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From the Wall Street Journal: Is ‘7′ More Than
A One-Hit Wonder?  VF’s Seven For All Mankind
Goes Beyond All-Denim Line In Effort to Broaden Brand

RAY A. SMITH
October 19, 2007

Seven For All Mankind established itself as a maker of upscale jeans with a flattering fit, its squiggle logo sported by celebrities such as Cameron Diaz and Gwyneth Paltrow. Now it’s trying to extend its brand to shoes, purses and sportswear.

VF Corp., the world’s biggest apparel company and owner of brands including Wrangler and Lee, is betting on Seven to succeed. In August, the Greensboro, N.C., company spent $775 million to acquire Seven, whose label refers to the No. 7 jersey that founder Peter Koral’s football-playing son wore.

New offerings from Seven For All Mankind include a $198 dress and a $495 tote (shown above).   In recent months, Seven has rolled out $795 handbags, $450 leather jackets and $332 cotton dresses in high-end department stores and boutiques. It has launched a line of sneakers, shoes and boots, the first of a number of planned licensed products. Expansions of its men’s and kids’ non-denim collections and e-commerce operations are in the works. It plans to open 100 branded stores around the world over the next five years. The first, on Los Angeles’s trendy Robertson Boulevard, is set to open next month.

In trying to push Seven’s label beyond $100-plus jeans, VF faces a familiar dilemma in the notoriously fickle fashion world: how to sustain buzz and expand beyond a single hot product.

Many labels have tried. Von Dutch Originals, the Los Angeles-based maker of trucker caps that were the rage a few years ago, hasn’t matched that buzz with newer items such as sunglasses, says a company spokesman, who calls the cap’s success an “anomaly” like “winning the lottery.” Deckers Outdoor Corp., the California-based maker of big shearling-lined Ugg Australia boots has introduced stacked heels and wedges that are selling well but aren’t the phenomenon the boot has been. The jury is still out on whether Crocs Inc., Niwot, Colo., can transfer the popularity of its funky plastic shoes to a new apparel line for men and children.

Seven’s effort comes at the same time other premium-denim labels are trying to diversify. Facing an oversaturated market for high-priced, non-designer jeans — a market that Seven helped create — California brands Chip & Pepper, Rock & Republic and True Religion and New York’s Rag & Bone have all been scrambling to transform themselves into broader brands featuring non-denim products.

Mike Egeck, Seven’s CEO, says having VF as an experienced and deep-pocketed backer gives it an advantage over other brands. “VF leapfrogs us along the learning curve with regard to the extension of sportswear,” he says. “We can tap into their expertise, their sourcing expertise, their retail expertise, their expertise in licensing.”

At the time VF purchased Los Angeles-based Seven, Mr. Egeck, a former VF executive who had helped turn around the troubled North Face brand when VF acquired it in 2000, had been running it for about a year.

VF yesterday reported revenue for the third quarter ended Sept. 29 rose 15% to $2.07 billion, partly driven by the acquisition of Seven. Net income rose 4.8% to $207.2 million from the same period a year ago, and shares rose 1.47% to close at $81.02 on the New York Stock Exchange.

VF’s goal is for non-denim products to account for half of Seven’s sales in five years. Now, they make up around 10% of the current annual sales of $300 million. The label is the centerpiece of a new VF division called contemporary brands, which the company expects to drive growth. Contemporary clothing, which includes looks such as snug-fitting T-shirts and relaxed cotton dresses, has been a recent bright spot in the U.S. apparel sector.

But Seven’s success has been based on a very different model from the advertising-heavy playbook at VF.

 A $295 men’s blazer and a $135 vest are also among new offerings from Seven For All Mankind.   Launched in 2000, without any advertising but lots of word of mouth in hip, fashionable circles, Seven For All Mankind’s jeans quickly became hot sellers, racking up $70 million in sales in its second year in business in 2002, up from $13 million its first year.

Boutiques reported having a hard time keeping the jeans in stock as female fans who swore by the jeans’ flattering fit snatched up several pairs at a time.

“Consumers are passionate about this brand because it stands for the best in fit, in fabric and in finish,” says Eric Wiseman, VF’s president and chief operating officer, who will become chief executive in January. Seven prides itself on its attention to jeans design, for instance placing pockets higher on some models and lower on others. It also uses a sewing technique that it says sculpts the figure.

The brand burned hot enough to catch Wall Street’s attention. In 2005, Bear Stearns’s Merchant Banking unit bought a 50% stake in Seven for All Mankind LLC for nearly $300 million. Founder Mr. Koral owned the rest. He is staying on with Seven until his contract expires in February.

As Seven presses ahead with its expansion and store openings, it has started advertising in magazines. GQ has a four-page ad spread showing Seven’s new apparel, shot by star photographer Patrick Demarchelier.

Nevertheless, some industry observers see hurdles for the company’s expansion strategy. “It’s not going to be easy making the 7 label stand for something beyond denim,” says Brad Stephens, an analyst with Morgan Keegan & Co. in New York.

“The temptation is ‘I’m Seven, I’ve got this brand, let me extend my target market’ — but when you do that, you are sending a message to your existing market,” says David J. Reibstein, a professor of marketing at the University of Pennsylvania’s Wharton School. “When other people start wearing 7 apparel, it changes the image” from hip to mainstream, he says.

However, Andrea Bernholtz, president of jeans maker Rock & Republic, says non-denim products it has, such as shoes, bags and sunglasses, have been doing “extremely well.” She says consumers have been responding well to the new merchandise because it contains the same sexy, progressive, edgy rock movement aesthetic of the jeans that put the brand in the spotlight.

Mr. Egeck says Seven will be disciplined in its expansion and that its new products will complement its jeans. Though the new lines include clothes for men and children, Mr. Egeck says the company’s research shows that its primary target customer is a college-educated woman with a lot of disposable income. The research shows more of his “customers own a passport and travel than any other premium denim brand,” he says. “She enjoys arts, gourmet food and wine and being active.”

In addition to clothes and accessories, “we think we have an opportunity in fragrance and perhaps in other categories, selectively,” he says, adding that distribution will remain limited to high-end department stores, specialty boutiques and its own stores.

At Bloomingdale’s, Jeanne Sottile, divisional merchandise manager of contemporary sportswear, is pleased so far. Seven’s pants for women are “blowing out” of stores because Seven did a good job of translating its denim fit into non-denim styles, she says.”

 

Hmm…we can’t wait to see what SFAM does with their handbag line.  When Rock & Republic ventured into handbags, some of them were nice, but for the price tag of $800+, we’d rather have a classic Vuitton or Gucci.  What do you think, should these jeans companies like SFAM and R&R stick to jeans or do you love their other products?