Daily EDition december 30, 2016 1

Fashion. Beauty. Business.

Child’s PlayKidiliz sees blue sky in the premium market.

Page 6

All Grown UpDavid Rabin’s Dorsey hits Las Vegas.

Page 11

Independent WomanZoeva expands beyond the makeup brush.

Page 7

● The retailer will close another 30 stores next month; most are Kmart locations.

by Vicki M. Young

Sears Holdings Corp. continues to aggressively shrink its store base as affil-iates of ESL Investments come through with another lifeline for the company.

The retailer is said to be closing around another 30 sites with store liquidation sales slated to begin on Jan. 6 and be com-pleted by mid-April. Most of those sites operate under the Kmart nameplate, with the balance under the Sears nameplate.

Howard Riefs, Sears’ director of cor-porate communications, in an e-mail to WWD, said, “We have been strategically and aggressively evaluating our store

● There’s still a space in the market where the clothes look fresh and expensive, but don’t cost thousands, as designer and contemporary prices edge closer.

by SaMantha conti

LONDON — Call it the luxury kiss.In a tricky climate for high-end goods,

with too many brands and stores, too few high-spending Chinese tourists, and the ever-present threat of terrorist attacks in key shopping cities, luxury prices have begun to drift downward, while premium and con-temporary price tags are floating up.

The aim is to reach the kissing point, that still underpenetrated space, where the clothes look fresh, original and expen-sive, but don’t cost thousands of dollars, pounds or euros.

Retailers, under constant pressure to drive footfall and digital sales, are embracing the trend, arguing that the premium middle ground has become a hotbed of creativity and commerce, piqu-ing interest and driving sales alongside the high-end runway pieces.

“It’s a really nice segment for the

business

ESL Extends Lifeline to Sears

business

PricesHome In OnSweet Spot

continued on page 9

continued on page 8

Nothing says festive like a shiny sequined frock. For pre-fall, designers launched into party mode with fun takes on the evening staple. Here,

Versace’s barocco embroidered and beaded mesh dress worn with Dyspnea’s polyester pants, Laruicci earrings, Chris Habana bracelet and Sonia Rykiel

platform shoes. For more, see pages 4 and 5.

Party Timephotograph by JoSh Filauri

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Men’s Fashion WeeksMen’s Paris FW

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december 30, 2016 3

Nasty Gal IP Proves Greatest Asset, With Boohoo’s $20M Bid● The Manchester e-tailer sees value in the brand as the parsing off of IP assets may become the norm for retail bankruptcies.

● Kendall Jenner Inducts Herself Into Her Own Hall of Fame

● Kate Spade Shares Spike on Sale Talk

● Vivienne Westwood, Andreas Kronthaler Design for Vienna Philharmonic Orchestra

● Vetements’ Reconstructed Denim Craze Trickles Into Pre-Fall 2017

ToP 5TreNdINGOn WWD.COm

nEWSmAKERSThis Week’s most Talked About names In Our Industry

Anna Cleveland

President Obama

Victoria Beckham

Ryan Gosling

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● U.S. brands and retailers are watching the escalation for signs of retaliation that could hurt U.S. exports.

by kriSti ElliS

WASHINGTON — The Obama administra-tion imposed a sweeping package of sanc-tions Thursday against Russian officials and entities for “malicious cyber activity and harassment,” charging them with interfering in the U.S. presidential election.

Nine entities and individuals were sanc-tioned and 35 Russian government officials were expelled from the U.S. amid what U.S. officials said was also part of a longer-term pattern of attacks on critical U.S. infrastruc-ture and harassment of U.S. diplomats.

In a parallel action, the Treasury Depart-ment also revealed Thursday that Russian individuals conducted cyber attacks on U.S. financial institutions, Fortune 500 firms, universities and government agen-cies, stealing a combined $100 million.

The move by the U.S. comes at the end of Obama’s presidency just days before President-elect Donald Trump is set to be sworn into office on Jan. 20.

U.S. intelligence officials reportedly believe the hacking of the Democratic National Committee and other U.S. political entities and e-mail accounts by Russia was aimed at hurting Democratic presidential candidate Hillary Clinton and subsequently helping Trump win the presidency.

Trump, who has expressed doubt about the accuracy of the U.S. intelligence find-ings of Russia’s interference in the U.S. election, will now be faced with having to decide whether to repeal the sanctions on Russia’s intelligence agencies. But he could also run into opposition from Con-gressional Republicans, many of whom supported the actions taken by Obama.

The sanctions against nine Russian enti-ties and individuals have far-reaching for-eign policy implications and ratcheted up the tensions between the U.S. and Russia.

While the sanctions did not directly affect the fashion industry, U.S. brands and retailers that export to Russia or have investments in the country are watching the rising political tensions.

The U.S. has not indicated trade sanctions as a possible deterrent to date, but companies are concerned that Russia might retaliate and target specific U.S. industries’ exports.

It’s not the first time Obama has sanctioned Russia. He imposed a series

of sanctions on Russian government officials and entities in 2014 following Russia’s annexation of Crimea from the Ukraine and the industry was on high alert at that time.

Russian authorities, who have denied interfering in the U.S. election, have warned they would retaliate if the U.S. imposed sanctions.

“All Americans should be alarmed by Russia’s actions,” President Obama said. “In October, my administration publi-cized our assessment that Russia took actions intended to interfere with the U.S. election process. These data theft and disclosure activities could only have been directed by the highest levels of the Russian government.”

“Moreover, our diplomats have expe-rienced an unacceptable level of harass-ment in Moscow by Russian security services and police over the last year. Such activities have consequences.”

