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Nick Hayek Talks WatchesPAGE 12ACCESSORIES: The chief executive of Swatch Group discusses growth goals, acquisitions, innovation — and plans to restrict the sale of components to other watchmakers.

Coach Links With Net-a-porter PAGE 3FASHION: The leather goods giant teams with the fashion e-tailer to reissue fi ve key styles from the Seventies.

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Esmerian Pleads Guilty PAGE 3NEWS: Ralph Esmerian, former owner of Fred Leighton, has pleaded guilty in a New York federal court to fraud regarding $210 million in loans and bankruptcy proceedings.

Alexis Bittar’s jewelry collection is hotter than ever, and still, he and his team handmake every piece from his Brooklyn

headquarters, where the designer recently gave WWD a fi rst look at his fall creations. For more on Bittar, see page 10.

WWDMONDAY, APRIL 18, 2011 WOMEN’S WEAR DAILY $3.00

PHOTO BY THOMAS IANNNACCONE; STYLED BY ROXANNE ROBINSON-ESCRIOUT

ANALYSIS

Industry Strategizes To Battle Infl ation

STING GETS BUSY WITH THE LADIES AT BCRF’S HOT PINK

PARTY.STYLE, PAGE 17.

From top, Alexis Bittar’s rhodium and pearl cuff;

gunmetal-plated and labradorite serpent cuff with Swarovski

Elements; gunmetal and Lucite necklace with

Swarovski Elements and peacock feather, horn

and wood necklace.

By VICKI M. YOUNG

THE SQUEEZE IS DEFINITELYcoming.

Retail apparel prices may have fallen last month, according to the U.S. Labor Department’s Consumer Price Index, but that’s only a temporary lull. The real crunch is expected to begin in back-to-school and fall merchandise, when the pressure from rising raw material and fuel costs is expected to become too much to bear and retail-ers will at last have to pass on some of those increases to consumers.

But retailers aren’t taking those infl ationary pressures lying down.

According to a study by AlixPartners, stores can mitigate the effects of higher prices for everything from cotton to gasoline by increasing long-range booking of materials and re-

ducing product complexity, among other tools, as they look to minimize the negative impact of sticker shock when consumers start looking to spruce up their wardrobes for fall.

According to the AlixPartners study, apparel infl ation is averaging 17.4 percent for most retailers, with some seeing increases as high as 30 percent. Even employing some of the strategies available, more than 40 percent of fi rms could put themselves at a competitive disadvantage later this year.

Of the nine strategies offered by the consulting fi rm on cost control (see box), 95 percent of retailers said they tried to force suppliers to hold or reduce costs, but it was the least successful tactic. Strategically man-aging raw materials through long-range booking was one of the more

SEE PAGE 4

A Tribe of His Own

IN WWD TODAY

FINANCIAL 1,2,4BEAUTY 2,17ACCESSORIES 3,6,8,10,12,14

FASHION 3INNERWEAR 16MEDIA 17

WWD MONDAY, APRIL 18, 20112WWD.COM

CORRECTION

The Ermenegildo Zegna pants on page MW10, Thursday, are wool. The fabric content was incorrect in the caption.

TO E-MAIL REPORTERS AND EDITORS AT WWD, THE ADDRESS IS FIRSTNAME.LASTNAME@FAIRCHILDPUB.COM, USING THE INDIVIDUAL’S NAME. WWD IS A REGISTERED TRADEMARK OF ADVANCE MAGAZINE PUBLISHERS INC. COPYRIGHT ©2011 FAIRCHILD FASHION GROUP. ALL RIGHTS RESERVED. PRINTED IN THE U.S.A.VOLUME 201, NO. 79. Monday, April 18, 2011. WWD (ISSN 0149–5380) is published daily (except Saturdays, Sundays and holidays, with one additional issue in May, June, November and December, two additional issues in February, March, April and August and three additional issues in September and October) by Fairchild Fashion Group, which is a division of Advance Magazine Publishers Inc. PRINCIPAL OFFICE: 750 Third Avenue, New York, NY 10017. Shared Services provided by Condé Nast: S.I. Newhouse, Jr., Chairman; Charles H. Townsend, Chief Executive Officer; Robert A. Sauerberg Jr., President; John W. Bellando, Chief Operating Officer & Chief Financial Officer; Jill Bright, Chief Administrative Officer. Periodicals postage paid at New York, NY, and at additional mailing offices. Canada Post Publications Mail Agreement No. 40644503. Canadian Goods and Services Tax Registration No. 886549096-RT0001. Canada Post: return undeliverable Canadian addresses to P.O. Box 503, RPO West Beaver Cre, Rich-Hill, ON L4B 4R6. POSTMASTER: SEND ADDRESS CHANGES TO WOMEN’S WEAR DAILY, P.O. Box 15008, North Hollywood, CA 91615 5008. FOR SUBSCRIPTIONS, ADDRESS CHANGES, ADJUSTMENTS, OR BACK ISSUE INQUIRIES: Please write to WWD, P.O. Box 15008, North Hollywood, CA 91615-5008, call 800-289-0273, or visit www.subnow.com/wd. Please give both new and old addresses as printed on most recent label. Subscribers: If the Post Office alerts us that your magazine is undeliverable, we have no further obligation unless we receive a corrected address within one year. If during your subscription term or up to one year after the magazine becomes undeliverable, you are ever dissatisfied with your subscription, let us know. You will receive a full refund on all unmailed issues. First copy of new subscription will be mailed within four weeks after receipt of order. Address all editorial, business, and production correspondence to WOMEN’S WEAR DAILY, 750 Third Avenue, New York, NY 10017. For permissions requests, please call 212-630-5656 or fax the request to 212-630-5883. For reprints of articles, please contact Scoop ReprintSource at 800-767-3263 or via e-mail at sales@scoopreprintsource.com. Visit us online at www.wwd.com. To subscribe to other Fairchild Fashion Group magazines on the World Wide Web, visit www.fairchildpub.com. Occasionally, we make our subscriber list available to carefully screened companies that offer products and services that we believe would interest our readers. If you do not want to receive these offers and/or information, please advise us at P.O. Box 15008, North Hollywood, CA 91615-5008 or call 800-289-0273. WOMEN’S WEAR DAILY IS NOT RESPONSIBLE FOR THE RETURN OR LOSS OF, OR FOR DAMAGE OR ANY OTHER INJURY TO, UNSOLICITED MANUSCRIPTS, UNSOLICITED ART WORK (INCLUDING, BUT NOT LIMITED TO, DRAWINGS, PHOTOGRAPHS, AND TRANSPARENCIES), OR ANY OTHER UNSOLICITED MATERIALS. THOSE SUBMITTING MANUSCRIPTS, PHOTOGRAPHS, ART WORK, OR OTHER MATERIALS FOR CONSIDERATION SHOULD NOT SEND ORIGINALS, UNLESS SPECIFICALLY REQUESTED TO DO SO BY WOMEN’S WEAR DAILY IN WRITING. MANUSCRIPTS, PHOTOGRAPHS, AND OTHER MATERIALS SUBMITTED MUST BE ACCOMPANIED BY A SELF-ADDRESSED STAMPED ENVELOPE.

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If you’re mad at someone, never put it in writing. Tell them to their face.

— LEONARD LAUDER, WHO WAS DISHING OUT BUSINESS ADVICE AT THE BCRF GALA. STYLE, PAGE 17

EYESCOOP: See more pictures from the Breast Cancer Research Foundation’s annual gala and Tory Burch’s L.A. dinner as well as Fall 2011 Accessories Trend: A Twinkle in Time at WWD.com/eyescoop.

FASHION: See New York & Co.’s fall 2011 collection at WWD.com/fashion-news.

BUSINESS: More financial news and daily stock movements at WWD.com/business-news.

GLOBAL BREAKING NEWS

TODAY ON WWD.COMSECTORS IN THIS ISSUE

By LISA LOCKWOOD

POLO RALPH LAUREN CORP. was among numerous com-panies affected by a massive e-mail breach at Epsilon, the Irving, Tex.-based multichannel marketing services firm.

Epsilon, which sends 40 billion e-mails annually on behalf of more than 2,500 clients, said customer informa-tion from 2 percent of its clients was compromised in a data breach, which was detected March 30. The informa-tion that was obtained was limited to e-mail addresses and/or customer names only. An assessment showed that no other personal identifiable information was at risk. A spokeswoman for Epsilon said she couldn’t comment further while the company conducts an investigation and cooperates with authorities.

According to security experts, the breach could result in an onslaught of phishing attacks — e-mails that pur-port to be from a legitimate business but are used to steal information such as passwords, account numbers and credit card information.

An e-mail Thursday night sent to Polo Ralph Lauren customers said the company had been recently in-formed that “an unauthorized third party” gained ac-cess to an Epsilon e-mail application and obtained names and e-mail addresses of Polo Ralph Lauren customers. “We have been informed by Epsilon that the company took immediate action to address the sys-tem vulnerability and is working with the U.S. Secret Service to investigate. We regret that you may have been affected by this,” said the e-mail.

Polo pointed out that no payment card information or Polo Ralph Lauren account information was acquired as a result of this incident. “Nevertheless, we strongly en-courage you to remain vigilant when reviewing e-mails that you receive, particularly e-mails that request sensi-tive personal or financial information. We take our obli-gation to safeguard your personal information very seri-ously and, therefore, we are alerting you so you can take steps to protect yourself,” said the e-mail. The e-mail gave several tips, such as “do not provide sensitive per-sonal or financial information using e-mail,” and “do not open e-mails from senders you do not know.”

A spokesman for Polo declined further comment, but said the company stopped using Epsilon last year.

A list published by Security Week named several companies in the retail and apparel industry that were affected by Epsilon’s security breach. They include Lacoste, Marks & Spencer (U.K.); New York & Co., Target, Bebe Stores and Eddie Bauer. These are in addition to companies such as J.P. Morgan, Kroger, Capital One Financial, Barclay’s Bank, The College Board and TiVo which have acknowledged that their customers’ data may have been accessed by hackers.

