WWDSTYLE

PHOTO BY THOMAS IANNACCONE

Raúl’s Rules

Broadway actor Raúl Esparza, soon to be seen in a revival of Tom

Stoppard’s“Arcadia,” talks celebrity, theater and “Pretty Woman.”

SEE PAGE 7.

KELLY’S HEROESREADY-TO-WEAR: Reality TV maven Kelly Cutrone

links with Chris Burch to launch the Electric Love

Army line, inspired by the likes of Cher, Blondie

and Joan Jett. PAGE 3

textiles & trade2 WWDSTYLE tuesday, march 8, 2011

By Kristi Ellis

WAsHiNGtON — Apparel executives are raising the specter of a prolonged increase in raw materials and labor costs as they grapple with a new inflationary cycle that has sent them scrambling to find ways to offset staggering price hikes that are bound to impact their bottom lines.

Facing historic highs in raw cotton prices, which hit $2.33 a pound last month in a key index, as well as signifi-cant increases in wool and synthetic fibers, executives at-tending the American Apparel & Footwear Association’s annual executive summit here aired their concerns and discussed strategies to determine how long the price in-flation will last — and how high it will go.

Price increases in cotton, driven up by a host of factors — from a tight global supply and flooding in Pakistan last year to nervous Wall street specula-tors — are not expected to diminish until the Western Hemisphere crop is harvested, beginning in september and October. the consensus was that, while a fresh in-fusion of cotton into the global market will stabilize prices, it will not bring them back down to their an-nual long-term average of about 65 cents a pound.

Over the last year, prices have jumped by as much as 160 percent for cotton and 44 per-cent for wool. the steep price increases also have forced companies to use cotton fabrics blended with synthetic, resulting in higher demand and price hikes for man-made fibers.

Apparel brands and retailers, wary of con-sumers’ unwillingness to absorb the price in-creases, are bracing for an expected hit on unit purchases and tighter margins.

“Our team was aware and abreast of the problems associated with this escalating crisis, not only in cotton but also in labor,” Mark Weber, chief executive officer of lVMH inc. and chairman and ceo of Donna Karan international, said in an interview. “Early on, we decid-ed on the alternatives we might have, such as changing blends, adjusting products and understanding that we had an obligation to make sure that, if prices were to go up, our products deserved the price increases.”

Weber said the luxury company is “well positioned” despite expected price increases of 5 to 10 percent, de-pending on the category.

“We haven’t really seen [inflation] through this first half of the year,” Weber said. “spring is perform-ing very well. For fall, we’ve arranged our prices. retailers purchase in dollars, not in units, and they will be forced to plan their assortments based on what-ever inflation in prices exists.

“there is always a shift in share of market, and re-tailers get paid to pick the best,” Weber added. “if they find us to be more fashion correct and more relevant, we will get a larger share of their openness to buy and that is what we are seeing. We are doing more business, and our expenses and cost structure are under control.”

rick Darling, president of lF UsA, noted that the industry is coming out of a 30-year period of price de-

flation on the wholesale side, driven pri-marily by China’s market entry, which had a major impact on lowering labor rates around the world.

“that day is over,” said Darling in an interview. “[last year] marked a com-plete turnaround…when China started to encourage significant increases in labor and that is going to continue, in

our opinion, in the foreseeable future.”Darling said the spike in commodity prices has

added more pressure and is being driven by demand around the world outside of the U.s. and Europe.

“it’s a fundamental change in supply and demand that is driving up those prices,” he said. “Are they sus-tainable at this level? We’re not sure. Certainly in the short term the industry is struggling with how to react and how much of those costs will be passed on to the con-sumer and how much of those costs the retailer versus the wholesaler will bear. it’s having a significant impact.”

Demand for cotton products has been growing sig-nificantly in China and india, said Kevin Burke, presi-dent and ceo of the AAFA.

“Here in the U.s., where we grow a lot of cotton, there has been a lot of pressure on farmers to grow other cash crops like corn for ethanol,” Burke said. “i don’t believe cotton prices are going to go back down to where they were a year ago, so the challenge for our industry will be how to keep the product reasonably priced with commodity prices so high.”

J. Berrye Worsham, president and ceo of Cotton incorporated, told executives at the summit there

might be some relief in prices on the way.

“traders are telling us that this upcoming crop will probably sell at a cheaper price than the current crop is selling at the mo-ment,” Worsham said. “But they are also telling us not to expect massive reductions in prices.”

Cotton inc.’s economist, Jon Devine, said last week that early projections for the August crop season are for “the largest cotton harvest ever recorded” worldwide, at 127.5 million bales, represent-ing 6 million bales more than have ever been harvested. Devine said a composite aver-age of forecasts from the U.s. Department of Agriculture, the international Cotton Advisory Committee and the Cotlook A index are for a 10 percent in-

crease in supply in the 2011-12 crop year from the pre-vious 12-month period.

While that should help stabilize prices, for now, ap-parel brands and retailers are facing some difficult fi-nancial times, Worsham said, noting that a 100 percent increase in cotton prices translates into an average in-crease in apparel retail prices in the Consumer Price index of 6 percent.

“A theoretical 6 percent increase in the CPi would be massive and we would see a big hit on volumes this year,” Worsham said, adding the industry’s overall margins could take a 1 percent hit as a direct result of higher cotton prices.