Through a new executive order, Obama expanded authority for responding to cer-tain cyber attacks that interfere with or undermine the U.S. election process and its institutions. Under the new authority, the administration sanctioned nine enti-ties and individuals.

Two key Russian intelligence agencies were sanctioned — The Main Intelligence Directorate and the Federal Security Ser-vice. In addition, four individual officers of the GRU and three companies that the administration said provided material support to the GRU’s cyber operations were sanctioned.

Thirty-five Russian intelligence opera-tives were declared “persona non grata” and forced to leave the U.S. within 72 hours.

The administration also revealed economic cyber attacks were carried out separately by Russian individuals.

The Treasury Department desig-nated two Russian individuals for using cyber attacks related to the “significant misappropriation of funds or economic

resources, trade secrets, personal identi-fiers, or financial information for private financial gain.”

Evgeniy Mikhailovich Bogachev and his criminal associates were charged the theft of over $100 million from U.S. financial institutions, Fortune 500 firms, universi-ties, and government agencies, according to Treasury.

Treasury officials charged Bogachev with developing and using the Zeus malware as well as managing and selling it to other criminals. He is also accused of being directly responsible for the development of Cryptolocker, a form of ransomware, which is “known to have held over 120,000 U.S. victims’ data hos-tage for financial gain.”

Aleksey Alekseyevich Belan was charged with compromising the com-puter networks of at least three major U.S.-based e-commerce companies.

“Belan used his unauthorized access on the e-commerce company net-works to steal user data, including e-mail addresses, customer names and encrypted passwords, belonging to approximately 200 million accounts worldwide,” according to Treasury.

Any property or interests in property of the two Russians within U.S. jurisdic-tion will be blocked and U.S. citizens are prohibited from engaging in transactions with them.

“The integrity and stability of our elec-tronic systems are of utmost importance to our national security and we will hold accountable those who seek to compro-mise or tamper with those systems,” said Treasury Secretary Jacob J. Lew. “Treasury will use all of its financial tools as part of the U.S. government’s effort to counter those who engage in malicious cyber activities against our financial sys-tem or our national institutions.”

The State Department is also shut-ting down two Russian compounds in Maryland and New York, that are used by Russian officials for intelligence-related purposes. The Department of Homeland Security and the Federal Bureau of Inves-tigation released declassified technical information on Russian civilian and mil-itary intelligence service cyber activity, to “help network defenders in the United States and abroad identify, detect, and disrupt Russia’s global campaign of mali-cious cyber activities.”

“These actions are not the sum total of our response to Russia’s aggressive activities,” Obama said. “We will continue to take a variety of actions at a time and place of our choosing, some of which will not be publicized.”

Obama plans to release a report to Con-gress in January on Russia’s efforts, which he said “undermine established interna-tional norms of behavior, and interfere with democratic governance.”

business

U.S. Imposes Sanctions on Russia for Cyber Attacks

President Obama signed an executive order sanctioning Russia.

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4 december 30, 2016

Pre-fall’s glittery dresses are here to celebrate.

Party Time

photographS by JoSh Filauri

by MaYtE allEndE

BCBG Max Azria’s nylon, metallic and spandex knit jacquard turtleneck (worn throughout) under Temperley’s sequined jumpsuit. Sonia Rykiel platforms (worn throughout); Laruicci earrings (worn throughout).

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TrendsDresses

december 30, 2016 5

Capezio’s nylon and spandex unitard under Diane von Furstenberg’s polyester and spandex dress. Chris Habana bracelet.

Capezio’s nylon and spandex bodysuit under Dennis Basso’s sequined and

organza dress and Dyspnea’s polyester pants. Rochas platforms;

Mulberry earring; Anthony Dreyer x Pearl Collective necklace.

Roberto Cavalli’s cotton and polyester sequined minidress.

Altuzarra’s sequined embroidered silk organza top and skirt. Falke tights

worn on arms; Baker & Black earring.

TrendsDresses

6 december 30, 2016

● Kidiliz to open 50 new stores as CEO sees “wind in the sails.”

by roBErt WilliaMS

PARIS — The premium children’s wear sector has “wind in the sails” worldwide and shows no signs of slowing, according to Rémy Baume, the chief executive officer of Kidiliz, maker of Kenzo Kids and Paul Smith Junior.

Formerly known as Zannier Group, the French company that produces 15 brands for children was re-baptized last month in a ploy to enhance international visibility and reinforce the company’s multibrand retail concept — also called Kidiliz — on the high streets and online.

As adult fashions face limited growth and multiple headwinds in the new year, sentiment surrounding the premium children’s wear sector is more optimis-tic. Worldwide sales of children’s wear reached $151.23 billion in 2015 after enjoy-ing growth of 5.6 percent in both 2014 and 2015, according to Euromonitor, and the market is expected to keep growing in size.

Kidiliz plans to open 50 new locations for its brands in 2017, including storefronts in Dubai, Colombia, Italy, and China. The company already operates more than 900 retail locations including single-brand boutiques for brands like Z and Catimini and multi-brand emporiums offering merchandise from across the group’s lines. Once wholesale is factored in, Kidiliz group counts 11,000 points of sale and saw revenues of $430 million in 2015.

In addition to Kenzo and Paul Smith, Kidiliz group holds licenses to produce Junior Gaultier, Levi’s Kids (for Europe and the Middle East), and most recently Esprit.

Givenchy and Karl Lagerfeld are among the latest brands to reach out to a knee-high clientele — and their image-conscious parents — through licensing deals with children’s wear groups (in the case of these two designers, with Kidiliz’s chief French competitor Children’s Worldwide).