This is the second online security breach impact-ing companies in the industry. In one of the biggest data breaches in history, hackers stole information on 45.7 mil-lion credit and debit cards from TJX Co.’s computer sys-tem in 2005 and 2006. In addition to credit card numbers, personal information such as social security numbers and drivers’s license numbers were downloaded by the intrud-ers. TJX set aside $171.5 million to deal with costs related to the computer intrusion. Albert Gonzalez, the computer hacker behind the TJX theft, as well as several others, was sentenced to 20 years in prison on March 25, 2010.

TECHNOLOGY

E-Mail Security Breach Ensnares Polo, Others

By VICKI M. YOUNG

THE SECURITIES and Exchange Commission’s 18-month investigation into Zale Corp.’s accounting of its advertising expenses has been closed without a rec-ommendation for further legal action.

Zale’s receipt of the so-called Wells Letter doesn’t take it off the hook entirely. According to the SEC, such a communiqué “must in no way be construed” as a form of exoneration, as a decision not to pursue enforcement action could be made for any number of reasons.

In confirming the end of the Zale probe, the agency said it had settled a civil action with Rebecca Lynn Higgins, Zale’s former vice president of marketing. The complaint alleged that between 2004 and 2009, Higgins caused the com-pany to record certain television advertising costs as prepaid advertising when those costs should have been expensed in the periods incurred. The SEC said due to “Higgins’ actions, Zale’s publicly reported pre-paid advertising and advertising expenses for these periods were materially misstated.” Higgins agreed to pay a $25,000 civil penalty, according to the SEC.

The complaint and settlement were filed on Thursday in a federal district court in Dallas.

In September 2009, Zale said certain financial statements for its 2007 and 2008 fiscal years and in-terim periods should not be relied upon, and it would restate its financial statements for fiscal 2008 and 2009 and related interim periods. It also said a “significant portion” of prepaid advertising costs “should have been recorded as expense.” Zale noted that an inves-

tigation had been initiated by the SEC’s office in Fort Worth, Tex., when it posted its annual report, or Form 10-K, with the SEC on Oct. 29, 2009.

In November 2009, the company and four former officers — Neal Goldberg, Rodney Carter, Mary Burton and Cynthia Gordon — were named in two separate lawsuits, later consolidated, filed in a fed-eral district court in Dallas alleging violations of feder-al securities laws. On April 7, the court issued an order dismissing the action.

Goldberg, 51, the former chief executive officer of Zale, passed away March 17.

According to a Zale spokeswoman, still pending is a shareholder derivative lawsuit filed in December 2009 in a state court in Dallas. The lawsuit was put on hold pending resolution of the federal action, the Zale spokeswoman said Friday.

Based in Dallas, Zale operates more than 1,870 jewelry stores throughout North America.

By KATYA FOREMAN

PARIS — Former L’Oréal chairman Lindsay Owen-Jones is fighting back against accusations of active and pas-sive corruption, aggravated laundering, misappropriation of corporate funds and breach of trust lodged in a com-plaint in the prosecutor’s office here earlier this month by Janez Mercun, a L’Oréal shareholder, and his Swiss dis-tribution company, Temtrade.

The plaintiffs accuse Owen-Jones of setting up a parallel distribution chan-nel in Russia in 1996. Owen-Jones’ law-yer Jean Veil said the former L’Oréal chairman on Friday filed two separate complaints: one against Mercun for false accusation, and the second against French daily 20 Minutes and Frédérik-Karel Canoy, the lawyer representing Mercun and Temtrade, for defamation. Veil claims Canoy accused Owen-Jones of having links with the Russian mafia.

The complaints are being studied by the prosecutor’s office.

As reported, a L’Oréal spokeswoman said the al-leged revelations date from a commercial disagree-

ment in 1998, which was already ruled upon by a court in L’Oréal’s favor throughout five different proceed-ings. “The definitive decision from the highest juris-diction [the cour de cassation] was rendered in 2003. These unfounded accusations…attempt to artificially

reactivate this case which was con-cluded in 2003,” she said.

Canoy takes a different stance, claiming the five former accusa-tions lodged in France’s civil jus-tice system have “absolutely noth-ing to do” with this new one, which is in the criminal justice system.

Mercun and Temtrade’s recent complaint is a supplement to their legal action taken on Sept. 30 — and still pending — against Owen-Jones and Liliane Bettencourt, L’Oréal’s largest individual share-holder. Mercun and Temtrade al-lege misuse of corporate funds linked to past contracts L’Oréal granted to photographer François-Marie Banier.

On Sept. 20, L’Oréal said it had ended those contracts with Banier, who was an-nually receiving 710,000 euros, or $1 million at cur-rent exchange.

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SEC Probe of Zale Now Closed

Lindsay Owen-Jones Fighting Lawsuit

Lindsay Owen-Jones

Eliza Doolittle

WWD.COM3WWD MONDAY, APRIL 18, 2011

Coach Going Back in Time With Net-a-porterA Look Ahead at Loft

Ralph Esmerian Pleads Guilty in Fraud Case

“THE BIGGEST THING is the play on proportions,” said Gary Muto, Loft’s president, when asked how the collection has evolved for fall 2011 at a preview Wednesday held at the 632 Hudson Street event space, and also hosted by Austyn Zung, Loft’s senior vice president and creative director over design.

Within its formula for refined casual wardrobing at moderate to better prices, Loft does adapt to trends. Skinny bottoms are out and boot and flare cuts are in, but in a way that still flatters the figure, and tops are shorter, though not cropped. There’s a more neutral or matte palette, with skinny belts and other accessories providing pops of color, and faux fur more of an accent to an item rather than the item itself.

Other highlights: woven synthetic “scuba” pants that feel like knits; hybrid sweater jackets for versatility; camel-color pants, skirts and out-erwear; lace as a novelty touch or as an overlay to a sweater with a printed look, and subtle shine in some of the fabrics. — DAVID MOIN

By SHARON EDELSON

THE SEVENTIES WERE a seminal time for Coach. Bonnie Cashin, who pioneered American sportswear, designed for the leatherwear manu-facturer and the brand launched several iconic designs. Now Coach is reissuing five of the classic handbags, which will be sold exclusively on Net-a-porter from June 15.

With the Seventies trend so ob-vious on the fall runways, Net-a-porter’s buying director Holli Rogers felt this was the perfect time to bring back some of the original Coach de-signs and introduce them to a new generation. “While they comple-ment the current trend in fashion of a wide-leg denim jean paired with a great stack-heeled sandal, these bags are so versatile, they will look smart

with practically any daytime look,” she said, adding the designs remain relevant even 30 years later.

“The Coach designs from this era were seminal in defining our approach to great American style,” said Reed Krakoff, president and executive cre-ative director for Coach. “Heritage is our hallmark, so we’re pleased to rein-troduce these iconic bags.”

Coach’s utilitarian designs of the Seventies were made of thick, pliable and smooth natural gloved tanned cowhide and featured old tone hard-ware, turnlock flap closures and leather handles at the top. “Each of these archetypal styles was originally introduced by Coach in the Seventies, with limited availability over the past few decades,” a Coach spokesman said, adding that the designs were taken directly from archives.

While Net-a-porter launched Reed

Krakoff ’s signature collection in the fall, the e-commerce site has never carried Coach. “We’re approach-ing 400 brands now and it’s a matter of finding the right opportunity to introduce a brand,” a Net-a-Porter spokeswoman said. “There’s an ap-preciation for what these [Coach] bags represent. There’s a younger customer who is not going to have the associations of the first time she got her Coach bucket bag when she grad-uated from college. This is something we’re proud of that’s being specially created for Net-a-porter.”

Today, Net-a-porter put up a des-ignated landing page for the Coach handbags where consumers can pre-register for the sale when it goes live.

Prices range from $298 for a shoul-der purse to $498 for a field bag. There’s also a Madison satchel for $358, Stewardess bag, $358 and duffle, $398.

By EVAN CLARK

RALPH ESMERIAN, once chairman of Fred Leighton, faces up to 30 years in jail after pleading guilty to three counts of fraud in connection with over $210 million in loans and the subsequent bankruptcy of the high-end jeweler.

Preet Bharara, the United States Attorney for the Southern District of New York, said Esmerian, 70, em-bezzled and double-pledged $48 million in jewelry and other assets that were used as collateral for loans to fund his 2006 acquisition of Leighton.

The fourth-generation jeweler acknowledged com-mitting wire fraud, bankruptcy fraud and conceal-ment of assets belonging to the estate of a debtor. In addition to fines that could top $750,000, he faces 20 years imprisonment on the wire fraud charge and five years each for the bankruptcy fraud and conceal-ment charges.

Esmerian, who plead guilty in Manhattan federal court Friday and will be sentenced July 22, is nearing the end of a long fall.

Many considered the famed collector to be an ideal owner for Leighton, though he had more of an eye for jewelry than business. He borrowed at least $217 mil-lion from Merrill Lynch, Acorn Capital Group and oth-ers to acquire Leighton from its founder and looked to expand the retailer with stores in Beverly Hills and Las Vegas while growing Leighton’s watch collection and signature jewelry line.

“Hopefully the luxury market will keep up and prove to be fruitful for us,” Esmerian said at the time.

Two years later, the economy was in recession and Esmerian had fallen behind on his payments to Merrill Lynch, which wanted to auction off jewelry that he pledged as collateral.

In a dramatic confrontation in New York Supreme Court, a lawyer for Merrill Lynch said the bank could not risk a fallout in the high-end jewelry market. “They are in no position to bond that kind of exposure,” he said.

The hearing turned horse-trading session as the judge divvied up how millions of dollars of jewelry

could be sold to cover the loan. But just as Christie’s was set to sell off 115 pieces, including several large, rare gemstones and French crown jewels, Esmerian put Leighton into bankruptcy protection to halt the auction.

At a day-long bankruptcy court hearing that ultimate-ly delayed the auction, Esmerian appeared relaxed and chatted with his lawyers and reporters. The auction was eventually cancelled, but some pieces were sold privately by Christie’s.

