARANTEED. DATA NETWORK SHALL NOT BE LIABLE FOR ANY INACCURACIES. STOCKS TRACKED BY WWD AND COMPILED BY DATA NETWORK INCLUDE ISSUES IN THE RETAIL, APPAREL, FOOTWEAR AND RELATED SECTORS.

TOP 25 PERFORMING STOCKS OF 2007 (IN THE RETAIL, APPAREL, FOOTWEAR AND RELATED SECTORS)

Aéropostale garnered a top spot in stock performance.

“Aéropostale has been a real success story, even more so than Abercrombie & Fitch.

” — Craig Johnson, Consumer Growth Partners

J. Crew impressed with a 25 percent stock gain for 2007.


By Constance Haisma-Kwok

HONG KONG — Pedder Red, the pri-vate label division of Pedder Group, has opened its first flagship in Hong Kong’s Central District.

Although there are already 14 Pedder Red stores in Asia, the 1,800-square-foot shop on Wellington Street is the fi rst to unveil a new retail concept for the brand and offers an original take on footwear retailing.

Peter Harris, president of Pedder Group, said the fi rst step was fi nding the right location. “In Hong Kong there’s a big move away from traditional retail-ing centers to more interesting streets — the circumference around the city. Obviously you need to look carefully, but these streets are where you fi nd ceiling height and facade volume that doesn’t exist in shopping malls,” he said.

Wyndham Street is popular with lo-cals and tourists alike as it connects the city’s two most popular social areas

— Soho and Lan Kwai Fong. Although there are a few local fashion boutiques here, the street is best known for being home to Hong Kong’s most beloved roast-ed goose restaurant and its quirky shops, such as the tattoo parlor next door and the exotic fl orist across the street.

The Pedder Red shop spans what was once two separate stores — the city’s best-known futon shop and an Indian restaurant. Shanghai-based architects Neri & Hu Design came up with a plan that keeps both entrances and two dis-tinct shopping areas, yet is anchored by one novel feature — the “shoebox.”

Made of smoked oak and placed at the front of the store, the monolithic structure is literally the shop’s stor-age area, but it is also an integral part of its energy. Through rectangular red-lacquered cutaways, customers can see into the shoe “library” (including roll-ing shelving units) and espy a red spiral staircase that leads to the larger stock-room upstairs. Salespeople are rarely

out of sight and, by design, cannot disap-pear into the back of the store. Principal architect Lyndon Neri said the concept of the shoebox arose as the team consid-ered how to deal with storage.

“In the end we liked the idea of glo-rifying the shoebox, which is usually hidden away. We pushed it all the way up front. Shoe stores can be more than a piece of glass and a bunch of shelves. It is possible to have a more meaningful experience,” he said.

The shop’s two distinctive selling areas include an industrial-looking zone highlighted by a curved sky-blue display table, and a warmer area with wooden shelving and display boxes.

The store also features a number of items that are exclusive to this location, including Wellington Limited Edition — a range of pouches, tote bags and bal-lerinas in black, electric blue, purple, silver and gold. Pedder Red also col-laborated with a number of artists for the opening: Hong Kong-based Oivong

created the ZIII line of environmentally friendly bags and seven designs from the Converse 1HUND(RED) collection are exclusively available here for preorder.

While most of the affordably priced handbags and shoes are Pedder Red designs, other brands also have a pres-ence, including Spitfi re sunglasses, Ed Hardy T-shirts and caps, Stuff rubber bags and Tiger sneakers.

Harris said he expects the store to bring in 1,500 Hong Kong dollars, or about $190, a month. “That’s a competi-tive projection,” he said.

He added the group has ambitious plans for Pedder Red, which came into being three-and-a-half years ago. “We want 200 stores by the end of 2012,” he said, explaining that growth will come from both adding stores to existing mar-kets and opening new ones, including Beijing and Jakarta, Indonesia, both slated for next year.

“All of our other business — whether it’s On Pedder, Lane Crawford or mono-brand — is based on selling branded merchandise,” said Harris. “Pedder Red is very much a product of our strong point of view and sense of design.”

By Jessica Steinberg

When Nait Rosenfeld opened her clothing boutique, Nait, in Tel Aviv’s Gan Hahashmal in 2002, she was

something of a pioneer. At the time, she was the only de-signer in the southern Tel Aviv neighborhood, which was home to mostly electrical supply stores (hence its name, which loosely translates as Electrical Garden or District).

