By SHARON EDELSON

HERMÈS IS SPENDING big to expand in America.The fi rst of three major U.S. retail projects to bow,

the luxury brand’s newly renovated Beverly Hills fl ag-ship, will open in September with twice the amount of selling space as its former incarnation. Everything about the 12,000-square-foot fl agship is meant to broadcast modernity and luxury, from the Carrera marble facade — a departure from Hermès’ typical French stone — and gilt glass panels to Wi-Fi and a state-of-the-art telephone system.

Hermès in 2012 paid a reported $75 million to buy the property that houses the fl agship at 434 North Rodeo Drive. “We decided to take advantage of the op-tion [to buy the building], knowing the investment we were going to make in renovations,” said Robert Chavez, president and chief executive offi cer of Hermès USA. “The whole building was gutted and boarded up. We moved two doors away to a temporary location on the same side of the street. We didn’t lose any traffi c or cli-ents, although the space is signifi cantly smaller. We’ve remained open during the construction period.”

Sources estimate the fl agship’s volume will in-crease by 30 percent or more.

Hermès International has the deep pockets to fund its growth. For the second quarter ended June 30, the company logged an 11.8 percent increase in revenues to 910.4 million euros, or $1.18 billion, from 814.5 million euros, or $1.05 billion, during the same period a year earlier. The company in July raised its guidance for

Grid System

By DAVID MOIN and EVAN CLARK

IT’S NOT A DONE DEAL yet but an eager Richard Baker has been touring Saks Fifth Avenue locations, eyeing potential closings as well as capital improve-ments, and locations that could be converted to Lord & Taylor units.

There is clearly work to do. On Monday, Saks Inc. reported second-quarter numbers that were weak, sparking speculation among vendors and analysts about what Baker, the chairman and chief executive offi cer of Hudson’s Bay Co., could do to improve Saks and its anemic profi tability. It’s a business which, like Neiman Marcus, is widely viewed as having limited growth potential, but the cachet endures and Baker has an adventurous streak that could take the brand in new directions.

“Today you have to take risks and be creative to make the business distinctive and draw people to the brick-and-mortar. Saks’ online business is strong but it’s also the biggest competition to the stores.”

On July 29, HBC revealed its deal to buy Saks for $2.9 billion, including debt. The deal is seen clos-ing in two to fi ve months from now, though Saks is going through a 40-day “go-shop” period allowing it to seek better offers. The Neiman Marcus Group, along with KKR, made a late bid before HBC’s offer was accepted and could still be interested. However, a bid topping HBC’s would be expensive and time-consuming, and would include a breakup fee to HBC. Regulatory fi lings put the break-up fee at $40.1 million during the go-shop period, which concludes Sept. 6. KKR might also pursue Neiman Marcus, which has fi led the paperwork for a public offering while alternatively remaining open to an outright sale.

Saks’ net loss in the second quarter ended Aug. 3 widened to $19.6 million, or 13 cents a share, from $12.3 million, or 8 cents, a year earlier. Last quar-ter’s losses included $2.5 million in expenses from the deal with HBC, a $1.6 million pension settlement charge and $1.1 million in store-closing costs.

SEE PAGE 11

WWD

PHOTO BY GEORGE CHINSEE; STYLED BY MAYTE ALLENDE

FORMING A GROWTH PLAN

Baker Plots StrategyAs Saks Loss Widens

Hermès’ American Push

SEE PAGE 8

Traditional plaid patterns are anything but for resort with several innovative takes on the classic, such as this Michael Angel digital-print wool, silk and sequined top and wool and silk dress. Robert Lee Morris bracelets. For more, see pages 4 and 5.

TUESDAY, AUGUST 20, 2013 ■ $3.00 ■ WOMEN’S WEAR DAILY

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PADDLING ALONG

LISA AND RICHARD PERRY HOST THEIR ANNUAL BREAST CANCER FUND-RAISER IN SAG HARBOR, AND HILARY RHODA JOINS THE PADDLEBOARD ACTION. PAGE 9

MADISON MANSEVALENTINO OPENS A TOWN HOUSE ON MADISON AVENUE

TO DISPLAY ITS FULL COLLECTIONS. PAGE 6

Grid System

WWD

PHOTO BY GEORGE CHINSEE; STYLED BY MAYTE ALLENDE

Traditional plaid patterns are anything but for resort with several innovative takes on the classic, such as this Michael Angel digital-print wool, silk and sequined top and wool and silk dress. Robert Lee Morris bracelets. For more, see pages 4 and 5.

TUESDAY, AUGUST 20, 2013 ■ $3.00 ■ WOMEN’S WEAR DAILY

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WWD.COM2 WWD TUESDAY, AUGUST 20, 2013

Saks Inc. reported second-quarter numbers that were weak, sparking speculation about what Richard Baker could do to improve Saks and its anemic profitability. Page 1 Hermès’ newly renovated 12,000-square-foot Beverly Hills flagship is a showstopper. Page 1 Valentino has a new New York home on Madison Avenue — a four-story town house that opens today. Page 6 The fashion industry is gauging the opportunities and risks of an Asia-Pacific trade deal. Page 7 A surf-minded crowd attended the Breast Cancer Research Foundation’s Paddle & Party for Pink on Saturday. Page 9 The theme for Nicola Formichetti’s first ad campaign as artistic director of Diesel is reboot. Page 9 The Duke and Duchess of Cambridge have released photos of themselves with four-week-old Prince George. Page 11

ON WWD.COM

THE BRIEFING BOXIN TODAY’S WWD

Nadja Giramata is the subject of “Model Call” on WWD.com.

MODEL CALL: Nadja Giramata has walked for Tom Ford and appeared in Vogue Italia, but she’s never made it to the U.S. — until now. For more, see WWD.com.

TO E-MAIL REPORTERS AND EDITORS AT WWD, THE ADDRESS IS FIRSTNAME_LASTNAME@FAIRCHILDFASHION.COM, USING THE INDIVIDUAL’S NAME. WWD IS A REGISTERED TRADEMARK OF ADVANCE MAGAZINE PUBLISHERS INC. COPYRIGHT ©2013 FAIRCHILD FASHION MEDIA. ALL RIGHTS RESERVED. PRINTED IN THE U.S.A.VOLUME 206, NO. 36. TUESDAY, AUGUST 20, 2013. WWD (ISSN 0149–5380) is published daily (except Saturdays, Sundays and holidays, with one additional issue in March, May, June, August, October and December, and two additional issues in February, April, September and November) by Fairchild Fashion Media, 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. For New York Hand Delivery Service address changes or inquiries, please contact Mitchell’s NY at 1-800-662-2275, option 7. 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 all request for reprints of articles please contact The YGS Group at condenast@theygsgroup.com, or call 800-501-9571. Visit us online at www.wwd.com. To subscribe to other Fairchild Fashion Media 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.

By KRISTI ELLIS

FEDERAL AUTHORITIES in New Jersey said five people associated with one of the largest counterfeit goods smuggling operations in his-tory have pleaded guilty.