According to statement from Bharara’s office, Esmerian didn’t even own some of the jewelry he used as collateral when he secured the loan from Merrill Lynch in 2006. And he continued to sell off the collat-eral without informing the bank. Other pieces were double-pledged, securing other loans.

The statement said “Esmerian repeatedly and systematically embezzled tens of millions [of dol-lars] worth of property of Fred Leighton and related debtor entities, sold that property, and kept the pro-ceeds for himself or to pay off other debts” during the bankruptcy proceedings.

For example, Esmerian sold a 13-carat Burma ruby and diamond ring worth an estimated $2.94 million for $2 million and had the proceeds wired to his personal bank account.

Esmerian also repeatedly lied to the bankruptcy court and his creditors in sworn testimony, affidavits and other documents, the statement said.

“Ralph Esmerian’s flagrant abuse of the bankruptcy system, at the expense of the lenders who trusted him with their money and collateral, was breathtaking in scope,” said Bharara.

In 2009, Leighton was sold to a group of investors that included former Barneys New York principal Bob Pressman and jewelry firm Kwiat Enterprises.

“The guilty plea is a very sad day for Ralph Esmerian,” said Patricia Pileggi, Esmerian’s attorney and partner at Schiff Hardin. “He and his family have collected fine art and jewelry for four generations. He has now lost everything.”

Esmerian was arrested on Nov. 22 and was released on a personal recognizance bond.

“There are a number of mitigating facts that are rel-evant as to why he engaged in certain financial transac-tions,” Pileggi said. “We anticipate bringing those facts to the courts’ attention at sentencing.”

— WITH CONTRIBUTIONS FROM ARNOLD J. KARR

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Fall looks from Loft.

The Coach bags for Net-a-porter.

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Ralph Esmerian, above being taken into custody in November, plead guilty to fraud related to his acquisition of Fred Leighton.

WWD.COMWWD MONDAY, APRIL 18, 20114

successful approaches. And while only 59 percent choose to simplify product complex-ity or quality, AlixPartners believes this strat-egy will supply differentiation in the fall.

Those that did had a high rate of suc-cess, but there were still 49 percent who elected not to simplify product and “they will face intense pressure and will be way behind this fall,” said David Bassuk, head of the global retail practice at AlixPartners.

Many retailers will test the waters of consumer resistance with prices that could be up by 10 percent or more in the fall, so first indications of who is and isn’t making the adjustment to the return of in-flation could come as early as July, when b-t-s floorsets are introduced.

Bassuk said more than 50 percent of the rise in cost pressures are likely to be felt in fall 2011 and beyond, particularly during the all-important holiday selling season.

While retailers are expecting to pass along “one-third of the cost increases on lower-priced product and commodities, [they are] hoping to pass on nearly 50 percent of the cost increases on higher-priced product,” he said.

The companies hurt more by the in-creases are those in the moderate business.

“We are definitely seeing more issues with the moderates where you have more cotton-based fashion brands, such as some teen retailers who are heavily focused on T-shirts and denim. There’s more flexibil-ity in the luxury end to add some costs, or even incur some of the expenses because its easier to do so when you have a $50 T-shirt than a $19 T-shirt,” he said.

Of the more than 30 retailers sur-veyed, one-third — 33 percent — said costs have risen 15 percent to 20 percent, 29 percent pegged increases at 10 per-cent to 15 percent, 13 percent reported hikes of 35 percent or more and 4 per-cent put the increases at 5 percent.

While cotton has been a major factor so far, labor and fuel are also having an impact. And Bassuk said that while labor costs began to rise significantly in China last year, they are now increasing in other key manufacturing countries.

“Material is about 40 percent of the overall costs, trims add one-third to the price of the garment, and then labor and finishing and transportation become more impactful as they go up,” he said.

Mark Montagna, analyst at Avondale Partners, believes that even the luxury sec-tor is not immune to the impact of rising prices. He noted that when the economy

declined in 2000 with the bursting of the dot-com bubble and in 2008 when the reces-sion hit, luxury retailers and brands saw massive declines in sales and share prices.

“Some of the luxury retailers have begun introducing a lower price point for their merchandise lines to bring back the aspirational customer. For that end of the market, some of those shoppers may again pull back on their spending,” he said.

Montagna expects to see more lux-ury brands offer merchandise at their own outlet concepts, or through online sites such as Gilt Groupe’s Gilt.com or Nordstrom’s Hautelook.com as another channel of distribution as younger cus-tomers and aspirational shoppers begin

to explore options for buying designer goods at lower price points.

He also expects retailers who sell core basics to offer value-added options such as embellishments for both unique-ness and a reason to raise prices to make up for rising costs.

Richard Hastings, macro and consum-er strategist at Global Hunter Securities, said, “The impact of inflation in the U.S. is focused on the lower-income house-hold. There’s not much of an effect any-where else in the other income groups.”

While food inflation overseas is an issue, Hastings said those increases are going to be felt less in the U.S. since there are greater transportation efficien-cies, as well as big-box options. Again, lower income consumers will feel it most, but that’s because they’re already pres-sured from reduced income levels.

“The real story is about those with annual household incomes of less than $75,000,” Hastings said. “That’s a huge number, and it all will depend on other variables such as debt, demographics, age, condition of one’s health or age of children. After that, you’ll see a lot more pressure for those whose annual house-hold incomes are less than $50,000.”

He said lower-income consumers will likely change the number of shopping trips to adjust for the price increases. Retailers in that sector will adapt to the pricing pressures by, for example, featur-ing a lower weight fabrication or fewer embellishments on the pockets of skinny jeans. There even may be a narrowing of variety on the sales floor.

“The big question will be the margins. Can retailers and vendors create something with enough markup to pay for the higher freight costs and other increases? An item selling for $39.99 can have a 3.5 percent pass-along increase to $41.39. That’s not that much, but a 10 percent increase will raise the price to $43.99. The lower-income shopper may balk at that increase, especial-ly if gas prices stay elevated during July and August,” the strategist said.

He also believes the problem will get worse in 2012 with local governments raising taxes to make up for persistent budget deficits.

“The state level burden will creep up in 2012 and 2013. The higher taxes will impact discretionary income. What you’ll eventually see is a severe bifurcation be-tween those having higher and [those with] lower incomes,” Hastings concluded.

WASHINGTON — Consumers haven’t felt the pinch just yet.Retail apparel prices fell in nearly every category in

March, marking the second consecutive month of price declines, as retailers continued to refrain from passing on higher costs from soaring cotton prices through to consumers besieged by rising fuel and food prices.

Retail apparel prices were down 0.5 percent last month, with women’s wear falling 0.8 percent and men’s wear declining 0.3 percent, the Labor Department said in its Consumer Price Index. Year-over-year compari-sons showed apparel prices were down 0.6 percent, as women’s fell 1.5 percent and men’s dropped 1.4 percent.

Prices for all goods and services rose 0.5 percent in March, fueled largely by significant increases in food and gas prices. The core index, excluding volatile food and energy prices rose 0.1 percent, indicating that in-flationary pressures in most manufacturing industries remained tame.

“It’s amazing the CPI apparel price component is down 0.6 from a year ago despite the recent 153 percent year-to-year jump by cotton prices,” said John Lonski, chief economist at Moody’s Capital Markets Group. “Retailers have to be aware of the fact that wages have not kept pace with inflation and that is one of the problems.”

Lonski said retailers and wholesalers are “sharing the pain of higher raw materials prices.”

“What is more amazing is not only are cotton prices sig-nificantly higher, so are transportation costs,” Lonski said. “I still expect that apparel prices will grow significantly fairly soon and I also suspect that consumers will balk at the forthcoming price increases and as a result sales vol-umes are likely to soften.”

The only category in women’s apparel that showed dramatic price inflation was dresses, which rose 7.1 per-cent compared with February. Every other women’s price category declined. Prices for outerwear fell 3.5 percent, suits and separates prices declined 2.5 percent and pric-es for the combined underwear, nightwear, sportswear and accessories category dropped 1.3 percent.

In men’s apparel, the two price categories that in-creased were offset by declines in two other categories. Prices for men’s shirts and sweaters fell 2.8 percent in March compared with February, while prices for pants and shorts dipped 0.4 percent. Retail prices for sport coats and outerwear rose 0.1 percent and prices for men’s fur-nishings were up 0.5 percent.

Nigel Gault, chief U.S. economist at IHS Global Insight, said, “An inflationary spiral can only take root if wage in-flation accelerates, which we don’t expect. Instead, rising prices are squeezing consumer pocketbooks and will re-strain the growth in consumer spending volumes, which we estimate halved to 2 percent in the first quarter from 4 percent in the fourth.”

Gault said there were two factors at play in the apparel price declines in March — a later Easter this year, which means retailers did not introduce more full-price mer-chandise in February as they did last year when Easter fell in early April, and a reluctance on the part of retail-ers and wholesalers to pass on apparel price increases to consumer who are facing soaring food and energy prices.

“Clothing is something that is more price elastic, so that if your spending power is squeezed by food and en-ergy prices, and on top of that you see clothing prices go up, then you…wait on buying clothing and hope for more reasonable prices in the future,” he said. — KRISTI ELLIS

{Continued from page one}

Apparel Prices Down in March as Retailers Hold Off Increases

Dealing With Inflationary PressuresANTI-INFLATIONARY ACTIONS BY RETAILERS

ON DIRECT SOURCING OF PRODUCT % Attempted % Successful of Those Attempted

FORCE SUPPLIERS TO HOLD OR REDUCE COSTS 95 43

OFFSET COST INCREASES WITH EXPENSE REDUCTIONS 91 60

INCREASE VOLUMES PER VENDOR BY NARROWING VENDOR BASE 86 63

INCREASE LONG-RANGE BOOKING OF MATERIALS OR FABRICS 86 89

SHIFT TO LOWER-COST COUNTRIES 82 72

CHANGE TO LOWER-COST VENDORS 77 76

SIMPLER PRODUCT PACKAGING 59 62

ALTERNATE MEANS FOR TRANSPORT OF GOODS 59 31

REDUCE PRODUCT COMPLEXITY OR QUALITY 59 92

SOURCE: ALIXPARTNERS

Retailers have to be aware of the fact that wages have

not kept pace with inflation.— JOHN LONSKI, MOODY’S CAPITAL MARKETS GROUP

The big question will be the margins. Can retailers and vendors create something

with enough markup to pay for the higher freight costs and other increases?