Sales in premium children’s wear — and particularly designer licenses — are expected to keep growing along with the middle class in emerging economies. “We can grow fast in these markets because people have been exposed to so much marketing for these brands,” said Baume. “There’s already a real desire to wear them or to see one’s kids wearing them.”

“The premiumization of children’s wear has been fueled by […] changing demo-graphics and the rising spending power of consumers,” said Euromonitor analyst Ber-nadette Kissane. ‘“Bling-fueled consump-tion and the trend toward westernization in emerging markets are creating opportu-nities for premium brands.”

While the rapid growth paradigm for luxury goods has faded in China and Hong Kong since 2015, the end of the one-child policy in the world’s most populous coun-try could lead to a demographic boom beneficial for the premium children’s wear sector.

Meanwhile, sales in the online space have become increasingly significant, with sites like Alexandalexa.com and Children-salon.com offering a Net-a-porter-style portal for kids. Kidiliz’s multibrand web site has seen sales grow by as much as 30 percent in 2016, according to Baume, who has been the firm’s ceo since 2013.

The rise of social media and smartphone use has also played a role in the growth of premium and designer children’s wear, according to Baume. “Through social net-works and selfies, children are exposed to their image much sooner—and parents are sensitive to this,” said Baume.

The desire to fit in — or for your child to fit in — is increasingly likely to express itself through fashion, and at a younger age. By allowing parents to instantly show off pictures of their offspring to friends and extended family — people who might have only seen them at holidays or parties before — social media gives some parents motiva-tion to make every day a fashion show.

In this context, consumers are increas-ingly willing to buy children’s clothes at prices that can line up with a designer’s adult offer — growth spurts be damned.

A boy’s blue velvet blazer from Paul Smith Junior line costs 322 euros, for example, and printed sweatshirts from Kenzo Kids go for 85 euros to 105 euros on the Kidiliz web site.

Brands for infants and kids have been affected by the broader trend toward more markdowns and off-price sales over the past 15 years, according to Baume, but the premium children’s wear sector is partially insulated by the fact that many sales are intended as gifts for special occasions.

“If it’s Christmas or the child’s birthday and you want to offer the child a special item, you won’t be able to wait until it goes on sale,” said Baume.

One clear benefit for brands to do a children’s wear license is about capturing young consumers. “Once a kid wears your brand, then there is an open door to the adult line,” said Baume.

But rather than making “mini-me” ver-sions of adult fashions, Kidiliz has focused

on licensing brands that already have a playful, colorful aesthetic that will easily transfer to a children’s wear universe. “Parents use clothes to project a vision of childhood and how they think their child should be,” said Baume. When exploring a licensing deal, “it’s important that a brand has values that line up with the rest of our lines.”

And while licensing deals of designer brands may be good business for children’s wear manufacturers — allowing them to

leverage the adult line’s image and design concepts — that doesn’t mean that kid-only brands will fade.

Brands whose entire messaging is focused on children are also capable of commanding a premium price point—as in the case of the delicate and girly Lili Gaufrette line, where winter coats for four- to 12-year-olds retail for 200 euros.

“For some consumers, childhood is childhood, and should still remain apart,” Baume said.

business

Selfies, Social Networks Seen Powering Designer Kids’ Wear

Kidiliz produces Kenzo’s children’s line.

Kidiliz CEO Rémy Baume

A winter 2016 look from Paul Smith Junior.

december 30, 2016 7

● The German-based Zoeva is rapidly growing sales and its product line.

by SuSan StonE

Four million brushes were sold globally in 2015. The number amazes Zoe Boikou, who founded online makeup brush com-pany Zoeva in 2008. She started in her living room, with just 10 brushes, an eBay account — and determination.

This year, the number will be even greater, reflecting Zoeva’s move from online shop into retail presence, and from brush seller to makeup source. Zoeva prod-ucts — which now include brushes, lipstick, eyeshadow, blush and eyeliner — are sold at German, Swiss and Austrian Douglas stores, in Sephora Australia and Sephora Malaysia doors (as well as online via Sephora Digital in Singapore, Indonesia, Hong Kong, the Philippines, New Zealand and Thailand), and Selfridges in the U.K., as well as in smaller boutiques in Europe.

Born in Thessaloniki, Greece, Boikou moved with her family to Germany in 1990. At 15, she started on-the-job train-ing, becoming an office administrator and customer service trainer for a collectables company, which took her to the U.S. for the first time at 18. A visit to department store beauty halls on that business trip fueled her love of luxury cosmetics, sow-ing early seeds for her later career change.

Though Boikou happily notes Zoeva’s fortuitous market entry, which coincided with the growth of YouTube makeup gurus and bloggers, she has mostly remained behind the scenes. Shy in nature, she has no desire to be the face of the brand. Out-reach is strong, but marketing is modest.

Prices are friendly, too — brushes start at $9.80 and lipsticks cost $11.80. At the high end, a 16-piece limited-edition eyeliner set retails for $90, while a 30-piece brush-and-bag set sells for $280. Zoeva’s largest mar-kets are Germany and the U.K., followed by Russia, the Arab countries and the U.S.

“I would say we talk less, as we want them to be amazed when they interact with the products,” Boikou says of Zoeva’s mar-keting approach. “And in the end it pays off more to be quiet and not be too loud, than to have disappointed customers.”

The messages Boikou does want to send seem to reach their targets. Not just that the brand offers quality products at reasonable price points, but also that Zoeva, which melds Boikou’s first name and “Eva,” for the first woman (Eve), is a woman-focused company. That starts with positive ideas about beauty, and

runs to charity projects including the Zoe Embracelet, a bangle bearing the message “Be Strong. Be Confident. Be Beautiful. Embrace Change.” Half of the proceeds from its sale go to the BFF, German’s Women Against Violence initiative.