The five were among 29 peo-ple charged in the $325 million counterfeit ring taken down and revealed by federal officials in March 2012. The operation in-volved counterfeit smuggling and sales of well-known appar-el and accessories brands, as well as large amounts of con-traband drugs, authorities said in indictments and three crimi-nal complaints at the time.

Yi Jian Chen, 53, and Hui Huang, 33, both of Brooklyn, N.Y., and Ning Guo, 40, of China, pleaded guilty to conspiracy to traffic in counterfeit goods Friday before U.S. District Judge Esther Salas in federal court in Newark. Guo also pleaded guilty to one count of money launder-ing conspiracy.

Two others — Jian Zhi Mo, 45, of Flushing, N.Y., and Yuan

Feng Lai, 28, of New York City — pleaded guilty Aug. 12 to one count of conspiracy to traffic in counterfeit goods.

The five defendants ran an international counterfeit goods smuggling and distribution con-spiracy from August 2008 through February 2012, according to court documents. Their part in the operation involved illegally

importing more than 35 contain-ers of counterfeit goods, primar-ily bogus handbags, sneakers and cigarettes, to the U.S. from China, authorities said. The re-tail value was estimated at $47 million. Among the goods seized at the time were counterfeit Ugg and Timberland boots, Nike sneakers, Burberry scarves,

Gucci handbags, Lacoste shirts, Coach and Louis Vuitton hand-bags and Polo sweatshirts.

According to court docu-ments, the conspirators sought help and unknowingly agreed to use a corporation that was actually a front company set up by law enforcement to import the goods through Port Newark/Elizabeth Marine Terminal.

They then used fraudulent customs paperwork, falsely declaring the goods within the containers. Authorities said several undercover special agents were introduced to the conspirators, who paid the agents more than $900,000 for “services” to help move the cargo through the port.

Each defendant faces up to 10 years in prison and a $2 million fine on the conspiracy to traffic in counterfeit goods charge. Guo faces up to 20 years in prison and a fine of $500,000 or “twice the gain or loss caused be the offense” for the money laundering charge. All five de-fendants are scheduled to be sentenced Nov. 25.

Guilty Pleas in N.J. Counterfeit Bust

Wal-Mart to Hold U.S. Sourcing Summit

Urban Outfitters Posts Record Q2 Net

WAL-MART STORES INC. isn’t giving up on its Made in America pledge, and on Thursday will host a U.S. Manufacturing Summit at the Orange County Convention Center in Orlando, Fla.

The retail giant in January committed to sourcing $50 bil-lion worth of goods in the U.S. over the next 10 years. It contin-ues to appeal to other retailers to participate as it tries to line up support from businesses across a variety of industries, and reaches out to the federal and state gov-ernments. The blueprint is simi-lar to other Wal-Mart initiatives

such as the sustainable index the retailer introduced in 2009. Wal-Mart created a coalition between retailers, manufactur-ers, government, nonprofit orga-nizations and academia for the index, which measures key per-formance indicators and catego-ry-specific metrics to evaluate a retailer’s performance and sup-ply chain performance.

On Thursday, Wal-Mart Stores president and chief executive of-ficer Mike Duke, Wal-Mart U.S. ceo Bill Simon, Sam’s Club ceo Rosalind Brewer and executive vice president and chief mer-chandising and marketing officer

Duncan Mac Naughton, will be joined by such business lead-ers as General Electric chair-man and ceo Jeff Immelt and Kayser-Roth president and ceo Kevin Toomey; Penny Pritzker, U.S. Secretary of Commerce, and Richard Fisher, president and ceo of the Federal Reserve Bank of Dallas, as well as the gover-nors of eight states.

Wal-Mart will convene some 1,500 people at its summit, which “will build on Wal-Mart’s com-mitment to drive more American manufacturing as an industry,” the Bentonville, Ark.-based re-tailer said. — S.E.

$47MESTIMATED RETAIL VALUE OF GOODS

SEIZED FROM DEFENDANTS.

CORRECTION

AG Adriano Goldschmied projects 2013 sales to be $250 million. This fig-ure was incorrect on page 15 of the WWDLasVegas section II, Monday.

By SHARON EDELSON

URBAN OUTFITTERS INC. on Monday reported record second-quarter net income and admitted it’s on the hunt for acquisitions.

The retailer had net income of $76 million for the three months ended July 31 and net income of $123 million for the six months ended July 31. Earnings per di-luted share were 51 cents for the three months and 83 cents for the six months.

Total company net sales for the second quarter rose 12 per-cent over the same quarter last year to $759 million. Comparable retail segment net sales, which include the comparable direct-to-consumer channel, increased 9 percent. Comp retail segment net sales jumped 38 percent at Free People, 9 percent at Anthropologie and 5 percent at Urban Outfitters. Wholesale seg-ment net sales rose 17 percent.

“There’s enormous growth potential in the Asian market, es-pecially China and Hong Kong,” said Richard Hayne, chief execu-tive officer.

Regarding acquisitions, Hayne said, “We’re in discussions with a couple folks. That’s moving along

nicely and hopefully we’ll have more to report. We have the op-portunity to make one or more acquisitions. We want to comple-ment and add product expertise in areas where we don’t have it or add whole new adjacent busi-nesses. The perfect candidate would be a slightly smaller com-pany rather than a larger one.”

He declined to reveal poten-tial acquisition candidates.

During the second quarter, operating income rose 24 per-cent to $119.3 million, from $95.9 million, in the prior quarter. For the six months, operating in-come rose to $192.3 million from $148.8 million.

Gross profit in the second quarter rose 17 percent to $298.5 million from $135.5 million in the year-ago second quarter.

The gross profit rate in the second quarter improved by 169 basis points versus the prior year’s comparable period. For the six months, the gross profit rate improved by 148 basis points versus last year. The improve-ment for both periods was due to fewer markdowns, primarily at Anthropologie.

As of July 31, total invento-ries increased by $24 million, or 8 percent, on a year-over-year

basis. Comparable retail segment inventories were flat.

For the three months, sell-ing, general and administrative expenses as a percentage of net sales rose by 14 basis points com-pared to the year-ago period. SG&A expressed as a percentage of net sales for the six months fell by 24 basis points compared to last year’s period due to the leverage of direct selling control-lable expenses driven by strong positive retail segment sales. The leverage in direct-selling controllable expenses was par-tially offset by increases in mar-keting expenses.

Urban plans to open 16 Urban Outfitters next year, five of which will be in Europe; nine Anthropologie units, and 14 Free People stores in North America. The company has budgeted capi-tal expenditure of $210 million for new stores and the expansion of the home office.

