Calvin Klein Inc.

founded by

Calvin Klein

belongs to

PVH; Warnaco Group

about

In 1968, Klein who was to manage the business, founded Calvin Klein Ltd., a coat shop in the York Hotel, in New York City with $10,000. Legend has it that a year later a buyer from Bonwit Teller got off the elevator on the wrong floor, and ended up placing a $50,000 order. It is more likely though, that Klein showed his work to Bonwit Teller staff, which led to the first Calvin Klein collection: a line of men's and women's coats featured at the New York City store.

In 1969, Mr. Klein, who was later described as "the supreme master of minimalism," appeared on the cover of Vogue magazine. By 1971, sportswear, classic blazers as well as lingerie were added to his women's collection portfolio. The fledgling company booked $1 million worth of business in its first year, reaching sales volume of $5 million by 1971.

By 1977, annual revenues had jumped to $30 million, and he had licenses for scarves, shoes, belts, furs, sunglasses, and sheets. Klein and Schwartz were making $4 million each. After the company signed licenses for cosmetics, jeans, and menswear, Klein's annual retail volume was estimated at $100 million. In 1978, Klein claimed sales of 200,000 pairs of his famous jeans the first week they were on the market. By 1981, Fortune magazine figured Klein's annual income at $8.5 million a year. In the mid-1970s, he had created a designer-jeans craze by putting his name on the back pocket. The jeans were famously advertised with a commercial featuring a 15-year-old Brooke Shields cooing in 1979/80 that "nothing comes between me and my Calvins" and "I've got seven Calvins in my closet, and if they could talk, I'd be ruined." Controversial advertising, including a series of ads featuring adolescents in sexually evocative poses, has been a recurring theme for the company. Shields advertised for Klein underwear in 1984 as well.

In the late 1970s, the company also made attempts to set up its own fragrance and cosmetics business, but soon withdrew from the market with big financial losses. In the 1980s, as the designer-jeans frenzy reached its all-time high, Calvin Klein introduced a highly successful line of boxer shorts for women and a men’s underwear collection which would later gross $70 million in a single year. Calvin Klein’s underwear business, promoted later in the 1990s with giant billboards.

The stunning growth continued through the early eighties. The licensing program, which brought in $24,000 when it was initiated in 1974, had royalty income of $7.3 million ten years later. That year, worldwide retail sales were estimated at more than $600 million. Klein's clothes were sold through 12,000 stores in the United States and were available in six other countries. His annual income passed $12 million.

Financial problems, increased pressure from all sides, disagreements with the licensee of the menswear line and its disappointing sales as well as an enormous employee turnover both within Calvin Klein and its licensing partners led to the first rumors that Calvin Klein Industries, as the company had been known by then, was up for sale. And indeed, in late 1987, it was said that the sale of the company to Triangle Industries, a container manufacturer, had only failed because of the crashing stock market.

Although the company almost faced bankruptcy in 1992, Calvin Klein managed to regain and increase the profitability of his empire throughout the later 90s, mainly through the success of its highly popular underwear and fragrance lines, as well as the ck sportswear line. Mr. Klein was named "America's Best Designer" for his minimalist all-American designs in 1993, and it came as a surprise in 1999 when it was announced that CKI was again up for sale. Planning to expand its business, the company had been approached by two luxury goods companies, LVMH and Pinault Printemps Redoute, to join Calvin Klein, but nothing resulted. Other potentials like Tommy Hilfiger Corp. and Italy's Holding di Partecipazioni proved to be similar disappointments because of CKI's steep price tag of supposedly $1 billion. After seven months and no potential buyer, Mr. Klein announced that his empire was not on the market anymore. The company would never manage to go public, which had supposedly been Mr. Klein's plan once.