— RICHARD HASTINGS, GLOBAL HUNTER SECURITIES

analysis

WWD.COMWWD MONDAY, APRIL 18, 2011 5

By RACHEL STRUGATZ

NEW YORK — Silver is the new gold.The price of the precious metal has soared and shows

no signs of abating, but demand is higher than ever.The World Silver Survey released April 7 projected

prices to peak at around $50 an ounce in 2011 — they currently hover at just over $40 an ounce — a rate that would lead many to infer that negative impli-cations lie ahead for retailers, suppliers and designers. But just the opposite is true, according to Michael Barlerin, director of The Silver Institute’s Silver Promotion Service, who said the 2010 survey results outpaced 2009’s on all measures.

“The results coming into the year were extraordinarily bull-ish, so if you think of it in terms of a year-to-year comparison, silver outpaced a record year on all measurements,” Barlerin said. “It’s not a short-term issue and it’s not linked specifically to the price of gold. It’s an exception- a l set of circumstances. Silver’s demand and silver’s role to a re-tail jeweler also appears to be at an all-time high.”

The price of gold, which has seen a 250 per-cent increase in price since 2005 — more than tripling from just over $400 to $1,475 an ounce — also shows little indication of peaking. The current selling price, 18 percent higher than it was almost a year ago in May 2010 at a rate of $1,250 an ounce and 59 percent higher than the previous year’s rate of almost $930 an ounce — has caused brands to flock to the lower-priced precious metal.

This means that even in a further increasing silver price scenario, GFMS, a precious metal consulting agency that conducts the annual silver survey, still sees sil-ver usurping some of the positions that gold jewelry previ-ously held in the U.S. market.

Designers and brands known for their silver crafts-manship and accessories, such as Judith Ripka, Stephen Webster, Robert Lee Morris, Pandora and Thistle & Bee, have all seen growth in the precious metal category despite soaring prices, which can also be credited to several societal factors, said Barlerin. These include a preference for white metals, particularly for female self-purchase. Silver is also highly giftable, espe-cially among the 20-to-30-year-old demographic, and its “highly wardrobable” nature allows for wearers to mer-chandise themselves with multiple silver looks at once.

Luxury Brand Consulting chief executive officer Janice Winter concurred, and added the emergence of men’s accessories is driving growth even more.

“Silver is modern and rugged-looking, and it’s a metal that works well in that category,” Winter said. “You can make it a little heavier and you can blacken it a little bit, and I think there’s a lot you can do to it that appeals to men. The silver also lends itself to other categories because you can be polished, shiny and so-phisticated, but you can also be rock ’n’ roll.”

Philip Newman, research director at the U.K.-based GFMS, attributed silver’s success in part to the high price of gold. In the gold category, the demand is pri-marily based in a more price-sensitive market, includ-ing regions such as India, East Asia and the Middle East, but for silver most of the demand is concentrated in the Western market, where the markup is higher.

“That has really given an opportunity for silver to gain showcase space,” Newman said. “A lot of the major retail-ers carry more silver jewelry than they used to 12 to 18

months ago. Silver has done relatively well in a number of markets, and the trend is growing, especially with de-signer and branded silver.”

Judith Ripka’s business has seen double-digit increas-es in sales of silver products over the past year, accord-ing to Charles M. Jayson, president of The Judith Ripka Cos. Inc., who maintains the company has not increased its silver retail prices while absorbing increased costs in procuring its silver products.

“In anticipating price sensitivity to gold and overall market trends last year, we fortified our sterling silver

collections, offering consumers a wider range of styles and price points,” Jayson said. “These new items…

have been well received by consumers on a na-tional basis. Our retail partners have expressed how cohesive their jewelry cases look and feel from a merchandising perspective.”

Luxury sterling silver brand Thistle & Bee has also seen double-digit growth in the past year, even with silver prices dou-bling from $18 in August to the current price of over $40 an ounce. Thistle & Bee is carried in more than 500 high-end independent retailers nationwide such as DeNatale Jewelers and Jewel Box in New York, Lux Bond & Green in Connecticut and Tiny Jewel Box in

Washington, D.C., and does not target department stores. McLoughlin noted that retailers that have never carried the precious metal before are eager to carry the line.

“We have always been in sil-ver, it’s our specialty, it’s not the half sister of a gold line,” said Jodi McLoughlin, chief design-er and marketing director at Thistle & Bee. “We’re finding that people are willing to pay for qual-ity. Consumers understand the fine design and quality, and that they’re not only making a fashion statement with sterling silver, but these are bold, solid and weighty pieces that will last for a while. A lot of people that are look-ing for luxury understand the difference be-tween inexpensive sterling product an some-thing that’s actually luxury.”

There are about 500 pieces in the brand’s offerings that span nearly 10 collections, and the broad price range goes from $250 to $1,500. Most recently, Thistle & Bee’s de-signs were featured in Ruffian’s fall show during New York Fashion Week in February, along with Robert Lee Morris.

Robert Lee Morris said that although his wholesale pric-es have been altered carefully, retail pricing has yet to catch up with the silver spike. Opening prices for his silver jew-elry start at $110 to $150 and can go all the way up to $3,500, although the bulk of the pieces retail under the $500 range.

“What we sell most of are the very classical, wearable things. Those won’t ever be that expensive, even if silver goes up to $80 an ounce,” Morris said. “As the price of sil-

ver goes up, it’s just going to be wonderful because silver will have evolved in front of our very eyes as a very being.”

On Tuesday, QVC will unveil the Robert Lee Morris for Andy Warhol line, a 16-piece sterling silver collection with an opening price of $49. The 18-inch “Ode to Spring” necklace, which will retail for $255, is comprised of cut-out poppy flowers, butterflies and bugs that are exact replicas of Warhol’s drawings in the Fifties, and each piece is engraved with a photo and quote from the artist.

Stephen Webster’s collection, predominantly fine jewelry at its inception in 1996, has seen its silver cat-egory steadily increase the past two to three years. The company now depends on the precious metal for more than 50 percent of its sales, said the designer, adding that it’s gold that continues to be a struggle.

“The silver business has been very buoyant,” Webster said. “Even if a product that’s between $300 and $2,000 at retail goes up in price, we’ve not yet seen the clients dropping off like we did with gold.”

He’s seen a big shift in the industry, and retail-ers that once only purchased edgy, gold pieces from Webster’s line are now moving toward more silver-based items. That said, the designer is clear that he has no in-tention of shuttering the production of his fine jewelry. He’s just had to adapt to meet the demands of a chang-ing consumer and a more cautious retailer.

“You have to look at [silver] as a viable option to a mate-rial, such as gold, for instance,” he said. “If you started to make jewelry in steel, brass or titanium, you would still have to convince consumers why they should purchase it. But consumers don’t question silver because it’s a pre-cious metal. Even when silver prices are at an all-time high, it’s still a fraction of the price of gold. The consumer understands it’s not gold, but they don’t need convincing that it’s some alien metal they’ve never heard of.”

But perhaps it’s Pandora Jewelry, where silver ac-counts for 80 percent of the business, that has seen the most growth in the sector, boasting a 92.6 percent global revenue growth from 2009 to 2010 to almost $1.3 million. Silver feeds the affordable luxury trend, which is part of the brand’s DNA, said John White, managing director of Pandora North America.

“It costs more to produce and costs more for the retail-er to buy from us right now,” White said, emphasizing that the company is at an advantage because of its position on the value chain. “Most other jewelry companies oper-ate through middlemen, but we’re completely integrated. We produce all of our designs in-house, and all jewelry is produced in company-owned factories. We also distrib-ute primarily through Pandora-owned distribution com-panies, such as Pandora North America, which is part of

Pandora Jewelry’s global company.”White said it’s only natural that

when the cost of materials rise, those prices find their way up the value chain. Despite this, the brand’s revenue per store grew more than 50 percent in 2010 and Pandora North America’s revenues

increased 87 percent.However, Tiffany & Co.’s silver

business has seen a decrease in the past year domestically, ac-cording to Paul Lejuez, manag-ing director and senior retail analyst at Nomura Securities International. He attributes

this party to the fact that the brand’s typical silver consumer is

a trade-up customer and not a true luxury one who might purchase dia-

monds, platinum or other fine jewelry.“It’s one of those categories that will be

pressured by commodity cost increases — and silver has certainly been up a lot — and [Tiffany]

doesn’t have the pricing power on lower-priced silver items that they do on higher-priced categories. The buyer is just not as willing to pay up for that item [silver],” said Lejuez. “It’s been more of a struggle. They’ve had a better time hanging on to their more affluent customer base than attracting the trade-up customer that they may have lost during the downturn.”

But Kimberly Greenberger, managing director and senior retail analyst at Morgan Stanley, said the re-tailer is well equipped for handling inflation and rising commodity prices, and that while the amount of units purchased might have declined, actual revenue has in-creased due to stronger pricing in many categories.

Necklaces from Robert Lee Morris.

A Cuff by Thistle & Bee.

Stephen Webster rings.

Judith Ripka rings.

Price, Demand for Silver Spikesaccessories

SkyrocketingSilver

April 2011

April 2010

April 2009

April 2008

April 2007

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$13.00 $14.00

$17.85

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WWD.COM6 WWD MONDAY, APRIL 18, 2011

accessoriesEverything’s Coming Up RoseJewelry designers have been big on rose gold for several seasons now and for fall, the watch market is equally enamored with the warm, glowing hue. — Roxanne Robinson-Escriout

Brera’s brushed 23-karat rose gold-plated steel watch.

DKNY’s rose gold-tone stainless steel watch with crystals. Guess’ rose

gold-tone stainless steel watch.

Marc by Marc Jacobs’ rose gold-plated stainless steel watch with rose gold and dégradé crystal dial.