Selling her decidedly old-fashioned look — pleated A-line skirts, prim cotton blouses and wide-legged trou-sers — in a small studio-store full of doilies and over-stuffed chairs, she convinced another designer friend, Idit Barak, to open her studio, Delicatessen, in the same neighborhood. And so Barak followed suit, with her retro, subtle skirts, tops and dresses in a more minimal-ist space, with a studio in back.

“It took until the third year for Gan Hahashmal to become what it is today,” said Rosenfeld, who recently reinvented Nait as an atelier, with sleeker, European-style clothing that is geared toward more serious shop-pers, and is now located on the second fl oor of one of Gan Hahashmal’s Bauhaus-designed buildings.

Now there are nearly two dozen designer boutiques, as well as several cafes and an organic hummus eatery in the once-gritty district. The early designers generally opened a combination studio-store, looking for an alter-native to their cramped apartment work spaces as well as the more standard storefronts on Dizengoff Boulevard and Sheinkin Street, two neighborhoods that have long been home to Israel’s burgeoning fashion scene. But now this more alternative district has become the “in” location, with established designers opening their own Electrical District storefronts.

On HaRakevet, the street that acts as the border be-tween the district and the next neighborhood, several larger, professionally designed stores have opened in the last few months, creating what Rosenfeld calls the “new SoHo.” These include Closet, Sharon Brunsher, Tes and Shine, which present typical Tel Aviv offerings, a blend of casual sophistication.

Sharon Brunsher sells what she terms “lifestyle ob-jects,” mixing old and new pieces all in monochromatic tones, from sweaters and pants to blankets, pillows and notebooks, with each piece tied to the next. Tes, a hand-bag shop, is next door, while Shine, owned by designer

Alice Dahan, also offers a monochromatic theme for its spare line of tissue-thin cottons and narrow jodhpur pants. Closet, at the end of the block, is designer Mirit Singer’s version of a complete wardrobe, with a focus on fi ne knits and embroidered accessories.

While Shine is the only shop that had its own store-front prior to its Gan Hahashmal addition, these bou-tiques are far grander in size and look than the neigh-borhood’s first design tenants, who tended toward smaller, simpler spaces.

“The earlier people were more experimental, more studio,” said Rosenfeld.

Yet even Rosenfeld has changed her focus with her new space. With a more centered, “grown-up” focus on collections of pieces that work together, she is working with a different client base — customers who will pur-chase several pieces or the majority of a collec-tion, rather than just one shirt.

Singer, the owner of Closet, also aims for more serious, repeat customers, and is slowly building a coterie of regulars who will make the effort to come to Gan Hahashmal. As Singer pointed out, the neighborhood is certainly authentic, but it is also farther from the city center and the action, and lacks traffi c.

Singer reels in her customers with a number of now-familiar sales techniques in Israel, from a customer club to start-of-season sales and club discounts.

“My success is in how much I bring the cus-tomers to me,” said Singer, who is opening anoth-er Closet store in an upscale mall in Ra’anana, a suburb outside of Tel Aviv. “I sell a unique, very European look, and I want to get to the customer who I’m trying to reach. My customers get fash-ion, but they’re not sacrifi cial lambs to the cur-rent trends. They know what they like.”

What the Israeli consumer also demands — besides the specifi c creations produced by each of these designers — is variety, even during a par-ticular season. With less distinct changes of weather in Israel, particularly in Tel Aviv, where a winter day can bring temperatures in the 60s, designers tend to cre-ate several collections within a given season, and their customers are pleased to see something new. That said,

designers found that the short Israeli winter is still their best season because there’s a wider range to offer in terms of styles and designs.

“Israelis hate to see the same things for a long time,” said Tal Brunsher, who likes to call customers “individuals.” “But with us, it’s an entire collection of almost 20 different items that have to be renewed with every change, which is very challenging.”

The Brunshers, Sharon and her husband and partner, Tal, always sold their products to stores and boutiques, but never as an entire collection or concept, something they can do with their own store. While they also sell their collection through a distributor in the U.S., the Gan Hahashmal loca-tion is their fi rst store, and offers what they seek to display in Sharon’s designs, a melding of the old and the new.