Boikou has maintained control over inventory, distribution and order fulfill-ment, and plans to keep it that way. The warehouse is downstairs from Zoeva’s cor-porate office, which makes quick decisions easy and flexible. The firm is self-funded, and aims to deliver tools, not trends. Some products are vegan; all are thoroughly planned and carefully produced.

“I am completely — I would say 100 per-cent — no, 1,000 percent — independent. From the beginning in my gut I had the feeling that this would be the way I have to go,” says Boikou. “So there’s no one sitting in the back of me saying ‘you have to do

this’ and ‘please follow this trend because the market is booming right now.’”

She also says she fears that investors, most likely “a group of 10 men,” would have little time and interest in the compa-ny’s women-centric charity efforts, some-thing she feels very emotional and passion-ate about. “For me independence is the best thing, to stand up and say,‘OK, I don’t have to justify things’,” insists Boikou.

Zoeva color cosmetics are manufactured in Europe. Brushes are made in China with a specialized brush maker. Boikou’s team set up a complete unit there for Zoeva brushes, with 900 people, some expert brush craftsmen flying in from Korea. That, says Boikou, guarantees them stable quality throughout the year.

Zoeva continues to grow, but Zoe Boik-ou’s dream market, the U.S., is still a glim-mer on the horizon. The brand sold out during its in-store test at New York Space NK locations (both retail and shop-in-shop) last December, but Boikou wants to move cautiously, growing carefully.

As the last year or so was concentrated on Zoeva’s retail growth, the brand is now expanding its product offerings. In the last months of 2016, Zoeva is increas-ing its assortment by 30 percent due to new releases, including buzzed-about strobe gels for highlighting ($15.80), liquid lipsticks ($12.80), and concealing and con-touring palettes ($19.50-$26.50).

After that — the field is open. Hair-brushes were recently suggested as a new direction, and Boikou notes that she’s currently testing skin-care samples. “There is no limit,” she says. Then, ever circumspect, she corrects herself with a smile. “If it fits our philosophy, there is no limit. First we want to make sure it fits our values and our rules.”

beauty

Zoe Boikou Paints a Niche With Makeup Brushes

● In January, Dermatologic Cosmetic Laboratories will release its reformulated, repackaged line of alpha-hydroxy-acid-based products at Space NK in the U.K.

by EllEn thoMaS

DCL is getting out of the doctor’s office.On the heels of a packaging and formula-

tion revamp this year, the clinical skin-care line is gearing up to enter the prestige retail arena with a January launch at Space NK in the U.K.

The in-house label of a contract manu-facturer, DCL — which stands for Dermato-logic Cosmetic Laboratories — is perhaps best known in the beauty industry for its pioneering of alpha-hydroxy-acid-based-products around the time of the inception for at-home use in the Eighties. Under the scientific tutelage of Joel Rubin, its long-time research and development lead, DCL has made a name for itself with alpha-hy-droxy-acid-based products sold primarily through dermatologist offices. Its first was the AHA Revitalizing Cream, containing an 8 percent concentration of glycolic acid, which today is known as the AHA Resur-facing Lotion 8.

Steeped with DCL’s proprietary formu-lations and developed under Rubin with a host of other doctors and chemists at DCL’s East Haven, Conn. facilities, the

brand’s initial products had more of a clinical look and feel, but its 2016 revamp spurned a sleeker package design meant to compete in the prestige arena. Also with the re-branding came new product formulations from Rubin and a redesigned, interactive web site.

President of DCL Cherry Robinson noted that the resurgence of consumer interest in alpha-hydroxy acids proved the right timing to parlay DCL’s clinical skin-care line into a brand with luxury appeal.

“Today, dermatologist skin care [“doctor lines”] is outpacing other categories within skin care,” said Cherry Robinson, president of DCL. Robinson is astute in her observa-tion. NPD’s global beauty industry analyst Karen Grant this year has noted that while prestige skin-care is experiencing sluggish sales growth, Millennials are still interested in skin-care lines with natural or doctor — “expert” — appeals. Ingredient-wise, it’s an apt time for DCL to revamp, as products

containing alpha-hydroxy acids — well-known varieties include glycolic, L-absor-bic and lactic acids — continue to prolifer-ate in the prestige market. The trend has even caught on at mass — earlier this year, L’Oréal Paris launched its Bright Reveal peel pads containing glycolic acid.

With that in mind, DCL is primed to takes its clinical skin-care technology out of doctors’ offices and into more upscale retail settings. Robinson and Rubin both noted that the packaging and reformu-lations were designed with an improved sensorial appearance in mind. Though DCL has scientific roots, executives thought the brand was in need of a facelift. “I joined two and a half years ago because we wanted to update the brand,” said Robin-son. “It hadn’t changed much since launch, it was still medicinal-looking, almost sterile because it was a clinical product.”

To update DCL’s range, Rubin removed parabens from the line, created richer tex-tures, updated the scent, which is meant to smell clean and “natural” and reworked the formulations into new product vari-ations. For the new formulations, Rubin used a combination peptides, retinoids, Vitamin C and alpha-hydroxy acids — DCL’s proprietary blend that he said targets four zones of the skin — the stratum corneum, epidermis, dermal epidermal junction and the dermis — for optimal skin health.