In mid-December 2002, Calvin Klein Inc. (CKI) was finally sold to shirt maker Phillips Van Heusen Corp. Tracie Rozhon, Calvin Klein Selling His Company To Biggest Shirtmaker in the U.S., New York Times, 18 December 2002, whose then CEO Bruce Klatsky was the driving force behind the deal, for about $400 million in cash, $30 million in stock as well as licensing rights and royalties linked to revenues over the following 15 years that were estimated at $200 to $300 million. The sale also included an ongoing personal financial incentive for Mr. Klein based on future sales of the Calvin Klein brand.

PVH outcompeted VF Corp., the maker of Lee and Wrangler jeans, which had also been interested in the jeans, underwear and swimwear business of CK that had been controlled by Warnaco Group, maker of Speedo swimwear, since 1997. The deal with PVH did not include these businesses, and they remained with Warnaco. Unable to pay debts from acquisitions and licensing agreements and due to bad publicity by a later dismissed lawsuit with Calvin Klein over selling license products to retailers other than agreed upon with Calvin Klein, Warnaco had filed for chapter 11 protection in mid-2001 but eventually emerged from bankruptcy in February of 2003. Mr. Klein himself had considered Linda Wachner, then CEO of Warnaco Group, a personal enemy.

CKI thus became a wholly owned subsidiary of PVH. In the beginning, Mr. Klein himself, who was included as a person in the 15-year contract he had signed with PVH, remained creative head of the collections but then continued as an advisor (consulting creative director) to the new company from 2003 on and has since been more withdrawn from the business. Mr. Klein has appeared in the news from time to time since then when his name was associated with drug abuse, withdrawal treatments and public nuisance. Barry Schwartz was said to concentrate on his role as chairman of the New York Racing Association, a horse-racing club. The current President and COO of the CKI division within PVH is Tom Murry, who had filled this position already before the acquisition.

In early 2003, it was announced that Vestimenta SpA of Italy would be entrusted with the manufacture and distribution of Calvin Klein Collection for men and women – the label's high-end designer line which these days is shown on runways during the fashion weeks in New York and Milan – while design, marketing, advertising and public relations as well as control over the distribution of the line remained with CKI.

In June 2003, CKI announced that Kellwood Corp. of Chesterfield, Missouri had been selected as a strategic licensing partner to produce, source and distribute a Calvin Klein women's better sportswear line to launch in North, Central and South America in late 2004. Under the terms of the arrangement, Kellwood collaborated with Andrew Grossman and Alexander Vreeland, two seasoned Giorgio Armani executives, who had formed a new business venture named GAV with Jay Schottenstein, chairman and CEO of Schottenstein Stores Corp., to help develop and launch the line in terms of marketing, design and advertising. GAV, a Manhattan based company, already then designed and manufactured for ck Calvin Klein and Emanuel Ungaro. The cooperation between Kellwood and GAV was ended on friendly terms in September 2005 with Kellwood being left solely responsible for the women's sportswear line while the other parties could focus on their ck Calvin Klein bridge business. A better sportswear line for men has been designed and developed in-house at CKI and PVH since spring 2004.

Just recently (December 2005), the Warnaco Group announced that in 2006 they would acquire 100% of the shares of the companies that operate the licenses and related wholesale and retail businesses of Calvin Klein Jeans and accessories in Europe and Asia as well as the ck Calvin Klein bridge line of sportswear and accessories in Europe from Fingen SpA, a Florentine holding company, and Euro Cormar SpA for €240 million. Fingen, a company controlled by the Italian Fratini family, had held a 90% share in the European Calvin Klein business – which was managed by Fabio Fusco – since 1995 with CKI owning the remaining 10%. Additionally, beginning in 2008 and continuing through December 2013, Warnaco will assume the license for Calvin Klein Collection men's and women's apparel and accessories worldwide from Fingen, with Mr. Fusco remaining in charge after the completion of the deal. The deal will have no impact on the existing US licenses with Kellwood Corp. for the Calvin Klein women's better sportswear line and with GAV for the ck Calvin Klein bridge sportswear business.