“This is the place for us,” she said, pointing at the still-to-be-restored former tax Bauhaus-style building across the street. “It’s alternative, it’s interesting.”

Nearly all of the Gan Hahashmal stores are owned by designers who are selling their own work, or that of other local designers, whether it’s shoes, bags, jewelry or cloth-ing. Shani Bar, a shoe designer, is across the street from Eva Teffner, a costume jewelry shop owned by Or Cohen, who specializes in recycled pieces. A couple of doors down is M, the studio where Michal Bassad makes her recycled T-shirts for Shine and Banot, another Tel Aviv boutique.

Adjacent to the recently refurbished park that centers the district are Hagar Sattat, who works with leather, sil-ver and gold in her jewelry collection; Kisim, a hand-bag store, and Frau Blau, named for designer Helena Blaunstein’s grandmother and known for its whimsical, humorous designs, as well as several other stores.

“This place fell into my lap,” said Sattat, who has doubled her output with the store and distribution of her designs to 30 stores in Israel, and 50 in Japan, Canada and the U.S.

With a wide range of ages in her mostly Israeli cli-entele, Sattat fi nds the store has become her signature, making her less anonymous on one hand, but more be-holden to the demands of her customers who always want something new and different.

“I like it because it allows me to be close to my cus-tomers while still in my workshop,” she said. “It’s my house and I’m the host.”

Designers Amp Up Tel Aviv’s Electric District

Pedder Red Launches New Retail Concept in Hong Kong

Shine, owned by designer Alice Dahan, favors a monochromatic theme.

The Hagar Sattat jewelry store.

This southern Tel Aviv neighborhood was a former electrical supply store district.

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Subliminal Messages

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AMERICA’S NEXT TOP MODEL, CW Total occurrences: 2,462It takes a model to know a model. Tyra Banks is the creator, host and executive producer of this reality series, also dubbed “ANTM,” which features a group of young women all vying to become the next big name in the world of modeling. Thanks to a $100,000 contract with Cover Girl Cosmetics, a modeling contract with Elite Model Management and a six-page spread and cover photo in Seventeen magazine, product placement is everywhere in this series. In addition, one of the most featured brands in 2007 was that of Glaceau SmartWater because it ran its own national model contest, which tied into the show — “ANTM” contestants were featured throughout the season drinking the products.

PUSSYCAT DOLLS PRESENTS: THE SEARCH FOR THE NEXT DOLL, CW Total occurrences: 1,934 The reality series made its debut last March and featured a behind-the-scenes view of a group of young women as they went through an audition to join the all-girl dance and burlesque ensemble the Pussycat Dolls. The auditions involved dancing and singing over the course of eight weeks, and contestants — who also had to live together — were eliminated throughout the series. The girls were groomed by the group’s founder, Robin Antin (who is also the series co-producer/creator). Top brands placed included Pussycat Dolls Lounge Nightclub at Caesars Palace in Las Vegas, Baldwin Pianos (used during auditions) and Chanel jewelry.

THE BIGGEST LOSER, NBC Total occurrences: 2,393 The fi tness reality TV series returned for its fourth season in September, with a new host (Alison Sweeney from “Days of Our Lives”); a new location: a studio lot, named the “Biggest Loser Campus,” and trainer Jillian Michaels (who appeared in seasons one and two), who returned to secretly train the contestants who originally thought they’d been eliminated. Eighteen overweight contestants battled to compete for the $250,000 grand prize, and it’s not just about the weight loss — the show is an elimination show, much like that of “Survivor.” And, of course, it wouldn’t be a fi tness program without some fi tness-related products in each scene. Top brands seen included 24 Hour Fitness Centers and Health Clubs, New Balance athletic footwear and Grand Lido Resort in Negril, Jamaica, where contestants stayed during part of the series.

EXTREME MAKEOVER: HOME EDITION, ABCTotal occurrences: 2,476 The reality series launched in November 2003, each episode featuring a family in the U.S. in need of a new home. The design team, led by carpenter Ty Pennington, faces the challenge of conceptualizing, designing and building (or rebuilding, depending on the structure) a new home for the family in one week. Thus the plethora of product placement opportunities the show offers. Top brands used include Sears, where appliances and household items are purchased by members of the design team (seen left); Walt Disney World, typically where the team sends the family on vacation while the house is being designed, and Southwest Airlines, the airline of choice if the family needs to fl y to its vacation destination.