“We continue to look at the entire world as an expansion op-portunity for all our brands in terms of the direct-to-consumer channel,” Hayne said. “Urban leads with 140 countries. We’re in the very early stages of realiz-ing the worldwide potential each brand possesses.”

wwd.com/apparel 212.630.4212

ERIC C. WISEMAN

VF CORPORATION

OCT 28-29 N E W YO R K C I T Y

A PPA RE L & RE TA I L

C EO SUMMIT

ROBERT K. KRAFT

THE NEW ENGLAND

PATRIOTS

MADE IN AMERICA ISSUE

CELEBRATING HOMEGROWN BRANDS—AND REACHING DECISION MAKERS WORLDWIDE.

MADE IN AMERICAISSUE

ISSUE DATE: SEPTEMBER 4AD CLOSE: AUGUST 21

For more information, contact Pamela Firestone, Associate Publisher, WWD at 212.630.3935 or pamela_fi restone@fairchildfashion.com

4 WWD tuesday, august 20, 2013

Grid, plaid and square

patterns — mostly rendered

in black and white — added

a Graphic edGe to resort.

Lela Rose’s silk dress and Timo Weiland’s silk shirt with A.L.C.’s cotton and wool jacket. Kris van Assche by Linda Farrow Gallery sunglasses; Carolina Amato gloves; Jimmy Choo shoes.

Ostwald Helgason’s silk shirt and skirt. A.L.C.’s cotton and wool jacket.Emanuel Ungaro shoes.

w20a004(5)a;5.indd 4 8/19/13 5:54 PM08192013175625

WWD.COM5WWD tuesday, august 20, 2013

Tracy Reese’s viscose, wool and poly blend coat with Robert

Rodriguez’s leather top and A.L.C.’s cotton and wool pants.

Robert Lee Morris bracelets; Alexis Bittar necklace.

Marc by Marc Jacobs’ linen sweater with Carven’s cotton shirt and skirt.

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By ROSEMARY FEITELBERG

NEW YORK — Following a five-month search, J.Mendel has hired Marc Durie from Louis Vuitton to serve as president and chief executive officer.

He officially joins the com-pany Aug. 27 and will report to creative director Gilles Mendel.

Durie will assume some of the responsibilities that were handled by Susan Sokol, who exited the company in February as president and chief operating

officer after a five-year run. A graduate of Ecole de

Management de Lyon, Durie has had two stints at Louis Vuitton, where he was most recently vice president, merchandising, Asia Pacific, and was responsible for product and visual merchandis-ing in 13 countries. He started his career at the company and then left in 2003 to join Yves Saint Laurent. Durie returned to Louis Vuitton in 2011. He is relocating to New York from Hong Kong to assume his role at J.Mendel.

With extensive experience

in merchandising and strategic marketing, Durie was part of the leadership team that helped turn around Yves Saint Laurent. From 2008 through 2011, he served as president of Yves Saint Laurent Asia Pacific, doubling its regional footprint and spearheading ex-pansion into China.

Durie said, “The possibility to develop the global poten-tial of an ultraluxury brand synonymous with exclusivity, femininity and craftsmanship, with its two ateliers in the very heart of Manhattan, comes

rarely. I am truly excited about this opportunity.”

During her tenure, Sokol was instrumental in the expansion of J.Mendel’s ready-to-wear, which now accounts for 60 per-cent of the wholesale business, as well as entering new interna-tional markets.

Mendel said, “I am [pleased] that Marc Durie is joining the J.Mendel team in this pivotal role. After conducting a thor-ough search with our partners, The Gores Group, we are con-vinced that Marc is the right

leader for J.Mendel’s future. His intimate knowledge of the luxury universe, along with his considerable experience in key international markets, makes him well-poised to achieve suc-cessful growth of the J.Mendel brand around the world.”

The company has other devel-opments underfoot. After 18 years at the same Madison Avenue ad-dress, J.Mendel is relocating a few blocks north in October to double its store’s space. And for the third consecutive sea-son, Daniel Jackson has shot the J.Mendel advertising campaign, which will once again feature Dutch model Bette Franke as styled by Melanie Ward.

6 WWD TUESDAY, AUGUST 20, 2013

By JESSICA IREDALE

NEW YORK — Valentino has a new home at 821 Madison Avenue — a four-story town house that opens today, situ-ated between 68th and 69th Streets in the prime of Manhattan’s luxury re-tail real estate. Formerly a Loro Piana store, the 5,295-square-foot space spans four floors and is the company’s first town house setup. Designed by British architect David Chipperfield, the town house features the new retail concept done in collaboration with creative directors Maria Grazia Chiuri and Pierpaolo Piccioli that has thus far been implemented in the Paris, Milan and Beverly Hills stores.

“The feeling of the store provides the customer with a very intimate, very high-end, very luxurious approach,” said Stefano Sassi, chief executive of-ficer of Valentino Fashion Group SpA, noting that this store “is very crucial to us because it is the first one we are re-vamping in New York.”

A taste of the new design concept, which features custom Venetian ter-razzo framing, black-and-white win-dowpane floors, brass fixtures, molded gypsum curtains and layered mirror walls, has already been installed in Valentino shops in Bergdorf Goodman and Saks Fifth Avenue. Each floor is dedicated to a specific collection — handbags on the first floor; daywear on the second; evening on the third, and a special VIP floor, the first in any U.S. Valentino store, on the fourth floor. The by-appointment-only VIP suite is made of up three rooms, each decorated in a different color scheme — red, green and blue. It features American walnut floors, lacquered mirror-finish paint, a faux fireplace, custom lighting fix-

tures by Viabizzuno and the debut of a custom furniture collection by David Chipperfield for Valentino.

The emphasis on VIPs underscores Sassi’s assertion that this store is tai-lored to “the most affluent customer,” who he sees as local in this case. “The store on Fifth Avenue next year will be more international,” said Sassi, refer-ring to Valentino’s forthcoming plans to redesign its Fifth Avenue flagship as a “power statement.” “But [Madison] is much more devoted to the local cus-tomer, although Chinese or Japanese or Brazilians are coming to our store there more than ever.”

Sassi declined to give estimated sales figures but said that he expects the new Madison space to perform “absolutely better than the temporary store we have now on Fifth Avenue.”

Valentino currently has 10 U.S. bou-tiques, with four more slated to open this year in Las Vegas (The Shops at Crystals and Caesar’s Forum Shops), San Francisco and Aspen. There are 115 free-standing boutiques worldwide.

Sassi has over the past seven years steered the brand back into the black, forged the successful design team of Chiuri and Piccioli, streamlined the company’s structure and operations and helped restore the label’s global profile.

The executive has succeeded in the transition from Valentino’s pre-vious owners, private equity fund Permira, to the new ones, Mayhoola for Investments, an investment vehicle backed by a private investor group from Qatar that bought the brand in July 2012. Terms of the deal were not dis-closed, but Milan-based sources pegged the price tag at about 700 million euros, or $933 million at current exchange. Sassi has repeatedly praised the new owners because they have a long-term, ambitious vision for the brand.