Michele’s 18-karat rose gold-plated stainless steel and diamond watch.

Michael Kors’ rose gold-plated stainless steel watch with crystal embellishments.

Burberry’s rose gold-plated stainless steel watch.

Armitron’s Ion-plated rose gold-tone and mother-of-pearl watch.

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Tough LuckCostume jewelry goes industrial for fall with oversized geometric shapes. — Roxanne Robinson Escriout

WWD.COM8 WWD MONDAY, APRIL 18, 2011

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CC Skye’s 14-karat gold-plated rings with pavé crystals.

Lulu Frost’s brass mesh chain and vintage brooch bracelet.

Flutter by Jill Golden’s 14-karat yellow gold-plated brass chain necklace with vintage crystals.

Noir’s gold-plated brass and cubic zirconia bracelets.

Erickson Beamon’s 24-karat gold vermeil necklace with Swarovski crystals.

Dannijo’s 14-karat gold-plated brass necklace with resin beads.

Lee Angel’s 12-karat gold-plated brass bracelet with Swarovski Elements.

Kara by Kara Ross’ 14-karat gold-plated brass bracelet.

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WWD.COM10 WWD MONDAY, APRIL 18, 2011

By RACHEL STRUGATZ

NEW YORK — Alexis Bittar is a designer who appeals to extremes.

First Lady Michelle Obama and Lady Gaga — both with distinct fashion images, but on opposite ends of the style spectrum — are fans of the designer, a testament to Bittar’s range and appeal.

Thumbing through the fall 2011 look book in his sprawling DUMBO office, studio, workspace, factory and showroom on the first 80-degree day of the season, Bittar points out a pair of fiercely studded gold cuffs connected by a thin chain, sort of like the pair of handcuffs he cre-ated with Lady Gaga, who was photo-graphed last year wearing one of the designer’s gray Lucite masks with the same studded detailing.

“It’s very editorial,” he said, aware that pieces such as this, as well as a goat fur capelet adorned with black crystals, an oversize white pearl head-dress fit for a queen of a bygone era and a peacock feather necklace, are not meant for the masses.

But the designer’s extensive offerings that span three collections — Lucite, Elements and Miss Havisham

— contain plenty of wearable options at varying price ranges and are available at more than 800 doors world-wide, including all major department stores. Small ear-rings and rings can start at $65 to $80, and bracelets can range from $500 for a basic bangle all the way to $900 for a hinged style infused with Swarovski Elements,

faceted, crystal clusters, semiprecious stones, or hand-carved detailing, depending on the hours

it takes to construct the piece. Many of the “editorial” selections — which are priced

upon request — are available at any of the designer’s seven freestanding stores.

The signature Lucite line is chock full of bangles, rings, brooches and earrings handmade from the medium — and it’s also the majority of the business, con-stituting 60 percent of the company’s sales — while mixed metal, oversize

gemstones and jewel-encrusted bangles inhabit the latter two lines.

The First Lady has stuck to the design-er’s signature Lucite pieces and has been

photographed in different flower brooches and bangles on occasions ranging from trips to South

America to being interviewed for Barbara Walters’ an-nual Thanksgiving special.

“I am able to manipulate and sculpt it. It’s interest-ing in the way it reflects light, manipulates color and the way it shadows. It’s so modern and bright and color-

ful,” Bittar said of Lucite.The material, invented by Dupont, is approaching its

75th anniversary next month, and the designer, who’s been working with it for 20 years, will host a breakfast in Lucite’s honor.

A background in antique collecting in the late Eighties exposed the Brooklyn-born and raised Bittar to Bakelite, a specific type of plastic known for its “retro” look that became popular in home decor items beginning in the Thirties. The home decor pieces, com-bined with hand-carved and fused pieces of Lalique that Bittar stumbled upon, served as the inspiration for the first piece of jewelry he designed from the ma-terial in 1991.

“There’s this one earring I refuse to pull out of my line,” he said. “It’s a round bottom clip earring, it’s a super basic, glowing little ball. It comes in 72 colors. It’s one of the first things I ever created.”

While giving a tour through the sun-drenched factory where his intricate, one-of-a-kind designs are produced, Bittar explained that every Lucite piece is hand-carved and painted, and even the most minute of details — down to the clasps — are designed in-house. Every item fashioned from the material undergoes a seven-step process [see sidebar below], including a secret fifth step about which the designer remains mum.

“I was kind of known as ‘The Lucite Guy,’ and of course, jewelry wasn’t at its zenith the way it is today when I was starting out,” he said. “People didn’t see a huge value in Lucite and what I was doing.”

Bittar is surprised it took more than a decade for knockoffs of the Lucite pieces that propelled his career to start springing up. Maybe it’s that top-secret fifth step.

1. The Lucite’s approximate shape is cut out from rectangular sheets of the material.

2. Each piece is carved down to its rough shape.3. The piece is thoroughly

carved and sanded to its final shape.

4. Hand paint the piece, either one color or an intri-cate pattern depending on the style’s complexity.

5. Mums the word. The fifth step is a guarded company secret.

6. The piece is carved and refined. For example, this step includes finishing touches such as the fine details or grooves on a leaf or flower petal.

7. All metal components, clasps, or crystals are fas-tened, adhered or adorned on the piece. Every detail is designed by Bittar himself, even the clasps.

20 Years of Alexis Bittar

1991: Alexis Bittar creates his first pair of round, button clip Lucite earrings. They are now a staple in the collection and have come in over 70 colors.

Early 1990s: The designer was told he needed to go more mainstream to get picked up by department stores. Bergdorf Goodman bought the collection in 1992 and Saks Fifth Avenue in 1993.

1994-1995: Bittar aligns himself with the Museum of Modern Art.

1996-1997: He designs a collection of Lucite and stainless steel furniture for the Cooper Hewitt Museum, and limited edition pieces for Barneys New York and the now-closed Takashimaya.

1998: Bittar is commissioned to design Burberry’s first ready-to-wear jewelry collection.

2002-2005: The designer partners with Patricia Field to create custom accessories for “Sex and the City,” opens his first freestanding boutique, is named the Accessories Council of Excellence’s (ACE) “RisingStar of the Year,” and is invited to join the Council if Fashion

Designers of America as a committee member.

2007: Bittar collaborates with Michael Kors on a runway collection for the brand’s spring 2008 collection.

2008: His designs appear on a cover of French Vogue.

2009-2010: Bittar teams up with Michael Kors to design accessories for

another runway collection. He does the same with Dennis Basso, Michael Angel and Jason Wu.

2010: Lady Gaga and Michelle Obama are both photographed wearing his pieces.

2011: The designer collaborates with Jason Wu again, and is ranked as the number-one jewelry brand in editorial coverage nationwide for 2010.

accessories

Bittar’s 7-Step Lucite Process

Basking in Lucite Longevity

A bangle is hand-painted in the workshop.

Alexis Bittar’s DUMBO showroom.

Alexis Bittar

Pieces from the fall collection.

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ESLady Gaga

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10421 SW 187 Terrace, Miami, FL 33157 | 305.233.7566

New York Showroom | 366 Fifth Avenue, Showroom 1110, New York, NY 10001 | 800.619.6588

ERICALYONS.COM

Naturally Inspired.

WWD.COMWWD MONDAY, APRIL 18, 201112

By JOELLE DIDERICH

BASEL, Switzerland — Sitting in a secluded corner of the Swatch Group restaurant, part of its sprawling pavil-ion in the main hall of the Baselworld trade show, Nick Hayek is excitedly waving what appears to be a small ethnic carpet.

The chief executive officer of the world’s largest watchmaker has just met a reporter recently back from Afghanistan and is wondering about the best use for the gift he has received, since he can’t quite decide whether it is a chair cover or a rug.

Hayek explains that Tissot, one of the brands be-longing to Swatch Group, donated some watches as prizes for the inaugural edition of the Afghan Ski Challenge, a skiing competition organized by Zurich newspaper NZZ to promote tourism in the province of Bamyan.

“Crazy,” he exclaims, raising his bushy eyebrows.

Hayek can afford to be generous. Swatch Group enjoyed a banner year in 2010, posting sales of 6.44 billion Swiss francs, or $6.19 billion, up 18.8 percent in organic terms versus 2009 and up 8 percent compared with 2008, its previous record year.

His next target for the Biel-based com-pany, whose 19 brands run the gamut from luxury Breguet timepieces to affordable plastic Swatch watches, is hitting the 10-bil-lion Swiss franc mark within three years.

He plans to achieve this through organic growth, though the group’s healthy cash pile means acquisitions are not a problem. The main issue, it would appear, is keeping up with the runaway demand that is stretching the pro-duction capacities of his brands.

Hayek has been ceo since 2003 and runs the company alongside his sister, Nayla, who was appointed chairman last June following the death of their father, Nicolas Hayek.

He shares many of the patriarch’s characteristics, in-cluding his love of cigars, his habit of wearing several watches and his determination to wean other brands from their dependence on ETA, the Swatch Group subsidiary that supplies watch movements to most of the industry, in the interests of promoting research and development.

Hayek sat down with WWD to discuss future expan-sion, the competition and which jewelry brands put a sparkle in his eye.

WWD: Swatch Group faces chronic supply shortages this year due to high demand. What is the situation and what are you doing about it?Nick Hayek: It shows how dynamic the watch market is for Swatch Group. Consumption in 2010 increased ev-erywhere. There are some excep-tions of course: Greece, you can forget about it, and Japan was al-ways difficult. But the U.S. picked up, Europe picked up, so the normal, traditional watch markets started to grow in the double digits. Added to this are emerging markets, which started to grow even further than previously, meaning sales were up 30 to 50 percent. We have also started opening more of our own stores, and for this you need bigger assortments, so this

has led us to the situation today, where we cannot satisfy everyone at the same time. This does not

concern just movements. Our problems are on the little details: crowns, cases, dials, hands and so-called appliqués. WWD: Does that mean that you are looking

to acquire more components suppliers to increase capacity?N.H.: No, not necessarily. Swatch Group is the most verticalized company in the Swiss watch industry. We have been adding capacity with additional people,

machines and new, innovative production methods, but at a certain point, you need to build extra factories, and this takes some time. The bottleneck is that you have to in-crease production by 30 to 40 percent, and that is not something you can do from one day to the next in an industry. You have to maintain a high level of quality, and that’s the kind of challenge we face. Here, we do not ac-cept any compromise. WWD: And when you say you have to increase production by 30 to 40 percent, is that just to meet existing demand or are you also factor-

ing in the next few years?N.H.: This is to satisfy existing demand and to be able to have enough stock, but it depends on the brands and the segments. You don’t have the same shortage every-where. For the Swatch brand, we are in the process of building two additional automatic production lines be-cause the demand is so high. We are adding some capac-ity in dials, especially for the high end, for Omega, for Breguet and Blancpain, where we have problems. We are experiencing shortages in hands in particular for Blancpain and Omega.