The end result is 40 new products, spanning skin care, sun care, hair and body. The biggest range is skin-care, with

hero products such as the C Scape High Potency Night Booster 30, priced at $120. Said to boost collagen with a 30 percent concentration of L-absorbic acid and a proprietary Vitamin C complex designed to release ingredients over time, Rubin noted the product contains an unprece-dented level of alpha-hydroxy acids for an at-home, non-prescription product. Many of the products have also been formulated for use during the day, defying conven-tional wisdom that alpha-hydroxy-acids, which can make skin more sensitive to sun exposure, can only be used at night. The products are designed to treat a slew of common skin issues at the same time, such as hyperpigmentation, dryness and acne.

With the addition of the U.K. Space NK stores, industry sources estimate the brand to generate 25 to 30 million dollars in retail sales by 2017. Since its re-brand, DCL has launched in the U.S. on Ama-zon’s Professional Skin Care store and on dermstore.com, and is available for sale in 1,000 doctors offices. The brand is also available in doctors offices in the Middle East and in the U.K. Robinson noted the next likely market for the brand is Asia.

The new website contains a “customized ritual tool” designed to help shoppers iden-tify the right products and routine for their skin needs. “Consider this a 360-approach for optimal skin health,” Robinson said of the line. “We treat multiple skin conditions at one, and this is really important. It sets us apart from other skin-care companies.”

beauty

DCL Re-brands, Gears Up for Prestige Retail LaunchA selection of DCL’s skin-care products.

The Zoeva rose gold brush set.

8 december 30, 2016

luxury brands to move into, because they’re not eroding their names or their credibility by stretching their prices downward. And it allows them to attract a brand new shopping base in a compet-itive climate,” said Honor Strachan, lead analyst at the London-based consultancy Verdict Retail.

Gucci is a classic case: While the velvet dress with the long white sleeves and the pink pussy bow may set customers back 1,850 pounds, or $2,270, there are also blouses with pearl buttons and price tags in the 400 pound to 500 pound range, or $490 to $615.

Burberry is another. In its aim to outperform luxury market growth in the coming years, the brand is re-strategiz-ing, slashing its product assortment and broadening its opening price offer with the aim of transforming its 40 million-plus social media followers into spenders.

With a new chief executive officer on board, Mary Katrantzou has also expanded her offer: The designer, who built her name on lavish, digital print dresses with price tags upward of 2,000 pounds, or $2,455, has added skirts, knits and embellished button-front cotton shirts to her famous occasion wear for resort, allowing retailers to buy deeper and wider.

Some brands have decided to live per-manently in the contemporary sweet spot. Last fall, Sonia Rykiel announced it was shutting its diffusion collection as it moves to reposition its main line to lower price points to meet the demands of an increas-ingly competitive market.

Already for fall 2016, the house began lowering prices on certain key catego-ries such as knitwear, a strategy that has proved successful.

Hugo Boss is another example, with the brand recently revealing plans to return to the premium category, with a renewed focus on entry price points.

Luca Solca, managing director at Exane BNP Paribas, said he believes there is a “significant opportunity in midprice, not in luxury. I welcome the announcement by Hugo Boss that they are going back to their roots and abandoning lofty ambi-tions to trade up.”

Stretching for the new middle ground isn’t only for the luxury players. Because

of all the competition on the high street, big chains are looking to differentiate themselves, too, and grab a larger share of the high-end market with the launch of premium lines.

Reiss has launched a premium range, with coats costing between 800 pounds and 1,000 pounds, or $980 and $1,227, while Zara Studio, a collection of timeless pieces, launched a few years ago.

Mario Eimuth, founder and managing director of the Munich-based Stylebop.com, which carries brands ranging from Alexander McQueen and Marc Jacobs to Polo Ralph Lauren and Paul & Joe, believes it’s consumers who are fuel-ing the changes, mixing up luxury with contemporary as they try to create an individual look.

“There is no denying that the continued growth of street style and social media are key points of influence here, creat-ing the desire for a more individual look and prompting customers to seek out

products from a more diverse range of brands,” said Eimuth.

“They’re teaming a McQueen jacket with Frame Denim jeans, an Être Cécile T-shirt and APC boots, looking to create something that reflects their personal sense of style.”

Sarah Rutson, vice president of global buying at Net-a-porter, has a similar take on customers’ increasing fashion mash-ups. She said that while Net-a-porter’s luxury designer business is “certainly not waning,” her customers remain thirsty for newness — and don’t mind about price.

“Women want to mix it up with high and low-price brands,” said Rutson, adding that the contemporary designers Net-a-porter carries all have a defined aesthetic and signature. “In an industry saturated with so many options, having this clarity of vision is essential.”

She said this season, Net-a-porter grew its contemporary buy by nearly a quarter, with brands such as Self-Portrait, Acne

Studios and Tibi driving the category. “Other brands such as, Ganni, Jacque-mus, Off-White and Joseph are perform-ing very strongly.”

Natalie Kingham, buying director at Matchesfashion.com, said the contem-porary brands that perform the best are the ones that offer luxury details, “in the fabric, the enamel button, or the colored stitching on the shirt cuff. They have something artisanal about them, or come in limited batches.”

Kingham added that the successful con-temporary brands also tend to be more flexible with their production cycles, and are able to arrive on the shop floor during critical times — well after the runway collections have landed, or when other stores are promoting their mid-season sales or pre-holiday markdowns.

“The luxury customer wants newness — and a store cannot rely on runway pieces,” said Kingham. “Those smaller, contempo-rary brands keep things interesting.”

Prices Home In On Sweet Spot COnTinuED FROM PAGE 1

Sonia Rykiel lowered prices on certain key categories for fall 2016, while Gucci has expanded its offerings beyond luxury to include more affordable pieces and Mary Katrantzou has added embellished items to her occasion wear.

