Betsy Johnson Flies Chapter 11; The Steve Madden impact

According to WWD:

On Thursday, it was revealed that Betsey Johnson LLC has filed Chapter 11 and, as a result, the bulk of the designer’s boutiques will close and about 350 staffers are expected to lose their jobs.

Betsey Johnson LLC is the licensee that operates the designer’s 63 freestanding stores, women’s apparel and e-commerce. It is run by Castanea Partners, the Boston-based private equity firm that bought a controlling interest in the company in 2007.

Despite all the upheaval, Johnson remains creative director of the brand and she will continue to oversee the design of her sportswear, accessories and various licenses. The designer, who turns 70 in August, still plans to have a runway show in September and she will start shooting a reality show in a few months. These and other plans were shared by Johnson and Steve Madden, founder of Steven Madden Ltd., which took over a $48.8 million loan to Betsey Johnson LLC and absolved it in exchange for the brand’s intellectual property. Madden produces some of the Johnson accessories and licenses out categories such as legwear and outerwear.

Going forward, the emphasis will be on the moderately priced Betsey Johnson label, which is sold at Macy’s Inc. and other retailers, as well as the litany of other categories. The Betsey Johnson Collection, which is carried in the designer’s freestanding stores and has dresses that retail for $395, has not sold nearly as well as the more middle-of-the-road Betsey Johnson label, which has a retail sweet spot of $128 to $148. About 75 percent of the spring line will be moderate-priced goods, with the remainder being editorial- and designer-range pieces.

“I love the moderate-price range. It is in sync with all the girls who are buying my clothes,” the designer told WWD.

There are plans to start closing the 63 stores in a few weeks with the help of a nationally recognized liquidation firm to be selected in the first weeks of the bankruptcy case.

Prior to the filing, Hilco Merchant Resources LLC was selected to be the stalking horse bidder at the auction to determine the liquidator that will conduct the store-closing sales, pursuant to an agency agreement with Betsey Johnson LLC. An auction has been requested for May 8. Parties interested in making a bid to purchase the company as a going concern may also bid at the auction. Store-closing sales are expected to begin shortly after that and should run through the end of July.

Betsey Johnson LLC’s chief financial officer, Jonathan Friedman, said, “The decision to seek protection under Chapter 11 comes after months of rigorously pursuing alternative restructuring arrangements to address Betsey Johnson LLC’s cash-flow problems. After exhausting our resources and possibilities, it became apparent that neither a restructuring arrangement with a new equity investor nor a sale of the business enterprise as a going concern outside of bankruptcy was to be forthcoming. Accordingly, our board made the determination that a Chapter 11 store-closing process will likely be the best way to maximize the value of the company’s assets, for the benefit of its creditors.”

Friedman did not respond to requests for comment Thursday, nor did executives at Castanea Partners.

Executives at Steven Madden Ltd., which has owned and controlled the designer’s intellectual property since it purchased Betsey Johnson LLC’s outstanding debt obligation of $48.8 million for $27.6 million in August 2010, declined to comment about how many staffers are affected. One senior executive at Betsey Johnson estimated that at least 350 people would be out of work.

Johnson said, “I feel so sad for my store people and all my pink girls. They live and die for me. But I need to be better. I really need to work well and be more efficient.”

Madden said the goal is to put a new license in place for Betsey Johnson sportswear “within days” in order to “have no interruption to wholesale deliveries.” He declined to name what company is in the running.

Madden also said there will be no interruption in e-commerce. “It will seamlessly integrate into our infrastructure,” he said.

Going forward, Madden aims to have four or five Betsey Johnson flagship-type stores in New York, Los Angeles and other key cities.

Despite Thursday’s shakeout, Johnson remains as busy as ever. The designer will start filming a new reality show, “Betsey + Lulu,” with her daughter Lulu in late July. “I am trying to make it relevant, deep and interesting about fashion rather than about gossip, girls, makeup and hair.”

This fall, she will unveil her second fragrance, Too Too Pretty, and she will soon be developing a third one that will play to her rock ’n’ roll, edgy roots.

Founded in 2001, Castanea Partners is a $500 million fund focused on investing in consumer brands and marketing services companies, as well as business-to-business providers of key information. Typical investments in individual companies range from $20 million to $75 million of equity capital, according to the company’s Web site. Last year Castanea Partners enhanced the fashion component of its portfolio by investing in Donald Pliner and Astor & Black. It also provides financial backing for Ippolita, Urban Decay and the blow-dry salon chain Drybar.

As for Steve Madden Ltd., there are plans to open seven or eight full-priced Steve Madden stores and five or six outlet stores this year. There are 90 Steve Madden stores in the U.S., including seven outlet stores and 125 full-priced stores in other countries. In late February, chief executive officer Edward Rosenfeld said the firm is on the hunt for a new brand to distribute exclusively to a large-network retailer.

For the quarter ended Dec. 31, Steve Madden Ltd. reported a 34.9 percent increase in net income to $23.8 million, or 55 cents a share, compared with $17.6 million, or 41 cents, in the same period a year ago. Net sales soared 73.7 percent to $279.8 million. For the full year, net income jumped 28.5 percent to $97.3 million, or $2.25 a share, on the back of 52 percent growth in revenue to $968.5 million.

Asked what she finds most challenging about business today, Johnson said, “The competition — the H&Ms, Topshop, Century 21 and the knockoff ability is unbelievable. Within three days of something being on the Internet, they have seen it, they copy it and they price-beat it. “

Madden offered another take: “Always endeavoring to have hot products. That’s my challenge — to stay relevant.”

Johnson said of the changes at hand: “You know, as you get older, you really want to go back to that idea of happy — happy, productive.”