WWD: How much are you looking to invest this year?N.H.: We invest between 150 million and 250 million Swiss francs annually in our production facilities in the form of new machines, new production lines, the renovation of old machines and buildings, and expanding produc-tion. What we are doing now, on top of that, is buying ad-ditional land. When I say the real investment that Swatch Group is making is probably more in the region of 400 million to 450 million Swiss francs, you have to bear in mind that that is spread over two to three years. WWD: You have also stated your intention of reducing the supply of movements and assortments to your com-petitors. I know it’s been a company intention for a while, but first you need the approval of the Swiss com-petition authority, the cartel commission.N.H.: We owe this first of all to the consumer. If you buy a very expensive watch and then you find out that inside, it has a standard movement made by ETA — a very high-quality movement, but of which many non-Swatch Group brands say that they produced it themselves — we call this cheating the consumer. The second reason is that it’s an unhealthy situation. We need competition that invests also in research and development, and in the produc-tion, because otherwise the industry is dying. It’s in the interest of the Swiss industrial landscape to have many of the competitors invest. Some of them do. Rolex has an industrial approach. This is also true of Richemont. And then you have others who spend a lot of money just on marketing, they buy big companies for billions, they claim they’re the biggest watchmakers, but they make zero investment to really build up the base of their prod-ucts. They produce neither the movements, nor the dials, hands or cases. They just create billboards. WWD: Are you referring to LVMH Moët Hennessy Louis Vuitton brands?

N.H.: I have not talked about LVMH brands. WWD: You have not mentioned them by name. I’m reading be-tween the lines, since the group recently purchased Bulgari for $6 billion and several LVMH brands have announced the launch of their own movements in the last year. N.H.: You mean the brightly announced movement for which Tag Heuer got a license from Seiko? OK. WWD: And the Unico movement from Hublot. Are you not impressed with that?N.H.: Look, it’s not that I’m not impressed. I think everybody has to take his responsibility. It is not up to me to tell these brands how to run their business, but we need to be trans-parent in the interest of the consumer. If the cartel commis-sion forces us to deliver assortments on the grounds that 95 percent of the industry is dependent on us, that means most of the other brands are using our parts, otherwise we would have the right to stop. I refuse to lie about that. Why should you pay added value for a watch if it contains just a standard movement purchased from a competitor who sells the same movement in a watch that costs five times less? This is not right. We have to change this, and we have the backing of the big, important groups in Switzerland as well as of the smaller independent Swiss brands. Swatch Group should not be treated like a supermarket where anybody can come in, and we are forced to serve them. WWD: Some people are saying that to implement such a change could take up to a decade. What is a realistic time frame as far as you’re concerned?N.H.: We try to do it tomorrow. WWD: But you know it’s not going to happen tomorrow.N.H.: I think we have solid arguments. First of all, look how many people are now claiming that they have their own movements. WWD: So you’re turning the tables on them. N.H.: Wait a minute! What you have to understand is that our patents on standard movements and assortments no longer exist. All you need today is to buy machines and train people, and you can produce your own movements

We registered sales of 6.4 billion Swiss francs in 2010, and we have the potential to make 10 billion, just with

organic growth, within three years.

{Continued on page 14}

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The Breguet Double Tourbillon.

WWD.COMWWD MONDAY, APRIL 18, 201114

and assortments. The only reason why most brands don’t do it is cost and risk. The cartel commission is beginning to understand this. And that’s why we are positive that the cartel commission will give us an indication fairly soon

that we can start to implement our plans. WWD: Talking of price increases, in terms of the finished product, are your brands holding off on raising prices or will there be some price increases this year to compen-sate for the strength of the Swiss franc?

N.H.: Price increases are a very sensitive issue and we are very careful before we do it, because we come from the lower-priced segment with Swatch. We don’t like to pass on immediately to the consumer any increases in the cost of gold or in exchange rates. It’s our job to find ways to keep prices attractive despite those factors. WWD: But in terms of the strengthening Swiss franc, I think it’s fair to say that raising prices is not a knee-jerk reaction, because it does look like a long-term trend.

N.H.: I hope not. We recently saw the dollar rate against the Swiss franc fluctuate by 4 cents in four days. That’s extreme, and as long as the exchange rate is this volatile, we will be very careful. We have authorized some price increases, between 4 and 7 percent depending on the brand and region, but I’m convinced that in the second part of the year, the euro will probably trade at around 1.35 to 1.37 against the Swiss franc, though with curren-cies, you never know, and the dollar will probably be at 0.95 to 0.96 against the Swiss franc, or heading toward 1 Swiss franc, I hope. We prefer to accept lower margins because of the currencies, and not lose market share and be loyal to the consumer. And this has paid off. WWD: I heard some of your brands were showing a pared-

down assortment at Baselworld just to make sure that they will be able to de-liver everything they show to retailers. Is that a companywide policy? N.H.: No, that’s not true. Swatch Group has never showed a prototype that is crazy and can never be manufac-tured just to show off. That’s a mar-keting bluff. We might run into delays and complications, especially for the high-end luxury brands. The Breguet Double Tourbillon, for example, was so complicated, it took us two years to de-liver. More recently, we have developed

a fantastic curved plastic touch screen for Swatch. We realized that it is so innovative and new that we can still improve the way it works, so we will probably launch it in October, which represents a delay of six months. That can happen. But here in Basel, we allow our brands to show only products that are destined to be delivered this year or the following year. That has always been done that way. WWD: Just to revisit the issue of acquisitions, does this mean you’re not in the market for any acquisitions whatsoever?

N.H.: We registered sales of 6.4 billion Swiss francs in 2010, and we have the potential to make 10 billion, just with or-ganic growth, within three years, provided the Swiss franc does not go down the drain. So this is the main objective of this company, to continue to grow our brands and take market share. Now, if there is a brand out there that is in-teresting for us, that we could buy, we will certainly do it. We are independent, we have enough cash so we could do it without the help of any bank, so we can be very quick. But I don’t see anything of great interest out there. WWD: There is no obvious gap in your watch assortment. N.H.: No, but some brands would nevertheless certain-ly fit. But we are not spending our time hunting down takeover candidates. On the jewelry side, what could definitely be reinforced is the pure luxury business. But for sure we would not pay prices like the one paid for Bulgari. But there are not so many candidates out there. WWD: Harry Winston?N.H.: This is a beautiful brand but only acting at the very top end. This is too limited for us. Tiffany would be a bet-ter fit, but forget about it. It’s quoted on the U.S. stock exchange where it is valued at I don’t know how many billions and we won’t embark on that kind of adventure.

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accessories

NEW YORK — Emily Blumenthal blames being a “garmento offspring” for her career path.

The former handbag designer — who designed, launched, produced and did marketing and sales for her own line for five years — founded the Handbag Designer Awards in 2006 as a forum to guide others seeking a career in the trade.

After halting production on her own collection in 2005, she decided to pen a book documenting the process. She started working on her first draft of “Handbag Designer 101” while simultaneously teaching fashion courses at the Laboratory Institute of Merchandising. This led to the creation of her Web site, handbagdesigner101.com.

Blumenthal is careful not to describe her online destina-tion — which just underwent a facelift last week — as a “blog.” Instead, she refers to it as a “me-dium” where aspiring handbag designers can get recognized and obtain the tools they need to start their own businesses.

It was from this Internet portal that The Independent Handbag Designer Awards were born.

Approaching its fifth anniver-sary and the second consecutive year with InStyle as the present-ing sponsor, the annual awards seek to help aspiring hand-bag designers get recognized. Through April 30, the applica-tion process is open for the June 15 ceremony, which includes two new categories this year. The first is an Artisan House award sponsored by Isabel Fiore, where the winner will get to cre-

ate a line of handbags for the designer, and the second is the InStyle Red Carpet Ready award, where the chosen designer’s piece will get featured at the InStyle Summer Soiree and be taken home by a celebrity guest. Other branded partners include Dooney and Bourke and Timberland.

“With this event, we’ve given designers opportunities for branding and exposure in an oversaturated market of accessories, and we’ve been successful in doing so,” Blumenthal said.

But it’s the arrival of her book that has Blumenthal excited. Nearly six years in the making, “Handbag Designer 101” is slated for release this fall and is available for preorder on Amazon.com. — RACHEL STRUGATZ

Emily Blumenthal’s Long Garmento Road

The book’s cover.

A Tissot watch.

{Continued from page 12}

We don’t like to pass on immediately to the consumer any increases in

the cost of gold or in exchange rates. It’s our job to find ways to keep prices

attractive despite those factors.

NICK HAYEK

WWD.COM16 WWD MONDAY, APRIL 18, 2011

By KARYN MONGET

RETAIL APPAREL PRICES may have fallen in every category in March, but as prices for raw materials and labor continue to skyrocket, wholesalers and retailers could face a third-quarter hit in sales.

Merchants have continued to refrain from passing on higher raw materials costs to con-sumers, but may be forced to later this year as margin pressure builds. Thus the concern over higher retail prices remains. Vendors said a main topic of conversation at the February market was about how consumers will react to price increases.

Executives said they expect retail apparel prices will rise by 10 percent or more during the critical back-to-school selling period. It’s believed sticker shock will have less of an im-pact at higher-end channels because upscale consumers want quality and fashion and are willing to pay for it. Business at mass merchants is expected to be the most affected, since those consumers have more limited discretionary in-come and shop for value-priced goods.