AMAZING RACE: ALL-STARS, CBS Total occurrences: 1,893 “The Amazing Race: All-Stars” was the 11th installment of the fi ve-time Emmy Award-winning reality race around the world. In this version, the contest featured 11 teams of two, all of whom had preexisting relationships and had appeared on previous races at some point. The season began in February 2007 and teams sported plenty of athletic apparel during the race, particularly from athletic giants Nike and Puma. Also, thanks to two of the most well-known reality TV faces, Rob and Amber (seen left), products such as Rob’s Red Sox baseball hat were seen all too frequently. No strangers to reality TV fans, the couple met on CBS’ “Survivor” and were later married on a two-hour special broadcast on the network.

DEAL OR NO DEAL, NBC Total occurrences: 2,028 Hosted by Howie Mandel, “Deal or No Deal” is a game show in which contestants play and deal for a top prize of $1 million. Contestants select briefcases full of different amounts of money, ranging from 1 cent to $1 million. Without knowing the amount in each briefcase, contestants go through the process of picking “the” one, until its unsealing at game’s end. In September there was an NFL extravaganza, which might explain why the top three brands for most product placement were NFL-related (NFL Association, Indianapolis Colts and Riddell sporting equipment). For the special episode, the show’s set was transformed to look like a football fi eld, while the models appeared in various football jersey dresses, and former NFL players, including Marcus Allen, Wayne Chrebet, Terrell Davis, Jerry Rice and Kordell Stewart, appeared on the show.

FAST CARS & SUPERSTARS: THE GILLETTE YOUNG GUNS CELEBRITY RACE, ABC Total occurrences: 3,231 “Fast Cars and Superstars: The Gillette Young Guns Celebrity Race” aired last summer and featured 12 celebrities in a stock car race. Former NFL quarterback John Elway was the winner, while the eliminated contestants included tennis star Serena Williams (left), singer Jewel, skateboarder Tony Hawk, pro volleyball player Gabrielle Reece, surfer Laird Hamilton and actor William Shatner, among others. Gillette, the show’s sponsor, had plenty of product placements throughout the series, as it featured its Fusion Razor, among other products. But the brand mentioned most? Alpinestars Apparel, the Italian manufacturer of professional racing products, high-performance apparel and footwear.

AMERICAN IDOL, FOX Total number of product placement occurrences: 4,349 Not only was this reality singing program ranked fi rst in product placements last year, but it also ranked number one in terms of viewers, according to Nielsen Media Research — and keep in mind, the show only aired from January to May. Two of the three top brands that were seen on the show included AT&T Wireless and Cingular Wireless, both owned by AT&T — viewers were encouraged to text their votes into the show by using these two brands’ text messaging services. But the most-placed product on the show was Coca-Cola, whose supersized plastic red cups sat in front of the judges — Simon Cowell, Paula Abdul and Randy Jackson (seen left) — week after week. And for those “American Idol” junkies, there’s more on the horizon: Season seven begins airing Jan. 15.

HELL’S KITCHEN, FOX Total occurrences: 1,755 The only cooking reality show to crack the top 10, “Hell’s Kitchen” is hosted by the fi ery chef Gordon Ramsay (left), known in the restaurant world for his incredible palate — and his extensive use of foul language toward chefs and customers. In the series, two teams of aspiring chefs compete in various cooking challenges for most of the season. Once the number of players has been narrowed, they compete as individuals. The fi nal chef this past season was given an opportunity to become head chef of a new Italian restaurant located inside Las Vegas’ Green Valley Ranch Hotel & Casino — one of the top brands placed on the series. The two other top brands were Penfolds Wine of Australia and Chef Revival Apparel, a more than 20-year-old manufacturer of clothing, footwear, cutlery and other professional tools for chefs.

BEAUTY AND THE GEEK, CW Total occurrences: 1,718 The CW show, also known as “The Ultimate Social Experiment,” matches up female “beauties” with male “geeks,” who compete as couples for a shared $250,000, among other prizes. In 2007, the producers, who include Ashton Kutcher, Jason Goldberg and Nick Santora, chose to add one team that consisted of a male beauty and a female geek. Three of the brands seen most often during the series included Dentyne Chewing Gum (the brand sponsored a sweepstakes for the show’s viewers to win a three-day, two-night trip for two to Las Vegas), Playboy (one contestant was a Playboy model) and Harvard University — two of the fi nal contestants this past season were Harvard grads.