Sassi, who was previously ceo of Marzotto SpA and started working at Valentino in 2006, said in October 2012 that he believed Valentino could double revenues in five years. Valentino’s sales in 2012 grew 22 percent to 392 million euros, or $501.7 million at average ex-change, compared with 322 million euros ($414.2 million) in 2011. Sales in three years have grown about 70 percent.

The ceo has been working on bridg-ing the gap with competitors, in terms

of visibility and quality of distribution globally, through a new retail model and store concept, which supports the ex-pansion of the accessories category. The goal now is to strengthen and intensify Valentino’s presence around the world, either directly or through franchises, in-creasingly taking control of the brand’s

store network, and to communicate with consumers providing the full Valentino experience. Valentino has also been de-veloping its men’s wear business with plans to open dedicated stores around the world. Sassi has been working on identifying new locations for additional flagships and even doubling Valentino’s presence in key cities.

In May, Sassi told WWD that sales at the brand’s stores had climbed 40 percent.

— WITH CONTRIBUTIONS FROM LUISA ZARGANI, MILAN

Valentino’s Madison Ave. Maison

A look at Valentino’s Madison Avenue town house.

Durie Joins J.Mendel as President and CEO

The feeling of the store provides the customer

with a very intimate, very high-end, very

luxurious approach.— STEFANO SASSI,

VALENTINO FASHION GROUP

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WWD.COM7WWD tuesday, august 20, 2013

By KRISTI ELLIS

WASHINGTON — As the Obama admin-istration turns up the pressure to com-plete an Asia-Pacific trade deal by the end of the year, the fashion industry is gauging the opportunities and risks of a pact that could impact billions of dollars in commerce.

U.S. Trade Representative Michael Froman said at a U.S. Chamber of Commerce dialogue last month that considerable progress has been made through 18 rounds of the Trans-Pacific Partnership negotiations between the U.S., Vietnam, Singapore, Australia, Peru, Brunei, New Zealand, Chile, Malaysia, Mexico, Canada and Japan.

The 19th round of TPP negotiations is slated to begin Thursday and run through Aug. 30 in Brunei.

“There is a real sense of momentum,” Froman said. “I think people really have a sense this is going to get done and it’s going to get done in this time frame that we have laid out to try get it done over the course of this year…It is an incred-ibly complex negotiation.”

Apparel and textile imports to the U.S. from the 11 TPP negotiating coun-tries totaled $15.1 billion for the year ending June 30. Vietnam, already the second-largest supplier of apparel to the U.S., accounted for $7.5 billion of the total TPP apparel and textile import vol-ume for the same period.

Vietnam is seen as the biggest oppor-tunity and the largest risk by different segments of the industry.

Negotiators in Brunei will try to nar-row differences between the countries over a textile rule of origin and tariff phaseout schedule on sensitive imports such as apparel and textiles. The U.S. has proposed a yarn-forward rule of origin that requires apparel be made of fabric and yarns supplied by the U.S. or other TPP partner countries to qualify for duty-free benefits when shipped back to the U.S. Importers oppose the rule, but American textile producers claim they need it to compete. The U.S. has also pro-posed a short supply program that allows importers to use third-country fabric and

yarns in apparel production if the U.S. determines they are not commercially available in the TPP member countries.

“A strict rule of origin for TPP is too limiting,” said Rick Helfenbein, president of Luen Thai USA. “Surely, we can create a new export market for American raw materials and finished products, while at the same time, not trying to totally restrict the global realities of product origin.”

Helfenbein said Vietnam relies heav-ily on raw material imports such as yarns and fabrics — in the range of 70 to 88 percent that come primarily from Asian suppliers — for its apparel production, which would not be eligible for TPP duty-free benefits.

Stephen Lamar, executive vice president at the American Apparel & Footwear Association, which is part of a coalition that opposes a strict yarn-for-ward rule, said Vietnam leads the list as the fastest growing export market — tex-tile exports to Vietnam rose 40 percent in the past 12 months — although it was far behind Mexico and Canada, the top two U.S. apparel and textile export markets.

“It demonstrates that apparel and

textiles can definitely be exported to Vietnam, but the question is can it be narrowly accommodated through a yarn-forward approach,” said Lamar.

Kim Glas, deputy assistant secretary for textiles and apparel at the Commerce Department, said, “We think yarn for-ward will help not only U.S. providers, but other textile and apparel companies in the TPP to ensure the benefits accrue for all the TPP countries.”

The trade accord could boost busi-ness among TPP countries in other ways. A brand making jeans in Vietnam or Mexico, for example, could boost its exports to Japan, once tariffs are low-ered. In addition, importers are hoping that regulatory barriers to imports are also lowered or eliminated, making it easier to expand business among the TPP countries.

“One of the goals of the TPP is to have it be a true 21st-century agreement and part of what that means is the ability of manufacturers in one TPP party to sell to all others with no new regulatory barriers, technical barriers [or tariffs],” said Julia Hughes, president of the U.S. Association

of Importers of Textiles & Apparel. “Part of the point of TPP is to create a new sup-ply chain among the countries.”

On the other side of the debate, textile executives contend that their export op-portunities are contingent upon having a yarn-forward rule in place.

“I think it’s supercritical that we do maintain the yarn-forward rule for a couple of reasons, not the least of which is that we already have a yarn-forward arrangement with six TPP countries [Mexico, Canada, Australia, Peru, Chile and Singapore, through free-trade pacts],” said Auggie Tantillo, presi-dent of the National Council of Textile Organizations. “Some of them, like Mexico, are our largest export markets. If there is a fundamental change in the rule, that could significantly disrupt the current export performance of the U.S. industry to those six countries, Mexico being at the top of the list.”

Among the TPP countries, Canada and Mexico are the largest export markets for U.S. textiles and apparel. For the year ended June 30, U.S. textile and apparel exports to Mexico were $5.3 billion, while combined shipments to Canada were $5.2 billion. Industry exports to Vietnam were $77 million for the same period.

“Beyond that, we have extremely com-petitive prices on products such as cot-ton yarns and our quality in that area is second to none,” Tantillo said. “So we’re anxious that this rule be put in place be-cause we believe we could be a signifi-cant exporter under TPP.”

David Sasso, vice president of inter-national sales at Buhler Quality Yarns Corp., said there could be a two- to three-year window of export opportunity for U.S. synthetics producers in Vietnam under a TPP with a yarn-forward rule. Sasso said TPP could eliminate a 30 percent tariff on imports of synthetic garments to the U.S., which would help boost demand for American synthetic fiber, yarn and fabrics producers if there is a yarn-forward rule.

“There’s investment going into fab-ric formation in Vietnam, but not near the same volume or potential of volume of fabric that they will require to offset Asian fabrics going into Vietnam [that would not qualify for TPP duty-free ben-efits],” Sasso said. “Until Vietnam has its own [textile] infrastructure, and that could take a couple of years, U.S. manu-facturers can take advantage of that.”

textilesWeighing TPP Risks and Rewards

By ARTHUR FRIEDMAN

NEW YORK — Eight recent gradu-ates representing the “best of the best” in American design schools will square off for a $10,000 first prize in the live runway finale of the Sixth Annual Supima Design Competition on Sept. 5.