The surging cost of cotton continues to impact manufacturers of underwear, sleep-wear, robes and loungewear, where it is a key fi ber, while the escalating cost of crude oil is raising petroleum-based product prices for nylon and polyester, a mainstay of the foun-dations market.

The price of cotton closed at $219.45 per pound Friday, according to Cotlook A-Index, a proxy for global cotton prices that generally trends in step with but is different from prices on the U.S. Futures market. That’s more than double the cost of cotton in January 2010, according to the International Cotton Advisory C o m m i t t e e . The cost of one pound of poly-ester staple was 99.5 cents on March 28, com-pared with 77 cents on March 29, 2010, and polyester fila-ment rose to 88 cents against 65 cents during the same year-ago period, according to the WWD Fiber Price Sheet, published March 28.

A majority of vendors said they have begun passing along some increases to retailers, but they also are coming up with creative meth-ods to cut costs, such as reengineering fabric blends, creating laces and trims in-house, and streamlining the use of embellishments such as appliqués, bows, beading and piping. Domestic lace suppliers are also being affect-ed and are reportedly cutting 20 to 30 percent of stock items from their lines because of pro-hibitive costs.

Due to the volatility of the cotton market, executives said they face the dilemma of whether or not to confi rm orders as far out as six months in advance to maintain a set rate. The reason: On March 1, the ICAC re-ported global cotton plantings were expected to increase 7 percent and the increased pro-duction would have driven down the cost of cotton. But on April 1, the ICAC revised its estimates, citing competition from food crops and limited resources such as land and water, which would prevent production from yield-ing as much as previously projected.

Here, executives share their thoughts on one big question: Will consumers pay the price?

Greg Holland, vice president of sales at Komar Co. and the licensed sleepwear collections by Donna Karan Intimates and DKNY: “We feel cotton is still a fabric of choice for our product category. Increased retail pric-ing will start to hit stores soon so we will see what the consumer is willing to pay. Open-to-buy dollars have not increased dramatically for the stores so they are buying less units if a product is at a higher cost. I believe the consumer will pay a little more for compel-ling product and the decrease in units bought should mirror sales over the counter.”

Bob Vitale, executive vice president of sales and marketing at Wacoal America: “I think consumers understand that price in-creases are part of life today, especially when they see the increasing price of gasoline. The big question is not just if they are willing to pay more, but if they are able to. In many cases, choices have to be made. Providing exceptional value in a product becomes ever more important in substantiating today’s higher prices.”

Guido Campello, vice president of sales, market-ing and innovation at Cosabella:“Whenever something is deemed unstable, they want more of it. Look at gold. There’s an awareness of cotton fabric but consum-ers really haven’t thought about the price of cotton.”

Arnold Aronson, partner and managing director of retail strategies at Kurt Salmon Associates: “A larger percentage of cost increases could be tolerated at better and luxury stores where

customers are not feeling the pressure of in-flation and have more elastic-ity in spending. Those customers want quality and trends. But the Wal-Marts and Targets of the world have to be more restrained in passing along price increases to consumers who are looking at dis-

cretionary items to buy and have household requirements...you’ll see the impact of higher prices in those [mass] channels, which will have to be much more careful and creative.”

Bill Ghitis, former president of Invista Inc. and president of consulting fi rm Bian International: “Cotton is still a very powerful story. Eventually the price for cotton will come down because people are wearing less cotton and farmers will plant more because of that. But when prices spike, more cotton will be planted and consumers will begin to buy less again...I believe consumers haven’t felt the impact at the raw material level, but if and when they do, they will surprise the market. Tremendous improvements have been made with synthetics over the years and consumers have been adapting.”

Richard Adjmi, chief executive offi cer of The Age Group: “I believe consumers will see price increases at all retail channels this fall and they will pay more if the product is trend-right. But in-creases for basic products will be tougher for consumers to swallow. However, I don’t think consumers will have much of a choice if they really want the product.”

innerwearWill Shoppers Pay the Price?It Depends on the Retailer

Connecting the dots: a timeline from the cotton fi elds…

…to mills with labor costs…

…to shipping and fuel costs…

…and yarn factories…

…and ultimately, to the consumer.

Amount industry executives expect retail apparel prices will rise this fall.

or more10%CO

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REWIRING, HIS WAY: Taking over Scott Dadich’s old job at Wired, a magazine that won the National Magazine Award for design two years running and is nominated again this year, was an intimidating charge for the magazine’s new creative director Brandon Kavulla.

“I think any magazine you take on, if you don’t feel intimidated or feel like, ‘Oh, man, I really got to do some great stuff,’ you’re not being realistic,” said Kavulla, who was hired from Rodale’s Men’s Health in February. “It’s like a musician who’s been getting on stage all his life and is still nervous getting up there — people paid for the tickets, and I have to perform.” Dadich left the magazine in October to focus on his role as Condé Nast’s executive director of digital-magazine development. He recommended Kavulla, a friend from the Society of Publication Designers board, as his replacement. “The fact that he threw my name in there really meant a lot,” he said.

Kavulla spent most of his career working on music magazines like Vibe and Spin before joining Rodale to work on Best Life, until it folded in May 2009 and he was transferred to Men’s Health. He said his experience with Men’s Health, where the design challenges revolved around creating visuals for “ideas” stories (“How do you deal with something about fi sh oil? How do you deal with the concept of metabolism?”) have prepared him well to work with Wired’s nerdy content.

The job required Kavulla to move his family — two young children and his wife, Anne-Marie, a fabric artist with her own company, Pirtti — from New York to San Francisco to be near Wired’s headquarters. Two days into the job, Kavulla fl ew back to the East Coast to judge the ASMEs and supervise his fi rst cover shoot with Mark Seliger for the May Humor issue: the comedian Andy Samberg with various cats,

fl uffy kittens and a hairless sphynx. “If you’re wondering how the cats thing came about — it was more about what sort of defi nes Internet comedy,” he said. “Everyone has cat sites and it’s the lolcat thing.” He tucked the

MEMO PAD

WWDSTYLE

Swinging With Sting

“I’m getting lucky tonight,” Sting laughed as a fl ock of New York socials writhed around him on stage at the Waldorf-Astoria Thursday night, where the Evelyn Lauder Breast Cancer Research Foundation was holding its annual gala.

He may have been under the weather, but one would never know it from the energetic performance of hits he gave to a crowd of 1,100, including “Fields of Gold” and “Roxanne.” During “Desert Rose,” he invited “all of the ladies in the room tonight” up on stage to dance with him, resulting in a virtual stampede. Not that there was any hanky-panky: his wife, Trudie Styler, also attended. As did Abigail Breslin, Carolyn Murphy, Miss USA Rime Fakih, Kelly Rutherford, Marjorie Gubelmann, Lizzie Tisch and husband Jonathan Tisch and Coralie Charriol Paul.

“Elton [John] is such a dear friend and so kind and generous himself with this that even if I felt sick it didn’t really matter,” Sting said backstage.

John revved up the crowd himself with a rousing version of “Your Song,” among other numbers. He then introduced Sting: “My dearest and most treasured friend Sting is so sick, but refused not to come,” said John. “He’s in a terrible state. I’m the reserve act, if something happens.”

While the stage set was being prepared for Sting — John played his trademark piano, while Sting played guitar — Lauder, clad in pink Oscar de la Renta, decided to try her hand at stand-up comedy to fi ll the time. After gamely making two jokes, she laughed and asked, “How much will you bid if I don’t make

“I’m getting lucky tonight,” said Sting, who was nearly swamped

after inviting the ladies in the audience at last week’s Hot

Pink Party to join him onstage. Kelly Rutherford, Lizzie Tisch

and Elizabeth Hurley were among those who grooved to

the beat of “Desert Rose.”

FASHION REHAB

PHOTO BY STEVE EICHNER

When Hollywood

starlets go wrong,

it’s time for a little

help. Page 19.

{Continued on page 18} {Continued on page 19}

STATUS QUO: During a tumultuous Paris Fashion Week marked by John Galliano’s flameout and Christophe Decarnin’s no-show at Balmain, there was also widespread speculation that Chloé and its designer, Hannah MacGibbon, would be parting ways after her runway bow. Not so. According to market sources, MacGibbon, creative director at Chloé since 2008, recently extended her contract with the French fashion and accessories goods house for another season. After that is anyone’s guess. Reached on Friday, Chloé’s chief executive officer Geoffroy de la Bourdonnaye said, “Hannah is still with us, that’s all I can say.”

TORY BURCH’S TRENDY BRIGADE: At the second annual dinner

with a designer hosted by the Council of Fashion Designers of America and InStyle magazine, guest of honor Tory Burch soaked up the accolades from guests Kristin Davis, Eva Amurri, Abigail Spencer, Amber Heard, Eliza Doolittle, Ariel Foxman, Steven Kolb, Juan Carlos Obando, Brad Goreski, Cameron Silver and Christos Garkinos at West Hollywood’s Soho House. Originally planning to open

three stores within three years of launching her contemporary label in 2004, Burch now oversees 50, with an additional 15 units to launch this year.

Other guests included Michelle Monaghan, who recently

returned from a world press tour for the action movie “Source Code”; Hailee Steinfeld, who’s

following up her Oscar-nominated turn in “True Grit” with a remake of “Romeo and Juliet,” and Teresa Palmer, who, when not in negotiations to play Nicholas Hoult’s love interest in the zombie flick “Warm Bodies,” is producing her first movie, “Track Town,” which she dubbed “a hybrid between ‘Thelma & Louise’ and ‘True Romance.’

PATRON MARC: Peek & Cloppenburg’s Designer for Tomorrow competition has just gotten a major design boost — and its first patron: Marc Jacobs. He is not only expected to hand out the award to the winning young designer July 6 during Mercedes-Benz Fashion Week Berlin. Jacobs will also be doing the first edit of the DFT applications before the jury of journalists and retailers are asked to select five semi-finalists for the upcoming award show.