“it’s pretty fragile out there,” said Worsham. “Consumers will be hit with price increases and we do believe it will have an impact on unit volumes.”

Companies like Hong Kong-based supply chain giants luen thai Holdings ltd. and lF UsA are on the prowl for new sourcing opportunities to help offset the rising costs of labor in China and raw materials worldwide.

Henry tan, ceo of luen thai, who gave a presen-tation on the changing face of sourcing in Asia, said the Chinese government, which recently doubled the nation’s minimum wage, plans to double it again in its next five-year plan. tan said apparel compa-nies are “running out of cheaper wage countries and we are also running out of duty free countries that are viable.”

He said China will remain the most competitive country in the world over the next five years, but appar-el firms will have to continue to move inland away from the Pearl river Delta and coastal manufacturing hubs.

But with diversified sourcing the mantra in the in-dustry, tan said he is continuing his search for new sourcing opportunities in the dwindling supply pool.

“i believe indonesia is close enough and too many people are going to Vietnam and Cambodia,” said tan, adding there is not as much competition for the labor force from high-tech companies in indonesia as there is in other developing southeast Asian countries.

tan is also backing legislation that would give duty-free treatment to apparel produced in the Philippines, a country he believes could significantly increase busi-ness through a preferential trade arrangement.

lF UsA’s Darling said Vietnam, Cambodia, indonesia and Bangladesh are “big beneficiaries” of the price and labor increases in China. He said a regional trade deal known as the trans Pacific Partnership currently being negotiated by nine coun-tries, including the U.s., could provide new opportuni-ties, particularly if Vietnam is given duty free status on apparel.

“it’s a great production country with a very hard working workforce and strong management capabili-ties,” Darling added. “One of the reactions to rising prices is to seek out duty free environments.”

Inflation Looms Over Apparel Industry

Cotton Inc. has forecast a

record harvest of

127.5 million

bales in the 2011-12 crop year.

Rick Darling

J. Berrye Worsham

Indonesia is cited as a growth country for apparel exports. Its GDP grew 6.1 percent last year.

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By ROSEMARY FEITELBERG

In A quInTESSEnTIAL only-in-new-York kind of story, a venture capitalist and a publicist-reality TV personality strike up a conversation on a SoHo street — each unaware of the other’s claim to fame — and within months go into business together.

Far-fetched as that may sound, that’s how Chris Burch first got to know Kelly Cutrone, with whom he is now launching Electric Love Army sportswear line and related boutiques. Last fall, standing on the sidewalk near what is now Alexander Wang’s new Grand Street store, Burch won-dered aloud to one of his daughters, Louisa, if the space was available. Parked on Le Pain quotidien’s bench nearby having a coffee, Cutrone piped up, “It’s not for rent.”

“What are you, the mayor of new York?” Burch wise-cracked. “no, but I am the mayor of Grand Street — my house and my office are here,” Cutrone shot back. The pair, each racon-teurs in their own right, were soon off and running in what has lead to a multimillion-dollar deal.

“Chris asked me what I did, and I said, ‘I work for People’s Revolution’ and he said, ‘never heard of it.’” Cutrone recalled during an interview with Burch and her business partner, Robyn Berkley. But after chatting about fashion, marketing and other areas of common ground, Cutrone and Burch agreed to a business lunch. And just last week, People’s Revolution and J. Christopher Capital LLC fi-nalized a deal for Electric Love Army (ELA) sportswear, which is set to hit stores in February 2012.

ELA will play up empower-ment, with Cher, Joan Jett, Katy Perry and Debbie Harry in her Blondie days embodying the strong iconic women the brand is inspired by. Geared for women between the ages of 18 and 34, the label should appeal to a cross between “some cool granola girl mixed with the ultimate fashion chick,” Cutrone said. The bulk of retail prices will range from $30 to $300, with $77 being the aver-age. Leather will not be used in any way in order to appeal to socially conscious shoppers. For the time being, ELA’s base is on the second floor of People’s Revolution’s SoHo offices where Patti Pao, who continues to run The Pao Principle consultant firm, is the intermediary.

With an initial investment north of $5 million, the company aims to open two to five of its own freestanding stores in the first year, with SoHo and Manhattan’s upper West Side being immediate areas of interest, as well as Los Angeles. Wholesale distribution is being considered, provided they could control ELA’s retail environment. Should the brand take off stateside, it is being positioned to go global “very quickly,” with Asia and Europe being at the top of the list, Burch said. But he declined to predict first-year sales, since the retail plan and distribution are still being ironed out.

Once the T-shirts, dresses, colorful denim and other “sexy, fun affordable clothes” arrive, there will be live window displays, in-store band performances and other events to try to keep shoppers coming back. Lining up the photographer Mary Ellen Mark, the godmother of Cutrone’s daughter, Ava, to shoot Polaroids of customers in a store window is one of the many ideas being considered.

Burch said his primary criteria for launching brands is they have got to do something unique, and he only wants to work with people who love what they are doing and who are extraordinary to work with. “And, I don’t ever want to compete with a brand I have in development or that I own,” he said. “Most importantly, I think the combination of three of us can offer something unmatched. With my sourcing

and business acumen, Kelly’s vision and creativity, Robyn’s know-how and the whole team’s ability to execute that, we can offer great clothes at a price women can afford.”

Burch, who remains chairman of his ex-wife Tory Burch’s clothing business, plans to leverage his affiliations with other investments in his portfolio that could benefit ELA. Aliph Jawbone wireless accessories, Voss water and Color Kinetics are among the companies he has made di-rect investments in.