Hosted by celebrity stylist and de-signer Rachel Zoe, the show will take place at 1 p.m. in the The Studio at Lincoln Center, where the young de-signers will present a capsule collec-tion of women’s eveningwear made exclusively with Supima cotton fab-rics. Chosen by an industry panel, the winner will receive a $10,000 check from Supima, the promotional organization of the American Pima cotton growers, to kick start his or her fashion career.

This year’s finalists are Bradley Mounce and Carly Rosenbrook from New York’s Fashion Institute of Technology; Sylvia Bukowski and Will Riddle from Ohio’s Kent State

University; Hannah Soukup and Morgan Selin from the Rhode Island School of Design, and Michelle Leal and Rachel Buske from Georgia’s Savannah College of Art and Design.

“Supima is [pleased] once again to work with the leading design schools and their students,” said Buxton Midyette, vice president of market-ing and promotions at Supima. “It is such a great opportunity for us to support the talent that represents the future of the industry.”

Started in 2008, the annual Supima Design Competition was created to give runway exposure to emerging talent. Since its start, for-mer Supima Design Competition winners have gone on to launch their own labels, show at New York Fashion Week and win jobs with major brands.

Supima is considered America’s luxury cotton known for its softness, strength and lasting color. Founded in 1954, the Supima brand designates an elite variety of Pima cotton grown only in California and the Southwest.

Supima Sets Design Contest Finalists

Sketches from Hannah Soukup,

Michelle Leal, Carly Rosenbrook and

Rachel Buske.

Vietnam shipped $7.5 billion in apparel to the U.S. in the last year.

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2013 revenues and margins after report-ing an acceleration in sales in the second quarter, aided by a strong performance in the U.S. and sustained demand in Europe and China. Total sales for Hermès last year were 3.5 billion euros (or $4.7 billion at current exchange). The U.S. represents 16 percent of the global total.

Hermès has a long history in Beverly Hills, having opened its first store there 41 years ago at 343 North Rodeo Drive. It moved in 1997 to its current location.

In addition to the Beverly Hills flagship, there are other projects in Hermès’ pipeline in American cities the company considers key.

A long-awaited location in Atlanta is nearing completion. Hermès in 2014 will open a 4,100-square-foot unit at the Buckhead Atlanta, a project that was originally scheduled to open in 2009 under the name Streets of Buckhead, but was halted as a result of the recession. Hermès moved out of the Lenox Square Mall in 2008 and into a temporary space, in anticipation of Buckhead’s launch.

A 12,000-square-foot flagship will open in fall 2014 in Miami’s Design District, where Hermès is building a three-story unit. The retailer in early 2013 left the tried-and-true Bal Harbour Shops for the grittier Design District, which is still building its following. Hermès is occu-pying a temporary location on N.E. 40th Street until the store, in a building not owned by Hermès, is completed. “It will be our third flagship in the U.S., along with Madison Avenue and Beverly Hills,” said Chavez. “It has major, major poten-tial. We believe in the Miami market.”

Hermès also believes in potentially risky locations. “We were one of the first

to sign [a lease] in the Design District,” Chavez said. “We don’t mind being pio-neers in new and unchartered areas. Wall Street is a perfect example. We’ve been there since 2007, and it’s one of our most successful boutiques.” Hermès raised in-dustry eyebrows when it signed the lease at 50 Wall Street, becoming the first luxury brand to open a store downtown. “The same applies to Atlanta and the Streets of Buckhead,” Chavez said, referring to the company’s leading spirit. “We prefer an open-air cluster of special shops ver-sus a shopping mall that is perhaps not drawing the best high-end clients we seek. Our move into the World Financial Center [now called Brookfield Place] is another pioneering move for us.”

Hermès was one of the first retailers to sign a lease at Brookfield Place, which

is scheduled to open in fall 2014. With just 27 stores in the U.S., Hermès’

retail decisions are carefully calculated. New York is the one market with multiple stores, but “we would consider second lo-cations at some point in the future in San Francisco and Los Angeles,” Chavez said.

“In Miami, the gravitational pull is more towards the city and downtown Miami Beach area,” Chavez said. “We are also able to offer a greatly enhanced se-lection of product going from just 4,300 square feet in Bal Harbour to 12,000 square feet on three floors in the Design District. This is also part of our strategy, to bring more assortment to our clients.”

Chavez said Hermès will expand “stores in many existing markets such as Dallas, Houston, Boston and Seattle. We’re adding square footage to be able to

increase our product offering.”That’s the concept behind the

Beverly Hills expansion, where Hermès turned the third floor into a showcase for home products, from accessories to furniture. “Now we’re able to show the extensive offering we have,” Chavez said. “Before, we were so cramped for space, we didn’t have the proper way to showcase the collection.”

Hermès captured square footage by replacing a large, wide two-story atrium with a white marble and Venetian plas-ter circular staircase that rises from the ground floor to the new roof terrace.

Looking up into the spiral, there appears to be a hole in the ceiling. Light streams in and at night, stars may be visible. The roof-less roof is an illusion made possible by a membrane air cushion that invisibly covers the circular opening. “In the old store, the rooftop wasn’t usable,” Chavez said. “In this renovation, we decided to renovate it for a rooftop garden.” The store was designed by the RDAI, the company founded by the late Rena Dumas, who was the wife of the com-pany’s former ceo, Jean-Louis Dumas.

All 16 “metiers” will be represented in the store and will command more space with enhanced displays. “The whole store is such a dynamic boutique that everything will be a focus,” Chavez said. “We’ve made a huge investment in all the categories.”

The second floor will house women’s ready-to-wear, men’s rtw with a gener-ous made-to-measure area, jewelry and watches. The ground floor is dedicated to scarves, belts, gloves and hats, and leath-er handbags, displayed in a cabinet with wood that curves like waves. A series of products designed for the opening of the Beverly Hill flagship include a scarf, tie ($195); leather wine case ($88,826); sandals ($590); women’s one-piece ($580) and two-piece ($255 for top and $255 for bottom) swimsuits; men’s silk-lined jacket ($4,475); Kelly Picnic handbag ($13,200); tunic cov-er-up ($1,600); mousseline embroidered shawl ($5,650), and a blue basketball, a salute to the Los Angeles Lakers ($12,900).

“Beverly Hills always had tremen-dous potential,” Chavez said. “Now, we’re giving it the opportunity to be-come a true flagship. It’s one of our highest-producing stores.”

8

…and roof garden.

Renderings of the Beverly Hills store’s facade with deeply recessed windows…

Hermès’ American Spending Spree{Continued from page one}

By RACHEL STRUGATZ

PRICE COMPARISON shopping site PriceGrabber scooped up location-based app Snapette, which taps into the smartphones of on-the-go consumers and updates them on new deliveries, sales and events at nearby stores.