10SOURCE: NIELSEN PRODUCT PLACEMENT SERVICE, PLACE*VIEWS; “OCCURRENCES” EQUAL THE TOTAL NUMBER OF PRODUCT PLACEMENTS ON THAT PARTICULAR PROGRAM FROM JAN. 1-NOV. 25, 2007

The writer’s strike has been putting a damper on the fi lming of TV programs lately, and the gaps in networks’ schedules are being fi lled by a slew of new reality programs. That’s good news for major brands, though (and perhaps bad news for traditional advertising), since they’ve taken product placement to a whole new level. In fact, Nielsen’s top 10 prime-time network TV shows with the highest number of product placement occurrences in 2007 were all reality and game shows: Not one drama or sitcom eked its way in. Why? Because product integration is a much easier form of advertising to execute in reality shows, mediapost.com pointed out in July 2006. Additionally, mediabuyerplanner.com noted that same month, “The success of placements has led companies to abandon 30-second commercials to intertwine their products into the plots and dialogues of some of TV’s prime-time shows.” — Cecily Hall

Top 10 network prime-time TV programs ranked by number of product placement occurrences from Jan. 1 to Nov. 25, 2007.


ACCORDING TO A DEC. 22 STATE-ment by the U.S. Attorney’s Offi ce in Manhattan, Michael Bodner was ar-rested and charged with stealing more than $4 million from his former employ-er. Neither legal sources nor the U.S. Attorney’s Offi ce could confi rm details concerning Bodner’s former employer, but media reports said he was the for-mer chief fi nancial offi cer for Tommy Hilfiger Handbags. Tommy Hilfiger Handbags is not involved in the legal matter. Bodner, 59, was charged with wire fraud related to his alleged activi-ties. According to the complaint fi led by the federal prosecutor’s offi ce, he is charged with writing checks to him-self and two credit card companies and transferring money to himself over a pe-riod of about three years. Bodner, who could be sentenced for up to 20 years in prison and charged a maximum fi ne of $250,000 if convicted, was not available for comment.

Chanel Inc. fi led a trademark coun-terfeiting and infringement lawsuit against Janet Stevens and Tara Stevens for allegedly selling counterfeit hand-bags through more than a dozen Web

sites and online aliases. The lawsuit was fi led in a federal court in Southern Florida on Dec. 20. Chanel asked the court for a preliminary and permanent injunction, damages and trial costs. The defendants could not be reached for comment.

Separately, Chanel also fi led a trade-mark infringement lawsuit against Teng Da Trading Inc. and Xiang Yuan Fan, also known as Shawn Fan, in a Manhattan federal court. According to legal docu-ments fi led on Dec. 7, Chanel alleged Fan sold handbags and wallets that in-fringed on its interlocking CC monogram trademark. Chanel asked the court for a permanent injunction, damages and trial costs. Fan could not be reached for comment.

True Religion Apparel Inc. and Guru Denim filed a lawsuit against True Apparel Co. for allegedly infringing on its trademarks and trade names. The lawsuit was fi led in a Massachusetts fed-eral court on Dec. 18. True Religion and Guru asked the court for preliminary and permanent injunctions, damages and trial costs. According to the com-plaint, True Apparel sold custom jeans through a Web site under brand names that infringed on its “True Religion” and “True Religion Brand” trademarks. True Apparel sells jeans and apparel under the “True Apparel” and “True Jeans” trademarks.

Oakley Inc. fi led a patent infringe-ment lawsuit against 5.11 Inc. in a federal court in San Diego. According to legal documents, Oakley alleged that 5.11 sold eyewear that infringes on a patent it holds for “concavely indented lenses for eyewear.” Oakley asked the court for a preliminary and permanent injunction and damages. The company 5.11 could not immediately be reached for comment.