“We have shirts that say ‘Happy’ if you go to a Steve Madden store,” Madden chimed in. “The kids in our stores wear shirts that say ‘Happy’ on the front and ‘Steve Madden Staff’ on the back.”

Wal-Mart At It Again

WOW!!!!
Shares of Wal-Mart Stores Inc. fell  in early trading today as investors worried over the fallout of the company's bribery investigation.

The decline puts Wal-Mart on track to see its worst day in the market since January 2009, when the market was reeling from the financial crisis and recession.

Wal-Mart revealed in December that it was looking into its compliance with anti-bribery laws. But the issue took center stage when a New York Times report on Sunday claimed the company covered up evidence that Wal-Mart executives in Mexico paid bribes to obtain building permits in 2005. The retailer denied the claims, but said it doesn't have a "full explanation of what happened."

I ask the question, would they have revealed this if the information wasn't brought to light?

How To Land A Job In Fashion

As the college season winds down many students are looking to land a job in the fashion industry. Below is a great set of resources to help you land that job. By the way these techniques also work outside of retail. If you've had some success with the tolls I would love to hear from you. 
Click on the DREAM JOB link below for more info

HOW TO LAND YOUR DREAM JOB

China's E-commerce Sites On The Rise

SHANGHAI — Brands will have no choice but to have an e-commerce presence in China or face being left out of what will soon become the largest online retail market in the world, according to a Boston Consulting Group study released Thursday.

An expanding population of Internet users combined with more widespread consumer acceptance of buying products online will spur China’s e-commerce market to triple in size to more than $360 billion by 2015, according to the study, titled “China’s Digital Generations 3.0: The Online Empire.” By around that time, the report projects China will become the largest online retail market globally, with nearly 10 percent of retail sales occurring online.

China already has more online shoppers than the U.S., the study said. By 2015, the country will have 700 million Internet users, which is 200 million more than the country has now and twice the online population of Japan and the U.S. combined.

Online buying and selling is the second fastest growing activity on the Internet in China after microblogging, the study said.

“Companies cannot have a major presence in China without having an online presence, not only to generate sales but also to engage with customers where they spend so much time,” the report said.

What is remarkable about Chinese online shopping behavior is a dramatic shift in the types of products they prefer to purchase on the Internet. While only a few years ago the top three e-commerce categories were books, digital cards and flowers, the main goods sold online are now apparel, accessories and consumer electronics, according to Yvonne Zhou, an author of the BCG study.

This means that for companies selling such products on the Mainland it is of “top urgency” to make sure they are also have a presence online, Zhou said. “The consumer has switched. The trend is clear,” she said.

Another key finding of the study is that Chinese Internet users are getting older, which means generations, specifically those born in the Nineties, are changing their online habits from playing games and seeking other forms of entertainment to searching for news and information about products. China’s post-Nineties generation — the country’s first to grow up with the Internet — is now also coming of age and entering into the workforce, which means they now have money spend and will be a key driver of online sales moving forward.

University students and young professionals are dedicating about 12 percent of their spending to online purchases, the study said.

According to Zhou, companies are neglecting to understand this new set of consumers and how to reach them on the Internet. There are “a lot of behavior changes,” Zhou said.

“They [companies] really need to think about their future consumers and their behavior,” Zhou said. “What we see is a challenge for companies is they tend to have the same mind-set. They have the same people managing their online and offline operations but they do not realize they are addressing different audiences. The generation that grew up on the Internet is quite different.”

In 2008, the average age of Chinese “netizens,” as the country’s Internet users are called, was 25. Last year, the average age was 29.

The study also found that seniors, which are defined as individuals age 51 and older, are also logging more hours online. This segment will grow by 22 percent annually between 2011 and 2015, making it the fastest growing segment of Internet users.

Another overlooked segment of Chinese netizens are those living in rural areas. The rural market has 26 percent of Internet users who log 22 percent of the aggregate 1.9 billion hours a day Chinese spent online in 2011. The rural market “has not received the same attention as urban and youth segments,” according to the study, which explained that this segment uses the Internet still largely for entertainment but also increasingly to “access goods and services that otherwise would be out of reach.”

The overarching findings from the study indicate that the Internet in China has reached a saturation and maturation point that renders it on par with developed countries. However, unlike in the West, Chinese behavior online is far more segmented, complex and constantly changing, which means companies need to develop multiple strategies to reach the country’s varied Internet demographics.

“The Internet is both a risk and also an opportunity,” Zhou said. “What we see so far is that consumers are way ahead in China and that companies are lagging way behind consumer trends in digital marketing and digital sales. With e-commerce, it is a very tricky question and this is probably why companies are hesitating about it. There are a lot of challenges. They need to consider the pros and cons of different online channels.”

Article courtesy of WWD writer Lara Farrar

JCP Cutting 900 Jobs

J.C. Penney Cuts 900 Jobs as Firm Streamlines Operations

J.C. Penney Co. Inc.’s reinvention is impacting its head count.

About 600 associates are being let go at Penney’s Plano, Tex., headquarters, primarily in merchandising, planning and allocation and marketing, according to the company. The headquarters has 5,900 employees.

In addition, the company’s call center in Pittsburgh will shut down on July 1, affecting another 300 employees.

The $17.3 billion, 1,100-unit chain on Thursday said the price simplification, re-merchandising on monthly cycles, marketing and cost-cutting initiatives — all at the core of the four-year reinvention strategy — enabled the personnel cuts. There was no word on whether there would be personnel reductions at stores.

“Often in business, companies must streamline in order to leap forward,” said Ron Johnson, Penney’s chairman and chief executive officer. “In our case, this has involved some very difficult decisions that have had an impact on many of our associates, but these changes are essential to help us achieve our long-term goals and, ultimately, grow our associate base as we grow our business.”

courtesy WWD