Through People’s Revolution, Cutrone and Berkley on average deal with 20 to 30 clients each year and have often talked about what might make them better. Then there is the national recognition they gained taping the reality shows “The Hills” and Bravo’s “Kell on Earth.” And now as a correspondent for “Dr. Phil,” Cutrone remains dialed in to the plights and interests of an array of women, especially teenagers. With a second book nearing completion, an MTV

show in the works and having just sold another show to the E network of which she is executive producer, Cutrone’s celebrityhood continues. Through friends, TV personali-ties and producers, musicians, stylists, celebrities, photog-raphers, artists and various other contacts, Cutrone hopes that ELA product will be integrated through reality shows, other TV programs, film and music.

While Cutrone and Berkley are content to serve as the front-of-house for the brand, Burch relishes the sourcing that goes on behind the scenes. His team visits about 1,000 factories a year — some of which he said “are in the most far-out places of the world. We will travel by plane or bus, or whatever way we have to go to factories.” That gumshoe approach was something he took to when starting his first business, Eagle’s Eye, as an Ithaca College student going door-to-door selling sweaters. With plans to launch nine new companies in a variety of fields, Burch left Saturday for a six-week tour of 10 factories. He said, “I try to visit every factory that we use to form a relationship with the manager or owner to make sure they understand how im-portant they are to our company. I’m not sure that’s nor-mal for most people in the fashion industry.”

3WWDSTYLE Tuesday, march 8, 2011

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Strong, iconic women such as Katy Perry, Cher, Debbie Harry and Joan Jett inspired the line.

Kelly Cutrone Gets Electricready-to-wear

ROYAL WATCHERS ARE eagerly anticipat-ing Kate Middleton and Prince William’s April wedding, but that union had nothing to do with designer Matthew Williamson’s decision to take the plunge into bridal.

In fact, the London-based designer was on the case long before the royal son made things official by giving Middleton Princess Diana’s sapphire engagement ring. Williamson first tested the waters a year ago by unveiling a capsule collection of wed-ding dresses through net-a-porter. Beyond the natural progression from eveningwear to wedding dresses that many designers choose to pursue, he had proven sales fig-ures to back up his inclination. The fact that many fashion-conscious brides-to-be were selecting dresses from his eveningwear for themselves and their bridesmaids was an-other reassuring point.

Even before he designed this full-fledged collection, Williamson knew firsthand how exacting brides can be. He designed custom-ized wedding dresses for his sister Andrea, his best friend Chantal Kerzner and, more notably, for Kelis’ wedding to nas. The latter asked for a gown the color of green grapes, so that is precisely what Williamson made. “It was so fitting of her personality and style that she was delighted with the result,” he said.

The 12-piece collection he has devel-oped is offered in more traditional shades. A parachute gown, a poppy georgette embel-lished shift dress and a tulle cocktail dress with hand-sewn ivory-colored feathers are a few of his personal favorites. Each style required significant craftsmanship, includ-ing fine embroidery, ornate beading and the use of luxurious natural fabrics such as a buttermilk-colored silk satin dress printed with a hand-painted abstract wintery scene accomplished through a burn-out technique. To complement that design, there are one-shoulder bridesmaid dresses softly draped in the same fabric and fitted at the waist. Williamson also created jewel-encrusted mink and rabbit fur shrugs. But there are more relaxed styles as well, like sheer ivory silk maxidresses with plunging necklines and ruffled skirts covered with Swarovski crystals for beach-bound destination wed-ding brides.

Williamson may host a trunk show April 9 at his Meatpacking District flagship in new York. The collection wholesales from $1,400 to $3,300.

It is too soon to tell where Williamson will catch the April 29 royal wedding but the designer is certain Middleton’s look will be copied far and wide. “I mean, who doesn’t want to look like a princess on her wedding day?” he said. —R.F.

Matthew Williamson Launches Bridal Line

Wedding dresses from Matthew Williamson’s new collection.

retail4 WWDSTYLE tuesday, march 8, 2011

LVMH Takes Control of BulgariWhile the owning families of Hermès

might see Arnault as a raider as wel-come as Attila the Hun, the Bulgari clan believes that joining the LVMH stable offers nothing but synergies and growth potential. Francesco Trapani, who has been ceo of Bulgari for 27 years, said his family “wanted to remain entrepre-neurs, we were not looking to retire and cash out.”

“We were not ready to sell, but to change the profile of our entrepreneur-ial activity,” he added. “LVMH is the perfect partner and there is no question about its scale and global high quality management structure.”

Trapani said he had been in talks over the years with “the majority” of luxury companies about a possible sale, but that “they were not open to a situa-tion like this, they were afraid of losing full control, especially Italians, who are jealous of their companies. My view of having a more industrial approach did not convince them.”

Bulgari is not coming cheap for Arnault, the world’s seventh richest man with a worth estimated at $26 bil-lion. Not only will the luxury titan have to shell out a substantial amount of cash, but he also is slightly loosening his family’s grip on LVMH itself.

The structure of the deal is unique in that LVMH will, for the first time in 23 years, issue shares to partially pay for Bulgari.