● Meanwhile, group revenue was up 1 percent.

by SaMantha conti

LONDON — Harvey Nichols saw its profits halve in the 2015-16 fiscal year due to a major investment in refurbishment, and subsequent store closures while the work was being done. The privately owned company said revenue rose 1 percent, while gross margin was broadly flat at 55 percent.

Profit at the group, which has stores in London and six British cities, the OXO Bar, Brasserie and Restaurant in London, and seven international stores, fell 49 percent

to 3 million pounds, or $4.4 million, while revenue rose to 194 million pounds, or $287 million.

All figures have been converted at cur-rent exchange for the 12-month period.

“We have made a number of necessary investments this year – in our stores, digital channels and people — in order to continue the radical transformation of the brand that will enable us to adapt to changing customer preferences and achieve future growth at the bottom line,” said Stacey Cartwright, chief executive officer of Harvey Nichols Group.

As reported, the first phase of the London refurbishment was unveiled in

April with the opening of two new men’s wear floors, which Harvey Nichols said is showing “encouraging early signs.”

A 10-month overhaul of the ground floor in London resulted in a new beauty destination that offers products, ser-vices and experiences that range from manicures and pedicures to LED facials, vitamin infusions and blowouts in the Beauty Lounge, which is open from 8:00 a.m. until 10:00 p.m.

The ground floor at the Knightsbridge, London store also has a new international accessories and jewelry departments, which opened in November in time for the Christmas trading period. The company

said the ground floor space in Knights-bridge has been seeing strong growth in sales since reopening.

Hong Kong’s Landmark store also had a complete refurbishment in the summer of 2016, which saw the closure of the store for three months.

The company said that almost half of its revenue has gone through the Harvey Nichols Loyalty App, which launched in the summer of 2015, and offers rewards such as cash vouchers and dining, travel and beauty experiences. It said investment in the web site in 2015-16 made it possible for the group to deliver to more than 200 countries in 74 currencies.

The company said that while the U.K. remains “a very important market strate-gically and commercially” for the group, Harvey Nichols will continue to assess opportunities overseas, and will be open-ing a store in Doha, Qatar in 2017, bringing its total international store count to eight. Its other international stores are in Dub-lin, Riyadh, Hong Kong, Dubai, Istanbul, Ankara and Kuwait.

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Harvey Nichols Profits Halve During Store Refurbishment

december 30, 2016 9

space and productivity, and have accel-erated the closing of unprofitable stores, as we’ve previously announced.” He declined to elaborate further or confirm the total number of closures.

The latest round of closures are on top of the 17 Kmart stores the company said in September that it would close. Sep-tember’s group of stores are part of the 235 Sears and Kmart store locations that Sears Holdings sold to Seritage Growth Properties in 2015 when it formed the real estate investment trust. Sears Holdings did a sale-leaseback arrangement for those sites. A few days later it was learned that another 60-plus Kmart sites outside of those held by Seritage were slated for closure in mid-December.

For the round of closures that will begin next month, employees at the stores affected were said to have been notified by Riefs via an e-mail on Tuesday.

Like most retailers, Sears’ fiscal year closes at the end of January. At this point, it will be closing more than 200 stores in the current fiscal year, leaving Sears Hold-ings with less than 1,500 stores when the new fiscal year begins in February.

Sears’ chairman Edward S. Lampert bailed Kmart Holdings Corp. out of bank-ruptcy in 2003 — Lampert’s hedge fund ESL Investments controlled a significant amount of Kmart’s debt — and in 2005 merged Kmart with Sears, Roebuck and Co. in an $11 billion deal to form Sears Holdings. At that point in time, the combined entity had projected annual revenues of $55 billion and more than 3,500 stores in operation.

Given that many of the company’s store closures have been Kmart sites, rumblings in the marketplace surfaced in late Sep-tember that the Kmart nameplate might be on the way out. Sears Holdings has denied that and continues to do so. On Thursday, when asked about the future for the Kmart nameplate, Riefs referred to Lampert’s Oct. 3 blog regarding the company’s commitment to Kmart. “It still holds true,” Riefs said in the e-mail.

In that blog, Lampert wrote: “Recent

reports have suggested that Kmart will cease its operations. I can tell you that there are no plans and there have never been any plans to close the Kmart format. In fact, we’ve been working hard to make Kmart a more fun, engaging place to shop, powered by our integrated retail innova-tions and Shop Your Way [program].”

Lampert added that a “significant num-ber” of Kmart stores in operation — at the time of the blog there were over 700 stores — are “profitable and have been profit-able for years.” He further wrote that the company has been clear on its “intent on improving the performance of our unprof-itable stores and, if we cannot, we will close them.” Lampert said the company is acting more aggressively and continues to evaluate its stores as leases expire, as well as when other opportunities present them-selves that would “improve the economics of Sears Holdings.”

But while Lampert touts the company’s commitment to turn around operations at Sears, there’s a lot going against the company. The credit ratings agencies Fitch Ratings and Moody’s Investors Service each have Sears on their respective watch lists. Of concern is its debt leverage, as well as its cash burn rate. Fitch analyst Monica Aggarwal has estimated the 2016 cash burn rate at $1.6 billion to $1.8 billion. She also estimated that Sears had injected almost $10 billion in liquidity to fund ongoing operations between the years 2012 to 2015. The $10 billion includes $4.7 billion from real estate transactions.

In mid-December, rumblings surfaced that Jan. 15 might be a key, critical date for Sears since that’s when the bills come due

for most retailers for the holiday season. And while there has been speculation that Sears didn’t have enough cash to pay those bills, many believed that Lampert would figure out a bailout to extend Sears’ retail life expectancy.

