TIME EUROPE
June 12, 2000 VOL. 155 NO. 23
Battle Below the Belt
Designer Calvin Klein goes to court claiming a business partner is destroying his brand's image
By LAUREN GOLDSTEIN
Designer underwear may not be a logical concept, but as Calvin Klein can attest, it is highly profitable. Which is why boxers, briefs and other Klein-branded skivvies could soon be at the center of a high profile court case that will have New York's gossip-ridden 7th Avenue fashion district twittering at high volume. Last week, the designer stunned the industry by filing suit against Warnaco, the company which makes the jeans and underwear that bear his name. And to show he means business, Klein hired the firm of Boies, Schiller & Flexner, which was special trial counsel for the U.S. Justice Department in its case against Mircrosoft.
The suit alleges that Warnaco, and specifically CEO Linda Wachner, have damaged the brand image by selling to discount stores and putting Klein's name on designs he didn't approve. Described in the suit as a "cancer" on the brand, Wachner is also lambasted for her "abusive and unprofessional" management style
"The vitriol in the comments is astounding," says one former senior Calvin Klein executive. "It's going to be a very nasty battle."
Wachner was taken by surprise by the action, but quickly countered that the real reason for Klein's suit was his inability to find a buyer for his company. Klein put his business on the block last October, only to take it off in April. Industry experts said at the time that the $1 billion price tag was too high, and that his extensive agreements with Warnaco were a major hindrance. Warnaco controls about $1 billion of Klein's $2.5 billion annual wholesale sales. It also owns Klein's underwear business outright and has a license to produce jeans until 2034. Buy Calvin Klein and you're also buying Warnaco and Wachner. A spokesman for Klein said that Boies was retained in January — while the company was still on the market — and that the lawsuit has nothing to do with the failed attempt to sell the company.
Licensing is fashion's dirty little secret. Designers try to keep it quiet that clothes, makeup, underwear, shoes and other items sold with a designer label may not be made by the designers, but by a more mass market producer, like Warnaco or Nine West. Licensing has advantages for the designers. They get an expert in a specific product to do all the work — produce, market and distribute the goods — while they collaborate on design and collect a hefty fee. Lately, however, the strategy has fallen out of favor with high-end designers. Gucci, Giorgio Armani and Burberry have all bought back licenses to keep tight control over their brands. But none of them has had to go to these lengths.
The suit comes at a time when Warnaco is vulnerable. Saddled with debt from acquisitions, poor earnings and a sinking stock price, nearly 44% of Warnaco's sales — some $2.1 billion — come from Calvin Klein products. News of the lawsuit sent its stock spiraling and started rumors that its board would rather lose Wachner than Klein. But a trial is also bad for the Calvin Klein brand image. It will leave everyone wondering who's wearing the pants.
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June 12, 2000
SPECIAL REPORT
French Connected
Despite a legacy of state control, and an archaic political leadership, France is thriving — and modernizing — in the face of global competition
EUROPE
The Victory Lap?
Europe toasts Clinton one more time, but the Atlantic relationship is showing strain
AFRICA
Reliving Apartheid Horrors
The trial of a South African cardiologist accused of murder reopens old wounds
BUSINESS
Ad Land Goes Cyber
Virtual agencies are using the Web to create campaigns in record time, and without the bureaucracy
The Game of the Name
The struggle for Web dominance shows that brands matter just as much in the new economy as in the old
The Wide Blue Yonder
Giant airships could become commercially viable again six decades after the Hindenburg disaster
Battle Below the Belt
Designer Calvin Klein goes to court claiming a business partner is destroying his brand's image
SOCIETY
Tangled Webs for Sale
Planning a tryst or a day at the races away from the boss? A Scottish firm can cover your tracks — for a fee
THE ARTS
Recreating a Jewel
Egypt has built an updated version of the fabled Bibliotheca Alexandrina, but its commitment to intellectual freedom remains an open question
DEPARTMENTS
Essay
To Our Readers
World Watch
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