Under the terms of the purchase, LVMH is set to pay a total of 4.3 billion euros, or $6.01 billion at current ex-change. The French luxury giant will issue 16.5 million shares in exchange for the 152.5 million Bulgari shares cur-rently held by the jeweler’s founding family, who own 50.4 percent of the com-pany. The LVMH shares are worth 1.86 billion euros, or $2.6 billion at current exchange. The Bulgaris also could buy another 14.5 million LVMH shares on the basis of the same exchange ratio. In that case, the purchase of Bulgari would be financed with 48 percent in LVMH shares and 52 percent in cash and finan-cial debt.

If the Bulgaris do not buy the addi-tional shares, 2.4 billion euros, or $3.3 billion, of the purchase price would be financed with available cash and new financial debt, or 56 percent of the total price. This would have a limited im-pact on LVMH’s debt, according to the company, which currently has a debt-to-equity ratio of 16 percent and free cash flow of more than 4 billion euros.

LVMH will make a tender offer for the remaining 49.6 percent of Bulgari’s shares outstanding at 12.25 euros, or $17.12 a share. This represents a 59.4 percent premium on the closing price of Bulgari shares on March 3. On Monday, Bulgari’s shares soared 59.4 percent on the Milan Stock Exchange, closing at 12.10 euros, or $16.91.

Following completion of the deal, Bulgari will be delisted and the Bulgari family will have two representatives on the LVMH board. Paolo and Nicola Bulgari will remain chairman and vice chairman of the Bulgari board, respectively. Trapani is to join the ex-ecutive committee of LVMH and take the management helm of the French group’s watch and jewelry division in the second half, succeeding incumbent Philippe Pascal.

In a conference call with analysts, Antonio Belloni, LVMH group managing director, said Trapani will remain ceo of Bulgari “in the short term, to assist in this important transition, but that, in the context of larger responsibilities, a new leader will be put in place.” As for Pascal, Belloni said that, as a “valued resource who has done an excellent job, we have an excellent assignment for him in the future,” following the transition period. He declined to pro-vide details.

LVMH’s watch and jewelry division was created in 1999 with the acquisition of Chaumet, Zenith and Tag Heuer. In 2001, LVMH set up a joint venture with De Beers to establish a diamond jewelry re-tailing platform, fol-lowed in 2008 by the acquisition of Hublot. “We are relatively young in this catego-ry and we cannot say we had a leadership, but at LVMH we do like to be leaders, so we will be doubling the size of our watch and jewelry division and strengthening our group [with the Bulgari deal],” said Belloni.

The LVMH watch and jewelry divi-

sion registered sales of 985 million euros, or $1.3 billion, in 2010, up from 764 million euros, or $1.06 billion at average exchange rate, in 2009. Including Bulgari, the di-vision’s pro-forma sales would be 2.05 billion euros, or $2.71 billion. Bulgari had sales of 1.06 billion euros, or $1.4 bil-lion, last year, with jewel-ry accounting for almost half of that, followed by fragrances, watches and accessories. Bulgari op-erated 173 directly owned

stores worldwide as of the end of December.

“This is a significant step for our fam-ily as well as for Bulgari, occurring at a time of strong revenue growth,” said Trapani during the call, adding that Bulgari sales in the first two months of

the year were up 25 percent at a compa-rable exchange rate, and that its order book more than doubled as of the end of February.

But Bulgari’s trajectory in recent years hasn’t been continually upward. The company struggled following the recession of 2008, as did many of its competitors, and also stumbled slight-ly several years before that with the expansion of its watch line. Recently, however, Bulgari has registered strong increases in profits and sales, although its profit margins at about 10 percent continue to lag those of the rest of the industry.

“Our entrance into LVMH will allow Bulgari to reinforce its worldwide growth and to realize noteworthy syner-gies, in particular in the areas of pur-chasing and distribution,” said Trapani. “My vision is that the luxury market will continue to grow in the next 10 years, become progressively and increasingly more competitive, and in more geo-

{Continued from page 1}

’’’’

The Bulgari Man scent.

We need to be more competitive in new areas, from Russia

to China, India and the Middle East,

to prosper.— Francesco Trapani

5WWDSTYLE tuesday, march 8, 2011

SOMETHING NEW: Who said pop stars are high maintenance? Lily Allen arrived at Chanel’s studios Monday afternoon alone amidst a logjam of editors, couriers and Chanel staffers, patiently waiting in the reception vestibule and even holding the door for people. “I’m here to see Karl for my wedding dress,” she disclosed. Allen sang live at a Chanel fashion show in 2009, and also fronted a handbag campaign the same year.

STELLA TURNOUT: A number of Christian Dior couture creations from the brand’s beginnings through today are featured in a new tome by Patrick Demarchelier, due out in November. “I took the photos in New York and Paris, working with different models — Gisele [Bündchen], Sasha [Pivovarova]. I even did some in here,” said the photographer, gesturing to the lavish hall of the Opéra Garnier, where he attended the Stella McCartney show Monday. Titled “Dior Couture by Demarchelier,” the book was art directed by Fabien Baron. At the show, Natalia Vodianova glided into her seat, looking ever fresh despite having run the Paris half-marathon a day earlier. In tow were her three children — Lucas Alexander, Neva and Viktor. Courting the flashbulbs, Sir Paul McCartney said he is looking forward to the September opening of the New York City Ballet’s “Ocean’s Kingdom,” for which he composed the music. “Buy a ticket,” he yelled, as the lights dimmed.