Van Cleef & Arpels Logistics, Van Cleef & Arpels Inc. and Van Cleef & Arpels Distribution Inc. fi led a lawsuit against Festival Marketplace, which is operated by Chester Brothers. The lawsuit was also fi led against several other defendants: Christina’s Creations, Christina Dilascio, Carmine Dilascio, Golden Images Jewelers Inc., Jay Trietman, Is It Real Sample Inc., Jerry Goldman, Jewelry Collection, Lola’s Fine Jewelry Inc., Silver Wave and Taste of Beauty. According to the court docu-ments fi led in Miami on Dec. 18, all the defendants are either suppliers or jew-elers that Van Cleef alleged sold copies of its Alhambra jewelry copyrights and trade dress. Van Cleef asked for an in-junction, damages and trial costs. The defendants could not be reached for comment.

Louis Vuitton Malletier fi led a law-suit against Melissa E. Pierce, who is also known as Melissa McDonald and

who does business as Cozy Critter, and Netfi rms Inc. for vicarious trademark infringement. According to legal docu-ments fi led in a federal court on Dec. 14 in the Eastern District of California, Louis Vuitton alleged McDonald and Cozy Critter operate a Web site that sold handbags and accessories that infringe on its trademarks. Netfi rms operates the servers that host the Web site, according to the court documents. Louis Vuitton asked the court for an injunction, dam-ages and trial costs. The defendants could not be reached for comment.

Separately, also on Dec. 14, Louis Vuitton Malletier filed a lawsuit against Doktor Gurson, who does business as InexpensiveDomains and InexpensiveDomains.com LLC, and Tracy Jackson, who operates TopOfTheLineFashions. The lawsuit was fi led in a federal court in San Francisco for alleged trademark infringement, copyright infringement, contributory and vicarious trademark infringement and contributory and vicarious copy-right infringement. According to legal documents the defendants sold hand-bags and accessories that infringed on Louis Vuitton’s registered intellectual property. The luxury goods manufac-turer asked the court for an injunction, damages and trial costs. The defendants could not be reached for comment.

— Liza Casabona

Erin Snow is dabbling in re-tail for the first time with a

pop-up store at the Sundance Film Festival.

The brand, known best for its high-end skiwear, will host an 825-square-foot space in Park City, Utah, from Jan. 17 to 27, in hopes of introducing the brand to the celebrities attending the event as well as skiers frequent-ing the resort town.

“This is our fi rst time doing a pop-up store and our fi rst time ever having a physical retail store — we only sell online and through wholesale,” said Erin Isakov, owner and designer of Erin Snow, which launched as a niche luxury winter sports brand in 2003. “I’ve always thought about opening a store, and this is a great way to test the retail waters.”

Taking over a real estate of-fi ce at 312 Main Street, near the

Egyptian Theatre, the Erin Snow pop-up will be open from 10 a.m. to 10 p.m., though it will close for appointments with VIPs. The store will sell the winter ski line, winter ready-to-wear and the new spring sportswear col-lection inspired by tennis, golf and sailing, which launches this season.

Isakov projects the store will do up to $30,000 in retail sales, which would yield a small profi t. She’s keeping the costs down, employing herself and staff from the New York offi ce to work there, and using easily set up fi xtures. But the intention is less sales than marketing, particularly to celebrities and visitors from Los Angeles, where Erin Snow is not sold.

“We may make a little profi t, but the main goal is to build brand awareness,” Isakov said.

— Whitney Beckett

Erin Snow to ‘Pop Up’ at Sundance

By Vicki M. Young

NEW YORK — Shawn Zachary Design Inc., an investment group formed by former retail executive Zachary Belil, last month acquired a 49 percent stake in Hanover Industries for an undisclosed sum.

Hanover, founded in 1997 by Elana Carello, manufactures wom-en’s and children’s novelty knitwear. The Elana Carello label is sold in better department stores and catalogues.

According to Belil, the company name has been changed to Elana Carello Knitwear. Carello will continue at the company in the role of chief creative offi cer. Belil, who said Hanover’s headquarters will remain in Providence, R.I., is chairman and interim chief executive offi cer.

The 49 percent stake in Carello is the fi rst acquisition for the newly formed investment group. “Zack and I worked together in the past when he was the president of Work in Progress, so I’m very excited to start working with him again,” said Carello.

Belil, director of Shawn Zachary Design, said his group will pro-vide the knitwear fi rm with operational and technological support.