This is the fourth round for Peek & Cloppenburg’s Designer for Tomorrow contest, past winners of which were Julia Knüpfer, Joel S. Horwitz, Sam Frenzel and Parsival Cserer. The prize comprises about 150,000 euros, or about $200,000, worth of start-up help. The German specialty store chain finances the winner’s first collection, selected pieces of which are carried in the P&C stores, oversees communication and public relations, and organizes a show for the winner during the subsequent MBFWB. Given Jacobs’ involvement, there’s now also talk of a trip to

New York plus an atelier visit for the winner. And who knows? Maybe more.

HELP WANTED: Olivier Theyskens and Colette are teaming in aid of earthquake- and tsunami-ravaged Japan. The Belgian designer has created four limited edition styles under the Theykens’ Theory label that are on sale at the trendy Paris boutique and on its Web site, with 100 percent of proceeds going to Red Cross-led relief efforts on the island nation. Items include a printed cotton tank top for 90 euros, or $130 at current exchange, and a silk-blend tank dress for 340 euros, or $492.

ROAD SHOW: Having already showed his original short film series for Magnum Ice Cream in Europe, Karl Lagerfeld will touch down in New York Thursday for a premiere. Rachel Bilson, who appears in the flick, will be at his side on the red carpet for the festivities at the IAC Building. The duo joined forces for Magnum’s Stateside debut. Ice cream is usually a tough sell with the fashion crowd, but if anyone can get them to splurge, it’s Karl.

TALKING TIME: As part of last week’s Madison Avenue Watch Week celebrations, Vacheron Constantin hosted a series of morning talks to dish all things horological. The Geneva-based firm, which is opening its first Manhattan flagship in September, covered the art of collecting — in a discussion between Andrew Jacobs, a senior

investment professional at Metropolitan Real Estate Equity Management, and Jack Forster, editor in chief of Revolution magazine, who detailed their personal archives — as well as the auction angle in another session with John Reardon, senior vice president of watches at Sotheby’s, and Katharine Thomas, a specialist in the department. The two clued guests in on a range of topics, from the Seventies Quartz Crisis (aka the Quartz Revolution) to what’s hot on watch circuit now: enameled Turkish

and Chinese Market Watches, which were made by Swiss manufacturers sent to Turkey and China in the 18th century.

The big hit of the series, however? Le Bernardin chef Eric Ripert, who has his own watch collection, including four from Vacheron Constantin and an early Cartier from his mom. But it wasn’t all watch talk. Ripert revealed he got kicked out of school at age 15 (“the principal said [to my mother], ‘Your son is such a bad student, it’s the end of the road for him’”), was an explosions specialist during his brief time in the army and was beaten up while training as a chef in France. “The French system was, we’re going to humiliate you to the point of breaking you and then we’re going to rebuild you,” he recalled. “If you made a mistake you were beaten. I remember having blue shoulders on both sides, not to mention the butt.”

WWD MONDAY, APRIL 18, 201118

OPENING CEREMONY exported a few New York signifiers for its Hong Kong debut last week. To celebrate the brand’s venture into the Chinese market, life-size animal statues, including an ostrich, horse and others, were shipped from its New York shop to the Lane Crawford store in Hong Kong’s IFC mall. Then there was the fare, which included hot dogs, mini ham-burgers and popcorn handed out from vending carts.

A mix of Hong Kong’s socialites, business types and local celebrities turned out for the fete, including Taiwanese model and actor Godfrey Gao, Hong Kong singer Kelvin Kwan, makeup artist Zing, radio personality Jan Lam and Jennifer Tse, sister of actor-singer Nicholas Tse. Hong Kong fashion blogger Joey Ma, who is already tall, showed up in platform boots.

“You’re the tallest Asian man in the world,” shouted one onlooker.

Opening Ceremony co-founders Humberto Leon and Carol Lim collaborated with Lane Crawford to create a capsule line for the Hong Kong and Beijing markets, includ-ing a special logo featuring two rabbits meant to represent the duo, who were both born under the Chinese zodiac sign. (Coincidentally, 2011 happens to be the Year of the Rabbit.) Official Opening Ceremony pal Chloë Sevigny was also along for the trek. The actress said she was still getting over jet lag, but had already been shown all over town.

“I went to the Peak,” Sevigny said, using local par-lance for Victoria Peak, the island’s highest point. In addi-tion to the natural wonder, she said she’d noticed some very trendy kids running around

the city. As for current proj-ects, Sevigny said she’s work-ing on a second collaboration with Opening Ceremony, as well as a miniseries for HBO.

“But I’m not supposed to talk about that,” the ever-dis-creet Sevigny said.

— ELLEN SHENG

Hong Kong Frock Exchange

FASHION SCOOPS

Trudie Styler, Donna Karan

and Sting.

Elton John

Jeanette Wagner

Abigail Breslin

any more jokes?” She also congratulated John and his partner, David Furnish, on the birth of their son, Zachary. Backstage, John was proudly showing pictures of the infant on his iPad to a rapt audience that included Lauder, Donna Karan, Sting, Styler and Elizabeth Hurley.

Karan offered to play Brenda Starr, agreeing to try to wrest a quote from John, with whom she was sitting for the dinner. Grabbing a tape recorder, she inquired, “What should I ask?” Hurley, in J. Mendel, discussed her next project. “I just shot a pilot for ‘Wonder Woman’ for NBC,” she said. “Fingers crossed.” She’s also busily opening pop-up stores for her Elizabeth Hurley Beach line and “hoping to spend some time soon at my farm.”

Leonard Lauder offered business truisms to the group, advice he often offers aspiring executives. “If you’re mad at

someone, never put it in writing,” he said. “Tell them to their face. And never punish a retailer. They have long memories.”

The evening raised $4.3 million, a record for the event, which has raised more than $350 million since the foundation was founded 17 years ago. Part of the proceeds were raised with a spirited auction by Deborah Norville and Christie’s Lydia Fenet, with one lot — an invite to the Vanity Fair Oscar Party — going for $50,000. A stay at Karan’s Turks & Caicos home fetched $60,000.

— JULIE NAUGHTON

AND PETE BORN

Christophe de Villeplée, Lynne Greene and Nicolas Mirzayantz.

Evelyn Lauder in Oscar de la Renta

with Leonard Lauder.

Carol Lim, Chloë Sevigny and Humberto Leon.

Swinging With Sting

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{Continued from page 17}

eye

Tory Burch

{For more Scoops, see page 19}

WWD MONDAY, APRIL 18, 2011 19WWD.COM

These Hollywood starlets took the term “dressing up” way too literally. WWD offers chic solutions for their ghastly getups.

FLOP: Something tells us Khloé Kardashian (left) never waited tables but she sure plays the part well.FIX: Viktor & Rolf’s cocktail shirtdress (right) makes a subtle reference to waitress-chic, and it would flatter — not to mention fit — Kardashian’s curves.

FLOP: Tatyana Ali’s sequined leotardlike number (left) would make a fine performance on “Solid Gold.”FIX: A jeweled mini by Lanvin (right) does glitz with an artsy touch that’s just right for the current decade.

FLOP: Aubrey O’Day (left) looks like a Disney princess gone wrong in a black-and-orange dress that should only come out on Halloween.FIX: Still flowy and colorful, this Marc Jacobs gown (right) might make O’Day live happily ever after.

Costume Party or Red Carpet?FASHION REHAB

words “OH HAI” (an Internet lolcat joke — Google it) on the cover next to the date.

In spite of the magazine’s design track record, Kavulla isn’t worried about making his own changes. He said his job isn’t just to protect the status quo. “If anything is sacred with Wired, it’s evolution and reinvention,” he said. “Over the last five years with Scott, Wired has gone through at least three rethinkings, and none of those were because something was broken or wrong. It’s just what Wired does.” He plans to launch his own “reboot” in the next few months, and plans to strip things down.

“One thing that I always do whenever I go to any magazine is I simplify things,” he said. “I’m always excited to see what people do with a limited palette; I think that’s when you get a lot of inventive solutions. If you give somebody every crayon in the box, you always get something boring. If you just give them red, you’ll see red like you never even thought of it, if you give it to somebody good.”

In other news about the issue, Wired is aiming to stem the slide in sales of its iPad edition, which fell by about 75 percent to an average of 27,000 a month for the six months after it launched last June, when 100,000 were sold. The May issue will be free on the iPad, courtesy of Adobe, Condé Nast’s partner in digital magazine production. — ZEKE TURNER

PRESSING AHEAD: Annika McVeigh has joined Celine as worldwide director of press relations, a new Paris-based post reporting to chief executive officer Marco Gobbetti. Previously, McVeigh was vice president of public relations at Prada USA. Her résumé also includes stints at Comme des Garçons and Hussein Chalayan. — MILES SOCHA

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{Continued from page 17}

LIQUID LUNCH: Belvedere recruited Zac Posen to host the launch of its new Bloody Mary flavored vodka, with a brunch at Le Caprice. On hand were Leigh Lezark, Pat and Ann Cleveland, Marjorie Gubelmann, Zani Gugelmann, Kate Lanphear and Peter Davis, among others. Posen created a special brunch menu for the

restaurant that will be served through June 26. The designer hosted a similar event for Belvedere in the London branch of Le Caprice earlier in the month.

STREET SCENE: Levi’s is on a mission to create cultural experiences for customers with a design collaboration of limited edition denim jackets and a series of free film workshops at Los

Angeles’ Museum of Contemporary Art. Coinciding with the “Art in the Streets” graffiti exhibition that opened Sunday, the workshop offers guests opportunities to create stop-motion animation that they can instantly share to the Web, check out film equipment for free, use editing docks and contribute to a hand-painted film strip that will be screened during a summer concert. Other street-centered events such as movie

screenings with food trucks and skate events are also set to take place through the four-month run.

In its third iteration, following stints in San Francisco and New York, Levi’s art series is tackling film for the first time. Consumers can take home a piece of the exhibit with $250 limited edition denim jackets decorated by 11 artists from the show, including Lady Pink, Shepard Fairey, André and Spike Jonze.

FASHION SCOOPS

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