PRISON BREAK: There’s nothing like a good fashion show for light entertainment. That was the case for a gang of French actresses playing some mighty tough roles who packed into the Chloé show on Monday. Mélanie Thierry, for instance, is shooting in the feature film debut of director Stéphane Cazes, “Le Sens de Nos Peines,” in which she plays a pregnant inmate. “We’re filming in a real prison. It’s pretty tough, but it’s important,” she said. Clémence Poésy is the latest actress to portray Joan of Arc, meanwhile, having recently wrapped “Jeanne Captive.” The Philippe Ramos-directed flick is up for selection for Cannes.

Anaïs Demoustier, 23, also could be hitting the French Riviera film festival for “Sponsoring,” a Polish movie directed by Malgorzata Szumowska in which she plays a student who prostitutes herself. Working alongside Juliette Binoche was a powerful experience, she said. “We started filming just after she won the best actress award at Cannes, but it’s really important to be able to cut off from the fact that you’re working with a major celebrity, otherwise you’ll lose the focus,” said the actress, who has already spied a long white Chloé dress for the red carpet, should the film be selected. “I like the idea of wearing flats with it, as it’s fresh and I think you can get away with it when you’re young,” she said.

MAY I HELP YOU?: Bianca Brandolini d’Adda usually has her pick of designer duds, but in her new movie, the tables are turned. The socialite and aspiring actress, who took in the Giambattista Valli show, said she plays a

sales assistant for Prada in “I Love You Too Much to Tell You,” a romantic comedy from Italian director Marco Ponti. “It was fun, actually, to act in a real shop,” Brandolini d’Adda said of her scene, which was shot at the Prada store on Via Condotti in Rome.

Valli’s front row also included Lee Radziwill, Virginie Ledoyen, Mélanie Thierry and Charlotte Dellal, who said she collaborated with milliner Victoria Grant on a capsule collection of hats to go with her fall Charlotte Olympia shoe line. “My starting point was Agatha Christie this season,” said Dellal, who is known for her collection of unusual headgear. Case in point: the Marie Mercié hat she wore to the show, which was shaped like a hand in a leopard-print glove.

Elettra Wiedemann is taking some time off after completing her master’s degree and launching her charity One Frickin Day. Include her modeling contracts for Lancôme and other brands, and it adds up to a taxing schedule. “It was a really intense year,” she reflected. “I mean, I live in New York and I’ve only been in New York about three weeks this whole year.” Not that this has quelled her wanderlust: Wiedemann is planning trips to Iceland and British Columbia next.

THE WOMEN: At Emanuel Ungaro, Kristin Scott Thomas said she’s heading back to the London stage. She starts rehearsals soon for a run of Harold Pinter’s “Betrayal,” marking a deliberate break from a slew of films she’s done recently in England and France. She noted she does many movies in the latter country because “they’ve got many good roles for women at my age.” Ones in her mother tongue, she laughed, “all get snapped up by Julianne Moore and Meryl Streep.”

FAMILY AFFAIR: The Hermès family, out to prove its unity in the face of advances by LVMH Moët Hennessy Louis Vuitton, has added another two members to its executive ranks. Eric de Seynes, 51, has been named head of the supervisory board, succeeding Jérôme Guerrand, who has resigned after 20 years in the post. De Seynes is chief executive officer of Yamaha Motor France. Meanwhile, Julie Guerrand will take over as director of corporate development in charge of investments and coordination missions. She will report to Mireille Maury, managing director of finance and administration at Hermès. Julie Guerrand, 36, has been working for the Rothschild Group since 1998. Both belong to the sixth generation of heirs to Thierry Hermès, who founded the company in 1837.

TALENT SHOW: This Wednesday and Thursday, the Council of Fashion Designers is highlighting the work of two panelists at the Newsweek & Daily Beast Women in the World Summit. Rebecca Lolosoli from Kenya and Phelicia Dell from Haiti — both from the Vital Voices network—will be showcasing their designs in the CFDA offices. Lolosoli, the matriarch of Umoja Uaso Women’s Village that protects women and girls fleeing from abuse, is bringing beaded jewelry and crafts that help sustain the village, while Dell features her VéVé handbags inspired by her native country.“It will help these two women who have emerging businesses,” CFDA executive director Steven Kolb said. “We are giving our members an opportunity to meet some interesting artisans that could bring collaborations and ideas to them. It’s a resource and introduction to artisans from Kenya and Haiti.”

Fashion scoopsgraphical areas. We need to be more competitive in new areas, from Russia to China, India and the Middle East, to prosper.”

Armando Branchini, dep-uty chairman of Milan-based consultancy InterCorporate, concurred, saying that con-sumer spending is expected to grow over the next few years and that, as part of LVMH, Bulgari will be able to open more stores around the world. “This is a win-win-win situ-ation: LVMH buys a firm with a strong positioning, that is consistent and has a big global potential; Bulgari obtains a 3

percent share in LVMH, becoming second majority shareholder, and the share price is at such a premium.”

A Milan-based analyst who requested anonymity said Bulgari secured a very high price, in “a sector that hasn’t seen this kind of values since 2007.”

Luca Solca, a senior analyst with Bernstein Research in Zurich, said “the price seems to be hefty versus our gener-al M&A guidelines. Expensive as it may be, the absolute deal size is small for LVMH,” with earning dilutions in 2011 and 2012 “likely to be minimal.” Solca said “the deal makes strategic sense and should be beneficial for LVMH. Bulgari is a potential megabrand with much to gain (media buying, retail development) from LVMH’s muscle. LVMH’s watch and jewelry are among the weakest areas — in need of a stronger brand lineup.”