The deal should help broaden the reach of Snapette, which already has more than 1.5 million active users and works with 225 brands and retail-ers. PriceGrabber is owned by CPL Holdings LLC and works with more than 12,000 merchants and sellers across North and South America and the U.K. Combined with its distribution partners, PriceGrabber drives more than $1 bil-lion in sales. Financial terms of the ac-quisition were not disclosed.

Snapette raised a $1.5 million seed round in October 2011, following the introduction of a beta version that was introduced in August 2011, according to cofounders Sarah Paiji and Jinhee Kim. The app launched officially in June 2012.

Paiji told WWD that Snapette has a “healthy mix” of national retailers (in-cluding Nordstrom, Ann Taylor, Guess and Nine West) and smaller boutiques like New York City’s Otte; Big Drop (in New York and Miami Beach), and

Satine (in Los Angeles). She maintains that the “contemporary” category is the app’s strength — listing brands like Diane von Furstenberg, Theory, Rebecca Minkoff and Steven Alan as popular with users. There are cur-rently 12 cities where the app recruits boutiques to participate: New York, Los Angeles, San Francisco, Chicago, Boston, Dallas, Miami, Seattle, London, Tokyo, Hong Kong and Madrid.

Snapette will integrate e-commerce capabilities later this week — trans-forming the app from a technology that drives foot traffic into stores to a tool that brings together the online and of-fline shopping experiences.

“When we first started, the focus was almost entirely on local and driv-ing people into stores and interrupting them while they’re in store,” Paiji said, noting it was difficult to measure con-version since some women turned on to a look by Snapette might pass it by in the store only to buy it later online. Now they can make purchases directly through the app.

“The big theme in the past 12 months has been around the omnichannel shop-per,” Paiji said. “By just proving a local component, we were losing a lot of con-version opportunities. If they are ready to buy, we want to make sure they can also buy from that retailer.”

PriceGrabber Acquires Snapette#72Get an eye for design and

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Smile and Wave

WWDSTYLEFAMILY PORTRAIT:The Duke and Duchess of Cambridge have released family photographs with new addition Prince George. PAGE 11

MEMO PAD

NORTH HAVEN, N.Y. — Hilary Rhoda was among the surf-minded crowd at the Breast Cancer Research Foundation’s Paddle & Party for Pink on Saturday. For more, see page 10.

PHOTO BY STEVE EICHNER

GOING TO THE MASSES: The theme of Nicola Formichetti’s first ad campaign as artistic director of Diesel is “reboot,” but it could easily have been “power to the people.”

Instead of focusing on models or actresses with big names, Formichetti relied on Tumblr and word of mouth to cast the subjects of the campaign. The 20 people chosen primarily live in New York, work in artistic fields and clearly aren’t wallflowers, with tattoos, varying body shapes and sizes, colored and shaved hair and androgyny heavily represented. Examples include Michelle Calderon, a 22-year-old pink-haired graffiti artist; Helen Primack, a 15-year-old aqua-haired aspiring filmmaker and student at the Frank Sinatra School of the Arts in New York, and Benjamin Ackermann, a light-eyed 23-year-old photographer, musician and collage artist. There are a few models in the mix, notably Loulou Robert, Omahyra Mota and Casey Legler, the former Olympic swimmer who broke gender barriers as a woman being contracted as a male model.

“I wanted to find people who reflected the diversity of the creative community today and not just the typical model. I wanted the campaign to showcase a variety of characters, people who are beautiful in their own unique way,” said Formichetti. The ads will break in the September issue of Vogue and will run in additional books in October. Inez van Lamsweerde and Vinoodh Matadin shot them, and Formichetti styled them with Diesel denim and leather.

Formichetti explained the photos are meant to merge classic portraiture with the sensibilities of the current generation of digital influencers. “It was less about capturing fashion and more about getting an insight into these people’s souls. No one captures people better than Inez and Vinoodh. They construct a photo with so much care and compassion to always pay tribute to the subject. Personally, it was a pleasure to work with them because when I was starting out they were my heroes,” he said.

Moving on from the campaign to the clothes, Formichetti has designed a capsule collection inspired by Diesel’s DNA that will be out in October. “The way we will present the collection will be something totally new. It will be very digital and physical at the same time. The whole experience will be about instant gratification,” teased Formichetti, who noted his runway debut for Diesel would be in March with full ranges for men’s, women’s and accessories.

— RACHEL BROWN

Diesel’s latest ad campaign, shot by Inez van Lamsweerde and Vinoodh Matadin.

10 WWD TUESDAY, AUGUST 20, 2013

DEFINITIVE AS his photographs can be, Timothy White would never want his life to be pictured in just one way.

In all fairness to him, his career is far from one-dimensional. Established as he is as a Hollywood photographer, White is adding a few new job descriptions to his portfolio — clothing entrepreneur, executive producer, curator and auctioneer. The truth is he never stops — editing, juxtaposing, rearranging, seeing how things relate to each other and composing — not even during an interview at the Dream Hotel in Manhattan. “I’m always composing. Sitting here looking at the pool, I see the people and see it a certain way, editing, changing, arranging,” he says.

That reflex is something he first picked up as an undergraduate at the Rhode Island School of Design, “where the people who were there worked. They weren’t there because their parents told them they had to go to college. People were passionate about what they do. You went to class all day, you went home and had dinner and then you went back to the studio and worked. But that’s what you wanted to do.”

Nearly 30 years on, White is still all about the work. And this fall is jam-packed. An avid motorcyclist, White has been swayed by Alan Piven to help launch the HGMC clothing label. Named after the High Gear Motorcycle Club, the British café racer-inspired collection is being developed by Jeff Hamilton and will hit stores in the spring. Piven sought out White after reading a profile of him earlier

this year, but the photographer, who rides his bike daily, took some persuading. “I’m kind of excited about it because we have a clear vision of what we want it to be. I’m not promising any of my celebrity friends or offering to dress anybody. Since I have a say, that’s cool and it will be more motorcycle-inspired than

other collections.”Demi Moore and

Brandon Boyd were among the guests who turned up Saturday at the Project Gallery for the opening night party

for White’s show dedicated to his friend Indian Larry, a motorcycle builder who died in 2004. When an image of the invitation was posted on Instagram before it was sent to guests, 8,000 fans checked out Project’s site within 24 hours. (Shooting for the film “Mr. and Mrs. Smith,” White bonded with Brad Pitt over bikes as soon as the actor started talking to him about his book about Larry. The pair have hit the road together here and there, too.) White curated another Project-based exhibition, “Rock Fight,” which pairs Theo Ehret’s boxing and wrestling imagery with iconic rock ’n’ roll portraits from Bob Gruen and others; the exhibit will open next month.

“It’s not work. It’s just life. I love the diversity of it all,” says White.