They weren’t disappointed as word surfaced Thursday morning that affiliates of ESL were providing another liquidity boost in the form of standby letters of credit in an initial amount of up to $200 million. The facility may be expanded by up to an additional $300 million at the request of the retailer and with the con-sent of the lenders.

The liquidity event wasn’t a surprise given that the Lampert’s ESL in August provided Sears with $300 million of addi-tional debt financing secured by a junior lien against the company’s inventory, receivables and other working capital. It’s been the playbook that Lampert has been following for the last few years to keep Sears afloat while he tries to effect a turnaround. That playbook has included short-term loans from ESL, store closures where needed and the monetization of assets, whether it was the spinoff of Lands’ End or the sale of real estate to create Seritage.

Sears still owns about 250 unencum-bered Kmart and Sears full-line mall stores, and it is still evaluating alternatives for its Kenmore, Craftsman and DieHard brands, as well as its Sears Home Services business.

According to some credit analysts, the new key, critical date for Sears could be late next summer or early fall. That’s when some believe that Sears might give up its ghost and file for bankruptcy since

the two-year mark for the real estate transactions connected with Seritage will have past and can’t be undone as a “fraudulent conveyance.”

When posed with the question regard-ing the timeframe and concerns about a bankruptcy filing, Riefs said: “We won’t comment on rumor or speculation.”

So how bad is Sears’ financial picture as it heads into 2017?

Sears has a $500 million term loan maturing in July 2017 that’s secured by 21 properties. One credit analyst said a ques-tion exists over what can Sears do in the matter of a refinancing. Another credit analyst said the company can continue to close more stores, noting that “would help, but it is not enough to help its finan-cial profile.” One commercial lender, a factor, said his firm had been “approving orders through the summer but now is almost all out of Sears.” Another individ-ual on the credit side said he’s been tell-ing clients for months not to ship to Sears and if they do, it would be at their own risk. This person said he’s called clients to tell them they “shouldn’t be in there and if they are to reduce their exposure.”

Sears ended its most recent quarter — its third quarter that ended Oct. 29 — with a net loss of $748 million, or $6.99 a diluted share on a net revenue decline of 12.5 percent to $5.03 billion. At the end of the three-month period, Sears said it had $258 million cash, while short-term borrowings were $618 million. Merchan-dise inventories were $5 billion, while merchandise payables were $1.6 billion. Sears said at the time that it used about $1 billion of its $1.97 billion revolving credit facility, and the amount available to bor-row was $174 million. Total long-term debt was $3.7 billion.

Sears chief financial officer Jason M. Hollar said earlier this month when the company posted third-quarter results that the company has financing resources available, but then said it was under a credit facility through its 2nd Lien Debt capacity. Sears said the 2nd Lien Debt Capacity is $2 billion, of which it had $604 million in debt outstanding at the end of the third quarter.

Shares of Sears shot up 5 percent earlier in the day when it said it had the standby letters of credit facility, but then rose even further to close up 10 percent to $9 in Nasdaq trading.

Sears is closing another 30 stores, many of which are Kmart locations.

ESL Extends Lifeline to Sears COnTinuED FROM PAGE 1

● Sales rose following a record-setting warm November.

by arthur ZacZkiEWicZ

Weather forecasting firm Planalytics said in its December weather impact report that colder temperatures in the Eastern U.S. bolstered sales of outerwear for apparel retailers. The researchers estimate “that weather boosted this sector’s sales by $309 million (versus last December) in just the markets east of the Mississippi River alone.”

The $309 million gain is an upwardly revised estimate from a prior estimate of $273 million.

The report was released as the National Oceanic and Atmospheric Administration’s climate prediction center is expecting colder than normal temperatures over the next two weeks. In a report earlier this month, market data showed that colder temperatures were driving sales of bomber jackets, peacoats and parkas.

Researchers at Planalytics said “certain

heavily populated markets saw very large year-over-year increases. Boston, Phila-delphia, Chicago, Richmond and Raleigh were up from 1.1 to 4.7 percent versus

[last year],” while, conversely, on the West Coast, “retailers saw unfavorable comp performance due to the warmer temperatures.”

The firm said it was worth noting that sales of sporting goods were also up on an year-over-year basis. “These more favorable conditions came directly after a very warm November — the warmest in 55 years,” the analysts said in their report. “The abrupt change in temperatures pro-pelled shoppers into the holiday mind-set even more, increasing demand for outer-wear, winterwear (hats/gloves/scarves), boots and sweaters.”

Regarding snow conditions, the analysts at Planalytics said the northern tier of the U.S. “saw increased snow versus [last year], with select markets in the Midwest and Northeast seeing measurable snow during Super Saturday weekend.”

In the National Oceanic and Atmo-spheric Administration report, researchers at the center expect colder weather across most of the U.S. over the next eight to 14 days with the Pacific Northwest seeing the sharpest below-normal temperatures. The lower reaches of Florida and the northern regions of Alaska are expected to experi-ence higher-than-normal temperatures.

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Cold Snap in East Pushes Up Outerwear Sales by $309M

Children run along the national Mall as snow begins to fall in Washington, D.C.

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‘Nightlife for Grown-ups’ at The DorseyDavid Rabin’s craft cocktail lounge opens today inside Las Vegas’ Venetian Hotel.

new year, new bar. David Rabin, the former lawyer-turned-hospital-ity ace behind New York City hot spots like Cafe Clover, The Skylark, The Lambs Club and Jimmy at the James, is lifting the veil off of his latest creation: The Dorsey in Las Vegas' Venetian Hotel.