René Weber, analyst at Bank Vontobel, said Bulgari gets a “very attractive price” at 21 times its EBITDA, and LVMH se-cures a “bigger size” in the watch and jewelry market. “As LVMH just has a very small leverage (debt-equity ratio 2010: 16 percent) and 50 percent of the deal is paid by shares, it does not have a big im-pact on their balance sheet.”

By doubling its watch and jewelry division in terms of sales, LVMH “gets closer” to producers such as Swatch and Richemont.

However, Weber estimated that the new LVMH watch business would still be less than half the size of the three big watch groups — Swatch, Rolex and Richemont. The new division will ac-count for roughly 10 percent of LVMH’s group sales, he said.

Richard Lowe, head of retail and wholesale at Barclays Corporate in London, said “the deal did not come as a surprise to me. You would expect LVMH to be on the lookout for global brands, with cross-continental appeal much like

Richemont did with Net-a-porter.com. And clearly, LVMH has bought the manage-ment’s vision for the brand. I doubt

that they would upset the applecart

by changing manage-ment now.”

Belloni said LVMH values the synergies of

the deal, and it fits in with LVMH’s philosophy of “one

model nurturing the uniqueness and differentiation of culture and integrity and creativity of each brand. There will be an opportunity to gain from putting the businesses together, and we will be stronger in development and retail, we can gain critical market, optimize our purchase of media and our organization around the world.”

Antitrust authorities are expected to approve the deal by the end of April. The closing of the share contribution is ex-pected in mid-May and the launch of the cash tender offer is expected at the end of May, followed by the closing of the cash tender offer at the end of June. Trapani said there was no exit clause and that the final agreement is unconditional.

In the conference call, Jean-Jacques Guiony, chief financial officer at LVMH, said this was “the first share swap in 23 years and the largest acquisition and not a precedent for any other transaction,” although he mentioned Christian Dior “did something similar” with Guerlain in the past.

Bulgari was founded in 1884 by Greek expatriate Sotirios Boulgaris, who later changed his name to Sotirio Bulgari, as a tiny silverware store established in Rome. Trapani, Sotirios’ great-grand-son, and the nephew of Paolo and Nicola Bulgari, became ceo in 1984 at age 27. In the mid-Seventies, Bulgari branched out

with high-end Swiss-made watches, such as the top-performing Bulgari design, where the logo is etched into the bezel. Trapani was instrumental in listing the company on the Milan bourse in 1995.

He also is credited with substan-tially expanding Bulgari in terms of its breadth of products and its retail reach. He has aggressively moved the company into accessories such as watches, silk products and leather goods and tapped Matthew Williamson to design a capsule collection. In light of the deal, Belloni said LVMH is still deciding on strate-gies regarding Bulgari’s perfumes and accessories categories, but that, for the latter, given the group’s expertise, “we’d be very smart to reason [on it],” he said.

— With contributions by Joelle Diderich and Samantha Conti

’’

’’Lucas Alexander Portman, Viktor Portman, Natalia Vodianova, Neva Portman and Alasdhair Willis.

Kristin Scott Thomas

An accessory from Bulgari.

Bernard Arnault

PHOT

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We are relatively young in this

category and we cannot say we had a leadership, but at LVMH we do like

to be leaders.— Antonio Belloni,

lVMH

Viennese fine jeweler frey wille tiptoed into the American market with the opening of its first new York flagship on Monday, on Madison Avenue.

The 900-square-foot space is being subleased from handbag brand furla. frey wille chief execu-tive officer frederich wille said the firm was drawn to this location as it offered a four-year lease, as opposed to the standard 10-year investment.

Though frey wille has 85 bou-tiques worldwide, this is only its second flagship in the U.s. The first opened in santa Monica, Calif., in november 2005.

wille said, “i consider new York, and America in general, the most dif-ficult market for anybody who comes from abroad, and it’s the highest-risk market.…Any investment needs to be thought through. it’s like a coronation of our worldwide city. it’s the most dif-ficult, but probably the most important.”

wille insists this flagship is not a indicator of a rapid expansion. “we won’t be popping up everywhere. we stay more exclusive than other luxury brands on purpose,” he said.

The store has a modern aesthetic and was a design collaboration between frey wille architect Miyako Tsutsui and chief designer simone Grunberger-wille, frederich wille’s wife. The space will feature frey wille’s complete collection of jewelry, watches and accessories, and has projected annual sales of $1.5 mil-lion. The company is best known for its

gold and enamel cuffs and rings, which are inspired by artists such as Claude Monet and Gustav Klimt. The design technique uses a colorful enamel finish over metals such as palladium, rhodium plate, 24-karat gold vermeil and 18-karat gold and retail between $435 and $4,500.

“we have introduced real art into jewelry, into fashion.…One of the rea-sons why our jewelry has become so important is it’s fantastic for the indi-vidual — those who want to be differ-ent, want to distinguish themselves and their own style.”

frey wille was founded in 1951 in Vienna by Michaela frey. wille became the company’s financial auditor in 1960, and the ceo in 1983. The company designed jewelry for Hermès from 1978 until 2009. The two luxury firms no lon-ger work together and have a “noble competition,” according to wille.

