Apparel alterations sharpen profits

DSN Retailing Today, Jan 24, 2005 by Emily Scardino

During the past 12 months, Kmart has implemented a dramatic wardrobe change across its apparel departments. From merchandise to merchandising, no stone was left unturned in making alterations to this key category--its primary focus post-bankruptcy.

The most critical change to departments has been a shift toward vertical sourcing, eliminating third-party fees and maximizing profitability. In tandem with this production change, the company also

launched a number of new private-label brands in 2004, produced by a Manhattan-based fashion-oriented design team. Many of these relaunched or new brands--Attention in particular--have proven successful, and the company is already building on their equity for 2005.

"We have been pleased with Attention for women's; we've been pleased with Thalia," said John Goodman, chief apparel and home officer. This spring, Kmart will launch men's Attention, building on its success in women's since its fall '04 introduction.

Goodman orchestrated the shift to direct sourcing, launching a number of other clothing lines during the past 12 months, including Gear 7, which targets young men's customers with urban-influenced styles.

The company is also launching a new brand this year called Highlander. Like Jaclyn Smith, which was reinvigorated last fall, Highlander will target female baby boomers, but is "a little bit different" in aesthetics, according to Goodman. Space on the apparel pad is finite, however, and some longstanding brands have been minimized or phased out. Kathy Ireland, which was once at merchandise levels on par with Jaclyn Smith, is now primarily a swimwear brand. Attention has stepped in to fill the void.

Changes extend to the children's department. It was recently announced that one of the core apparel exclusives in this category--Sesame Street--will be available to the rest of the marketplace as of this July. The company also launched two major labels in this category, Small Wonders and Wonder Kids, which have been performing well, Goodman said.

While Kmart's exclusive for the Disney Kids brand has ended and its Sesame Street deal is drawing to a close, the retailer still will carry licensed children's merchandise.

"Sesame Street has done well in the environment as well as some of the licensing products we are doing from Disney and Nickelodeon," said Goodman. "The business that has always performed has always been the character business."

While the primary focus is on private label, national brands remain crucial, and mid-tier Sears may create trade-up opportunities. Kmart is expanding its assortment of Dickies apparel, which has its own in-store shops in the Penn Station, Manhattan, and White Plains, N.Y., stores and recently introduced Levi Strauss Signature.

"We have been pleased with the initial response from the consumer on the Signature line," Goodman said. "We continue to do business with VF and Hanes and Fruit of the Loom, and they are still good partners."