As co-owner of the Morrison Hotel Gallery, which represents 90 photographers, White is dressing up the downtown Dream Hotel with memorable images of Mick Jagger, Jimi Hendrix and others. Soon guests will be able to buy the prints they see on the walls of the hotel’s new upstairs club or subterranean lounge by dropping

by the lobby shop or ordering online in their rooms. He has teamed up with Antiquorum to host “The Art of Music” sale of rare signed photographs and iconic prints October 8 in New York. “In my mind, the photography the Morrison Hotel represents appeals to the same guys who collect watches and supercars, smoke cigars and have man caves.”

Still living bicoastally, White sold his 6,500-square-foot carriage house in Hell’s Kitchen in Manhattan to the Richard Avedon Foundation reportedly

for nearly $7 million earlier this year. The New Jersey native lives in Beverly Hills, returning to New York every two weeks to photograph his aging parents for a book. Bouncing from working on that project to shooting the “Paranoia” movie poster with Harrison Ford (a friend for 30 years), organizing a gallery exhibition, mentoring Julian Lennon’s photography pursuits and then meeting about HGMC somehow all adds up. “When I talk about it, it sounds like I’m in a spin, but I like it. I’m not just a photographer. That’s not my identity,” he says. “I’m just me. You know, go after what interests you. I’m also an opportunist. When you see things come your way, you go after them.”

That might explain why he is trying out his executive-producer skills. He is developing a new reality show that focuses on a Pennsylvania mechanic who restores vintage luxury cars. That project came to be through the owner of a European luxury label whom he declined to identify. White has another new show with Vice that will center on well-known photographers talking about images that changed their lives.

As for whether a good photo says more about the photographer than the subject, White says, “I certainly think it says a lot about the photographer but it depends on the type of photographer. A picture by Terry Richardson says more about Terry Richardson than it does about the subject. But people whose intent is to capture someone else’s personality, energy and impact really does come through and makes them stand out as a great photographer. Nonetheless, there is always that influence of you on it. It’s perspective. It’s your point of view.”

Having recently done a fashion shoot with a glammed-up Daryl Hannah wrestling with her pet pig in the woods, White says he approaches each assignment with an up-for-anything attitude. “I create an image. I make an image. I don’t take a picture — I make a picture. That’s just my style. But I definitely think my pictures are more about me than my subjects,” he admits.

Asked about putting people at ease, White says, “I mean, I’m from New Jersey. It’s easy. It’s just being yourself.”

— ROSEMARY FEITELBERG

White’s Space

“I CAN’T IMAGINE a chicer location for our second annual Paddle and Party for Pink,” said Myra Biblowit, president of the Breast Cancer Research Foundation, as she took in Lisa and Richard Perry’s Italianate-style North Haven, N.Y., estate on Saturday night. On the lawn, more than 650 revelers clotted around Saint-Tropez-inspired arrangements of stark white lounge furniture under the looming presence of a large, fertile-looking female sculpture by Niki de Saint Phalle. A pair of models circulated in black and white Lisa Perry ensembles, Leviev diamonds woven into their hair and wrapped around their necks. The hostess herself wore a Grecian-inspired flowing red and pink dress that she

had designed especially for the event as she guided guests such as Matt Lauer, Aerin Lauder, Mark Teixeira and Hilary Rhoda towards the unobstructed panoramic views of Noyack Bay and the Shelter Island Sound.

Guests wandered the grass between the yellow loops of Zhu Jinshi’s “Rings” sculpture and the Perrys’ house, where a covered terrace provided shelter and palm-sized plates bore bites from local restaurants. The collective appetite had been well-earned. The party was preceded by an 8 a.m. paddleboard race at Havens Beach in Sag Harbor, attended by Carolyn Murphy and Edie Falco.

“I was actually not at the event this morning,” Thom Filicia revealed, “and one reason for that is because I was hung over.

The other reason is that Laird is here...and I wasn’t about to compete with that.”

Surf superstar Laird Hamilton is credited with both the record for surfing the world’s “heaviest wave” 13 years ago in Teahupo’o, Tahiti and the current vogue of paddleboarding as both a core-slimming and meditative exercise.

“It’s like walking on water,” he said, citing the explorative possibilities. “You see everything from the sea life under you to the coastline in front of you. It’s a different type of freedom.” It is also worth noting, he added, that paddleboarding is a spectacular workout.

Nearby, fellow surf champion Tom Curren’s rock band performed as Hamilton’s wife Gabrielle Reece corralled their troupe of towheaded children into a photo op near boards designed, signed and donated for silent auction by Perry, Tory Burch, J. Crew, Martha Stewart and Ross Bleckner. Stewart was on hand, warmly greeting cochair Donna Karan and complimenting her lapis-colored ensemble.

Maria Baum, co-owner of popular Sag Harbor eatery Tutto il Giorno, founded the event during her own fight with breast cancer, inspired by a conversation with the Perrys over dinner. The couple came on board almost immediately, helping to raise $615,000 last year and more than

$1.2 million on Saturday. “Richard [Perry] taught me

how to paddleboard — it played a huge part in my recovery — and soon I was going out and having these long, extremely emotional rants at ‘Laird,’ this guy whose name was the label on my board, and I’d come back so much more relaxed and energized by the beauty of the bay,” Baum said.

As for the actual, living Hamilton’s presence at the party, it was a fortuitous act of branding: “A mutual friend told Gabrielle [Reece] about these purging, calming, therapeutic conversations I would have with an imaginary Laird, and now they’re our new friends, they came to stay with us, it’s been amazing.”

— ALESSANDRA CODINHA

eye

FOR MORE PHOTOS, SEE

WWD.com/eye.

Paddle Up

Timothy White

White’s portraits of James Franco…

Martha Stewart and Donna Karan

Laird Hamilton

Edie Falco and Aida Turturro

…and Jennifer Hudson.

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FAMILY SNAP: The Duke and Duchess of Cambridge have released family photographs of themselves with four-week-old Prince George, photographed by Catherine’s father, Michael Middleton. The two images were taken in early August in the garden at the Middletons’ family home in Bucklebury, Berkshire, England. One shows the new parents standing and cradling their son, while the other shows them seated on a picnic rug accompanied by the Middleton’s dog, a retriever called Tilly, and the Cambridges’ cocker spaniel, Lupo. Catherine is pictured wearing a fuchsia dress by maternity label Séraphine and holding baby Prince George, as Prince William, in jeans and a checked shirt, has an arm around his wife and another around Lupo.

The photos are another indication of the new, more informal royal era being ushered in by the Cambridges. In the past, such first official photos were taken by famed British photographers like Lord Snowden rather than the grandfather of the prince. — JULIA NEEL

A TREE GROWS IN TIMES SQUARE: J.C. Penney is looking to put some pep into an otherwise tough period by launching Joe Fresh Kids and the back-to-school season right in Times Square. On Wednesday and Thursday, Penney’s will have “a real-live orange grove” in the middle of Times Square, with games, a truck selling Joe Fresh Kids, popsicle and fruit juice stands, and a photo booth projecting images of kids and parents on a billboard in Times Square. All proceeds from the event will be donated to Adopt-a-Classroom, which Penney’s stores this month also support by enabling shoppers to round up their purchases to the nearest dollar to benefit the cause.— DAvID MOIN

11WWD TUESDAY, AUgUST 20, 2013

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The Duke and Duchess of Cambridge with Prince George.