The store’s grand-opening recep-tion will take place in mid-April.

— Lauren Benet StephenSon

retail6 WWDSTYLE tuesday, march 8, 2011

India Hit With Strikes Over Branded Apparel

Global Retailing Roster Set

new DelHi — More than 10,000 retail-ers of branded apparel — including small shops in markets and in bigger malls — shut their doors throughout india Monday in an act of solidarity with fash-ion manufacturers.

Producers in india have been pro-testing since the government unveiled a 10 percent increase in excise duty on branded apparel last week. On friday, more than 100,000 factories closed in a protest orchestrated by the Clothing Manufacturers Association of india.

“we have to encourage consump-tion and not discourage it,” said Kumar rajagopalan, chief executive officer of the retail Association of india. The strike is estimated to have caused the loss of about $38 million worth of business in a single day.

As the india retailers Association takes up the issue, both big and small re-tailers are joining the pro-test. “we are approaching the ministry to reconsider the decision and hope to witness positive results out of it,” said Govind shrikhande, managing director of shoppers stop. Other retailers includ-ing Pantaloons and Arvind Brands, which operates stores for brands such as Arrow, izod and Polo, participated in the strike.

There is also anger that the budget did not address the issue of opening up the retail sector to foreign direct invest-ment, which had been widely expected. Currently, overseas companies cannot own more than 51 percent of a mono-brand retailer, while fDi is barred in re-tailers of multiple brands.

“it’s a negative step and we feel it should be held in abeyance,” said Premal Udani, chairman of the Apparel export Promotion Council, speaking about the government decision on ex-cise duty. “Also, the domestic industry is already reeling under price pres-sures, and garments are expensive be-cause of the raw-material hike. This will add to clothing inflation.”

Domestic apparel production in india is estimated to be worth about 1 trillion rupees, or $22.22 billion at current ex-change, annually, and the textile industry is the second biggest sector in india after agriculture. The apparel industry em-

ploys about 600,000 people nationwide.According to industry estimates, more

than 75 percent of branded apparel sales come from smaller players who already deal with seasonal issues, the skyrock-eting price of cotton and the capital in-tensive nature of the business. industry executives contend the excise duty could cause these smaller companies to fail.

in the past three days there have been strikes and protests in different regions, with more than 10,000 people protesting in Kolkata and more than 20,000 in Mumbai, in addition to sepa-

rate protests in cities such as Bangalore, ludhiana and indore.

“we will fight it till the end. if the government doesn’t respond positively to our demands, we might go for an in-definite strike,” said sanjay jain, vice president of the federation of Hosiery Manufacturers Association of india.

The issue has unified the indus-try, with the Clothing Manufacturers’ Association of india lending it a larger voice. “The response from the industry for the strike was very encouraging. we are positive that the government will roll back the proposed excise duty after such a reaction,” said rahul Mehta, the asso-ciation’s president.

He said a delegation from CMAi would submit a memorandum of de-mands to the finance and textiles minis-tries this week.

“The excise duty has been made mandatory by the government, and this will harm customers, apparel makers and retailers. Keeping the stores closed even for a day means loss of revenues for firms. we will collectively talk to the government,” said Thomas Varghese, ceo of Aditya Birla retail. — MaYu SaInI

TOMMY HilfiGer AnD MArTHA sTewArT are among the design entrepre-neurs and innovators set to speak at The Global retailing Conference of the University of Arizona’s Terry j. lundgren Center for retailing.

There’s also a long list of chairmen and chief executives signed on to speak at the event, which runs April 7 to 8 at the loews Ventana Canyon in Tucson, Ariz. included are: Mike George of QVC, Barbara Turf of Crate & Barrel, roberto Orci of Acento, Claudio Del Vecchio of Brooks Brothers, susan lyne of Gilt Groupe, jiri nechleba of 4r systems, Alan Dabbiere of Airwatch and Terry lundgren of Macy’s inc.

Others on the roster are raul Vazquez, wal-Mart stores inc.’s executive vice president of global e-commerce; javier Polit, chief information officer of the Bottling investments Group, The Coca-Cola Co.; ira Kalish, director of global eco-nomics, Deloitte Consulting; Michael Archbold, chief financial officer of Vitamin shoppe; jesse w. Curlee, president of supima Cotton, and jeff elder, vice presi-dent of marketing, j.G. Boswell Co.

“The conference offers a unique opportunity to fuse the experiences of estab-lished retailing-fashion leaders with the energy of new ideas and perspectives that are being formed at the University of Arizona,” lundgren said.

event details can be found at globalretailingconference.org, or by e-mailing mburke@cals.arizona.edu.

’’’’

If the government doesn’t respond positively to our demands, we might go for

an indefinite strike.— Sanjay jain, Federation oF HoSiery ManuFacturerS aSSociation oF india

Frey Willie Opens on Madison Ave.

A rendering of the Frey Wille flagship in New York.

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WWDSTYLE tuesday, march 8, 2011 7

WWD: Tell me about your role in “Arcadia.” Raúl Esparza: One of the central themes of the play is that sex is the attraction that Newton left out of his equations.…The character I play, Valentine, is a mathematician, but Stoppard writes him as a kind of unwilling poet and pulls out of him this amazing glimpse that he has, through all of his scientific learning, at what the reality is around us in the world.

WWD: What’s your dream role?R.E.: That’s funny. I get asked that a lot and I never have answers.