What started with a friendly game of tennis with Rob Goldstein, president of Las Vegas Sands Corp., turned into a business pro-posal that brought Rabin back to Las Vegas for the first time since 2005, when he left V Bar. "I always had a bad taste in my mouth that we had created this thing long be-fore Light and Tao and all the other big clubs came to Vegas," Rabin said. "It’s frustrating to be there so early in the transformation of Vegas and not be able to see it through, so I jumped at the chance when Rob asked me."

Rabin thinks Vegas has New York City beat as far as big-scale nightlife is concerned. "I can’t remember the last nightclub opening in New York that caused a stir," he said. "But in Vegas, they’ve taken the ball on this. They’re opening these massive, extremely well-designed night-

clubs and they’re able, because of the volume, to pay incredible fees for this top-tier DJ talent." The Dorsey will offer an alterna-tive to Vegas' flashy, towering clubs. As Rabin put it, it will be "nightlife for grown-ups."

"When I say ‘adult,’ that’s a mind-set," he said. "It could be a 27-year-old who’s just not into going to shot and beer bars any-more. Like, they’re done with that part of their life or they’re done with it for that night." Sam Ross of New York's Attaboy curated Dors-ey's craft cocktail menu. Thomas Schlesser of the Design Bureaux is responsible for the lounge's interior. Equally as important as the drinks and the design is the music — a mix of "neo-soul, funk, R&B, reggae, old school hip-hop." Check all Top 40 hits at the door.

The Dorsey won't have a set food menu, but it will offer food through The Venetian for private and semiprivate events. "We’ll have specially designed menus, sort of like how we do it at Skylark, where we have platters of food available for smaller groups, but it won’t be a place where you’ll come have dinner at 10 o’clock,"

Rabin said. He'd prefer to see more food options, but said smok-ing regulations in Vegas casinos have complicated the process.

"I hope that every aspect of it will be a slightly elevated experi-ence from what currently exists in Vegas," Rabin said of Dorsey. "Not to the point of feeling exclusionary, but certainly to the point of feeling aspirational. There’s a little bit more bounce in your step when you walk in this place. You feel like you might look a little bit better or feel a little cooler just 'cause you walked in. The music hit you right, the lighting hit you right, your drink is fantastic, you have a beautiful woman who’s working there say 'hello' to you, your server, or a handsome guy behind the bar. And they meant it, they were kind about it. That’s the thing about hospitality — it has to feel genuine, not forced."

The Dorsey opens today. — AlexA TieTjen

The Dorsey at The Venetian Resort Hotel Casino3355 Las Vegas Blvd. SouthLas Vegas, NV 89109www.venetian.com/restaurants/the-dorsey.html

Caballo Blanko

A view of the space inside The Dorsey.

Fashion Scoopsroyal Accoladealthough Queen Elizabeth’s annual New Year’s honors list is yet to be released, it appears one person is already planning her visit to Buckingham Palace.

According to the Daily Mail, Victoria Beckham will be named an Officer of the Most Excellent Order of the British Empire, or OBE, in the Queen’s New Year’s honors list, which is set to be released on Saturday.

According to the British tabloid, the British designer revealed the news to her family over the Christmas holiday, saying that she is “delighted and humbled for the recognition.” The honor recognizes Beckham’s contributions to the British economy and to charity.

The designer’s husband, David Beck-ham was handed an OBE 13 years ago for his services to British sport.

A spokesperson for Beckham did not return requests for comment.

The honor would be the culmination of a successful year for Beckham, who launched her first makeup collection in partnership with Estée Lauder last Sep-tember and watched it fly off the shelves.

As reported last month, she is set to release a second cosmetics capsule collection with Lauder in the new year, as well as a skin-care line with a niche beauty partner. — nATAlie THeODOSi

Good HumorlVMH Moët Hennessy Louis Vuitton has lost its legal fight against spoof tote bag company My Other Bag. On Dec. 22, the United States Court of Appeals for the Second Circuit tossed out the luxury conglomerate’s appeal from a judgment of the United States District Court for

New York State’s southern district.In January 2016, Judge Jesse M.

Furman had struck down the luxury conglomerate’s formal allegations of trademark dilution, violation of fair use, dilution by blurring, trademark infringe-ment and copyright infringement. The firm first filed these claims against My Other Bag in 2014.

In its summary order, which affirmed the judgment of the district court, the Second Circuit said that “obvious differences in My Other Bag’s mimicking of Louis Vuitton’s mark, the lack of market proximity between the products at issue, and minimal, unconvincing evidence of consumer confusion compel a judgment in favor of My Other Bag on Louis Vuit-ton’s trademark infringement claim.”

On the trademark dilution claim, it said: “At the same time that they mimic Louis Vuitton’s designs and handbags

in a way that is recognizable, they do so as a drawing on a product that is such a conscious departure from Louis Vuitton’s image of luxury — in combination with the slogan ‘My other bag’— as to convey that My Other Bag’s tote bags are not Louis Vuitton handbags.”

In its conclusion, it said Louis Vuitton’s remaining arguments were without merit.

LVMH declined comment on the appel-late court’s ruling. My Other Bag said that Louis Vuitton is the only luxury brand that has challenged its products.

My Other Bag’s products are known parody handbag designs by LVMH labels, including Céline and Louis Vuitton — the illustrated, caricature-type likeness of which are superimposed onto cotton tote bags and pouches.

My Other Bag founder and chief ex-ecutive officer Tara Martin launched the brand in 2012. — lAURe GUilBAUlTVictoria Beckham

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