Prior to forming Shawn Zachary Design, Belil was vice president of sales and merchandising at Pine Needles Apparel. Before that stint, he was divisional merchandise manager at Christopher & Banks for nearly fi ve years. He was product development director at Mitsubishi International Corp. before becoming president and co-owner of the Daggar Group, which manufactured sweaters under the label Work in Progress. After selling Daggar, Belil worked briefl y at Kellwood Corp. as divisional vice president of Vintage Blue Sweaters.

Firm of Former Retail Exec Acquires Stake in Hanover

Innovation Next Step for ChinaBy Kathleen E. McLaughlin

BEIJING — With its vast low-cost labor force and a consuming 20-year thirst for economic growth, China was a natural to become the world’s fac-tory. Now its central government faces the new, vastly more difficult challenge of making China a global innovator.

Beijing has stated that it intends to make China’s economy innovation-based by 2020. Government experts have said the change will be essential to maintaining China’s economic health and improving the living standards of its people. Intellectual property rights protections, improved product quality and safety and a more competitive global economic base would result, and a manu-facturing economy is not entirely sustainable in the long term, they say.

China has maintained its rapid economic rise on making the products that other nations have created and designed, often in violation of intel-lectual property protections. Now the downsides of low-cost mass manufacturing have begun to manifest themselves, with last year’s global scare over product safety in toys and complaints at the World Trade Organization over wholesale intel-lectual property theft. These developments have turned the focus even more on China’s capacity to innovate rather than just manufacture.

While 13 years is a long time for China to evolve, given its current rapid pace of change, analysts and experts are skeptical that the nation can accomplish its innovation goal without chang-es that reach into the very fabric of society.

“People don’t become innovative because of government policy, they become innovative be-cause they develop creative minds,” said Fraser J.T. Howie, a China economic analyst and author of “Privatizing China: The Stock Markets and Their Role in Corporate Reform.” “What’s impor-tant has to do with educational systems and teach-ing people to think for themselves.”

A long-held criticism of China’s educational system is that it depends on rote memorization rather than free thinking and individualism. Howie said that, because of such ingrained so-cietal challenges, along with China’s one-party system and the market dominance of state-owned fi rms, he sees little hope for innovation. Development of the private sector remains essen-tial to creativity. Most innovation happens in the private sector, he noted, and China’s private sec-tor remains woefully far behind.

“I don’t think they’re going to be able to do enough quickly enough,” he said.

The Organisation for Economic Cooperation and Development takes a more optimistic view. In a recent report, the Paris-based group said that, while signifi cant challenges remain, China has made great strides toward encouraging innovation

and the outlook is somewhat positive.Still, the report noted that, while China’s

spending has increased by 19 percent on research and development since 1995, key areas such as IPR and gains in education lag far behind what is needed to foster innovation.

The OECD study found that, while China has more researchers than any other nation, under-graduate degrees in science are on the decline, and public funding has yet to fi ll in a major gap in research dollars.

The predominance of state-owned banks and closed capital markets hinder business develop-ment that leads to innovation in market econo-mies, the report found, and in short, “the innova-tive capabilities of the Chinese business sector remain weak.” Financing, corporate governance and China’s propensity to develop product stan-

dards that differ from global norms are all road-blocks to a climate fostering innovation.

China’s drive toward creativity is not just a do-mestic issue, the OECD said.

“A failure to manage the process of integrating China smoothly into the global innovation sys-tem carries the risk of costly tensions,” said the group’s report. “There is a risk that discontent arising in both China and OECD member coun-tries may complicate this process.”

Even domestic experts are skeptical, first that China even needs to become an innovator to survive. Cai Fang, director of the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences, said he believes pro-ductivity and effi ciency are equally meaningful. China is improving in productivity, Cai said, which will help it maintain stable economic growth and keep manufacturing here even as wages and costs increase. Simple math dictates that China will re-main a manufacturer.

“We will continue to be the biggest supplier of labor in the world,” predicted Cai.

Others, however, say China’s integration into the innovative global economy is vital, and key to the country’s own success.

“It’s counter to what they’ve been doing, but their current model is unsustainable,” said Howie. “Once you’ve made all the [neckties] in the world, you can’t make any more.”

“What’s important has to do with educational systems and teaching people to think for themselves.”

— Fraser J.T. Howie


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