WWD: I’ll change the question. What are the top three women’s roles you’d like to play, now that Brian Bedford is in drag in “The Importance of Being Earnest”?R.E.: I think it’d be really great to play Mrs. Lovett in “Sweeney Todd.” I think it would be really cool to play Mama Rose in the “Gypsy” musical. It’s a cool question. Great women’s roles.…Why is it that our brains freeze up? I could probably tell you at home.…I’d like to play the Julia Roberts role in “Pretty Woman.”

WWD: I use that line a lot and you’re the only one who’s ever said “Pretty Woman.”R.E.: Cinder-f---ing-rella. It’s a good film. A fun film.

WWD: Do you watch a lot of movies and TV?R.E.: I think television is really in a new golden age.

WWD: What’s your favorite show?R.E.: Well, “Friday Night Lights” was, I mean, I just worship that show. Connie Britton gave one of the finest performances I’ve ever seen on TV.…Jesus, she’s great.

WWD: Do you enjoy working with actors in theater who have a pretty big career in television or film?R.E.: I think that becomes incidental on stage. A certain amount of celebrity might get people to buy tickets. But look, the market’s changing a lot for Broadway, so

there seem to be more and more people being hired from film and TV to do stage work. But I think, ultimately, you really have to have a good actor to deliver on stage. So what I’m interested in is just a good actor, it doesn’t matter.

WWD: Is that what you think when someone famous is cast, that it’s a ticket sale thing?R.E.: Not always. Look, Jeremy [Piven] being cast in Mamet is a no-brainer. He’s done a lot of theater and he was really, really, really, really great on “Entourage.” And it was a good fit for him, plus he’s a Chicago guy. So that kind of thing helps, partly because it helps sell tickets.

WWD: That didn’t end very well.R.E.: That one didn’t go so well. That is also the risk you run. All I can say about that is that, while he was there, he did good work.

WWD: What was the last play you saw?

R.E.: “Hamlet” in London at the National Theatre.

WWD: Have you done a lot of Shakespeare?R.E.: I haven’t done a lot. I did “Richard II,” and “Twelfth Night” at Shakespeare in the Park. I’d like to do more. It’s a lot of fun to do. Not always that much fun for the audience, but a lot of fun for the actors. But I’ve also seen some seriously bad Shakespeare where you just wanna gouge your eyes out.

eyeEvery Night Lights

On Sunday night, hollywood stars, oil executives, senators, cabinet secretaries and lobbyists got a taste of the kind of stamina once demanded of serious Washington socialites. the ritual of starting the workweek party-down tired, last seen in the mid-nineties when the Clintons ran the White house, was back in full force at the Kuwaiti Embassy. Proof positive: Ben Affleck and Michael Douglas waiting more than an hour to greet dinner guest of honor President Bill Clinton at the annual Kuwait-america Foundation gala hosted by ambassador Salem Al-Sabah and his wife, Rima. this year’s event raised almost $3 million for the uSO, celebrating 70 years of boosting the spirits of american military personnel stationed overseas.

Clinton led the crowd in a round of applause for his former aide, new Chicago Mayor Rahm Emanuel. Later, new york Congressman Anthony Weiner cautioned Emanuel to savor the next two years, adding: “that’s all the time he has as the leading Jewish city mayor.”

But Weiner didn’t get much time to gloat. When affleck, in town to testify before Congress on his democratic Republic of Congo initiative, took the microphone, he toasted war heroes John Kerry and John McCain, adding: “and then there’s Rep. anthony Weiner.” affleck and Weiner have a history of ribbing one another, which the actor acknowledged Sunday as he said: “anytime i can get a chance to juxtapose you against two american war heroes.…”

Weiner evened the score later in the evening. “has anyone here seen ‘daredevil’?” he asked after affleck admitted that, while he’s never served in the military, he’s been responsible for “quite a few bombs.”

But this being a Sunday night, many didn’t linger at the event. among the first to leave: Obama White house press secretary Jay Carney and his wife, Claire Shipman. Last to leave, not surprisingly: Clinton, along with singer Michael Bolton and his band. Most agile at adapting to changing democratic White house styles: Gene Sperling, now President Obama’s economic guru, who buttonholed his old boss Clinton and asked him and his foundation “to help with a White house program for retrofitting old buildings” to make them more energy efficient.

— SuSan WatterS

Embassy Greets

Raúl Esparza is a marquee name on Broadway and one of those rare theater actors whose name non-theater people know. Much of that is because he’s been nominated for four Tony Awards for his work in David Mamet, Stephen Sondheim and Harold Pinter plays, as well as “Taboo,” by Boy George. Last month he staged his first solo concert as part of Lincoln Center’s American Songbook series to two sold-out crowds. And he’s currently in previews for a Broadway revival of Tom Stoppard’s “Arcadia,” opening March 17, in which he stars opposite Billy Crudup and Grace Gummer. Esparza, a natural talker, spoke to WWD about Jeremy Piven, his undying love of “Friday Night Lights” and what happens when Shakespeare goes wrong.

— JESSICA IREDALE

eye

Raúl Esparza

Teresa Heinz Kerry and Sen. John Kerry

Rep. Anthony Weiner with wife Huma Abedin.

Michael Douglas

Sen. Scott Brown, Mika Brzezinski and Joe Scarborough.

Rima Al-Sabah with Ben Affleck.

Rahm Emanuel and wife

Amy Rule (left).

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