Excluding these items, losses would have tallied 10 cents a share, 2 cents steeper than the 8 cent loss analysts projected on average.

Sales, up 0.5 percent to $707.8 mil-lion from $704.1 million, were behind the $732.6 million analysts projected. Comparable-store sales increased 1.5 percent. Gross margins fell to 36.6 percent of sales, from 37.2 percent a year earlier.

“While the second quarter was our 14th consecutive quarter of posting a comparable-store sales increase, our sales growth was modestly below our expectations,” said Stephen I. Sadove, chairman and ceo. “This shortfall con-tributed to our second-quarter year-over-year gross margin rate decline and SG&A expense deleverage.”

Lawrence Leeds, managing director at Buckingham Research, believes Saks will benefit from the HBC takeover. “It’s a case of two and two make five. I don’t think anyone else could get the same level of economic synergy with Saks. The economics are unmatched.”

Industry executives see at least $100 million in annual savings through con-solidations and layoffs, and some top management changes at Saks are like-ly, possibly involving Sadove, though they won’t be revealed until after a deal is concluded.

“Companies like Neiman Marcus and Saks Fifth Avenue run a bit fat,” added Isaac Lagnado, president of Tactical Retail Solutions. “They have a lot of expenses they could trim if they wanted to. But that could kill the gold-en egg. These are not commoditized businesses. They recognize they have to reinvent inventory virtually every year,

they recognize these are very discre-tionary purchases and that they need people talking to new designers, look-ing for new trends. That is a very dif-ferent model than The Bay [now called Hudson’s Bay], which has a large com-moditized, more predictable business.”

“Saks has a major problem. Their excellence is confined to maybe eight locations and the rest is marginal,” said one Wall Street investor. “Neiman’s stores for the most part are around the same size. Saks can’t really carry the assortments to compete with Neiman’s in those small stores.” Because of the challenges, market sources believe Baker will accelerate the growth of the three most profitable elements of Saks, which include:n The Off Fifth outlet chain currently with 69 units. New and existing Off 5th units are adopting a “luxury in a loft” de-sign for merchandising flexibility, ease of shopping and an elevated ambience. n Saks.com, which is the fastest-grow-ing segment at the retailer and steadi-ly being merchandised for greater consistency with the stores and more upscale product.n The Fifth Avenue flagship, which accounts for about 25 percent of the chain’s total business. Baker, with big-ger coffers than Saks has, could revisit past renovation schemes at the flagship

that never materialized, including pos-sibly creating a lower-level selling floor to expand jewelry and accessories, both currently crammed on the main floor, and bolster cosmetics. Saks’ cos-metics, 10022-Shoe and the premium contemporary brand departments are considered standout performers. Men’s wear is gaining ground, particularly in private label.

Aside from the flagship, some of Saks’ stronger locations are in Beverly Hills, and Boca Raton, Sarasota, Naples and Bal Harbour, Fla. Saks units in Raleigh, N.C.; Richmond, and Santa Barbara, Calif., are said to be among the weakest. Over the last decade, 20 Saks locations have been closed, in-cluding 12 in the last three years. By the beginning of 2014, the count will fall to 40 locations.

Earlier this year, Sadove acknowl-edged a handful of closings for the fu-ture, though he didn’t specify which ones or how many. Baker has already said he plans to invest substantial sums renovating Saks stores, that he will re-brand certain Hudson’s Bay stores as Saks, or Saks stores as Lord & Taylor, and may even insert Saks into certain larger Hudson’s Bay boxes to beef up productivity. In Canada, there might be the opportunity to build from ground up a new Saks store, Baker added. He fore-sees up to seven full-line Saks stores and 25 Off 5th outlets in Canada, and furthering Saks’ Internet business by es-tablishing a Canadian saks.com. Canada is already saks.com’s largest interna-tional ship-to market.

Another possibility for expansion, which Sadove alluded to at Saks’ last an-nual meeting in June, was the possibility of rolling out new specialty stores that

could be under different Saks formats. Sadove didn’t specify any formats, but 10022-Shoe could be considered.

Others say that two other strategies are critical to closing the productiv-ity gap with Neiman’s. Saks generated sales per square foot of $436 last year, while Neiman’s hit $535 in its fiscal year ended July 28, 2012. Baker must some-how re-energize the sales force to build better customer loyalty and productiv-ity, and he must push for more launches and exclusives. Saks lags the Neiman Marcus Group on both fronts.

Saks is also pressured by current business trends, where auto sales and spending on homes seem stronger than apparel spending. Deutsche Bank ana-lyst Paul Trussell said in a research note that Saks’ weakness was driven by a combination of unseasonable weather, a focus on big-ticket purchases, consum-er fatigue and, perhaps, luxe brands’ ef-forts to court consumers directly.

Trussell also noted that Saks as well as Macy’s Inc., Nordstorm Inc., Dillard’s Inc. and Kohl’s Corp. all ended the second quarter with “inventory levels above current sales trends.”

“The promotional environment will be heightened heading into [the sec-ond half], with sharper discounts and quicker markdowns likely throughout the season,” he said.

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Saks Posts Weak Q2 Results As HBC’s Baker Tours Stores

For more scoops, see

WWD.com

’’’’

Companies like Neiman Marcus and Saks Fifth Avenue run a bit fat.

They have a lot of expenses they could trim if they wanted to. But that

could kill the golden egg. — ISAAC LAGNADO, TACTICAL RETAIL SOLUTIONS

{Continued from page one}

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The fabric pilled horribly I had to exchange It doN’ T bUy ThiS oNe It SmellS of body odor i h a d T o r e T U r N i T I am not ImpreSSed wIth the qualIty of thIS fabrIc at all fabric ripped almoST immediaTely

I would not recommend i caN STill Smell The odor the fabrIc lookS cheap diSappoiNTed iN The fabric It SmellS lIke It took a chemIcal bath JUST NoT worTh iT Itchy fabrIc ThiS prodUcT USed To be made wiTh 100% coTToN

briNG bacK The coTToN

replace coTToN aNd yoU may have To replace cUSTomerS.research told us that over half of all consumers would be dissatisfied if cotton were taken out of their favorite clothing.

now they’re starting to speak up. the good news is, 56% of consumers say they’re willing to pay more to ensure their

t-shirts and denim jeans stay cotton rich. So if you’re thinking of replacing cotton to keep your costs down, you may want

to think again. after all, there’s a reason cotton is the fabric of our lives.

AMERICA’S COTTON PRODUCERS AND IMPORTERS. Service Marks/Trademarks of Cotton Incorporated. © 2013 Cotton Incorporated.

Source: The Cotton Incorporated Lifestyle Monitor™ (www.CottonLifestyleMonitor.com)

cottoninc.com