Q&A With Kenneth Cole

NEW YORK — It’s 9 a.m. on a Friday and the Kenneth Cole store in Rockefeller Center is mobbed.

There are no freebies to speak of, no rock bands drawing in early crowds, no spectacular sales promising bargain-priced items. On this August morning, it’s all about the shoes.

Women have lined up around the block for the launch of the Kenneth Cole New York 925 Silver Edition collection and to meet Cole, who mingles easily with his fans, signing shoe boxes and touting the benefits of the new line. By noon, more than 1,500 shoppers will have walked through the doors and tried on what the brand is hoping will be the next big thing: fashion footwear infused with comfort technology.

“Everything a woman puts on in the morning affects the way she looks, but her shoes, more than anything else, affect how she feels,” Cole told Footwear News during an exclusive interview at his Manhattan offices not long after the launch. “It’s a very powerful place, [being] afforded the opportunity to be a part of how a woman is going to get through her day. It’s a privilege we don’t take for granted.”

More than 2,250 pairs of the shoes — dress flats, stilettos and high-heel booties with comfort features including deerskin, Poron form, cork and flaxseed — were pre-ordered and sold at the event, marking a new beginning for the brand’s footwear strategy. The technology will first be incorporated across the Kenneth Cole New York women’s footwear line in the coming year, and later added to the Reaction, Unlisted and men’s collections.

“In these times, people are looking to pay half price [when they shop],” Cole said, noting that all five styles, which retail for $135 to $195, have been placed on backorder and will only be sold in Kenneth Cole retail stores. “To have such a large turnout for people to pay full price, prepay and wait several weeks for the product shows there is demand.”

The launch also is part of what Cole and his team — which includes CEO Jill Granoff — see as a return to the company’s footwear heritage and a complete revamp of the 27-year-old lifestyle brand. While the firm now derives about 60 percent of its revenues from non-footwear categories, Cole said the focus is squarely back on shoes: “We’re going back … and reintroducing the brand through footwear,” he said.

Kenneth Cole Productions Inc. is facing considerable hurdles, though, as it looks to rebound. For full-year 2008, the firm’s loss was $14.8 million, or 80 cents a share, against net income of $7.1 million, or 35 cents, while revenues declined 4 percent to $492.3 million.

The company has continued to stumble this year amid the broader economic slowdown. For the period ended June 30, Kenneth Cole reported a loss of $3.3 million, or 18 cents a diluted share, versus a loss of $2.1 million, or 11 cents, in the year-ago period. And many industry insiders and analysts said the firm has a long road ahead.
But Cole, pointing to a solid balance sheet, said he is upbeat about the plans that are in motion. For instance, the firm has been revamping its executive team. Granoff was tapped in May 2008, while Ingo Wilts — formerly of Hugo Boss — was installed as creative director in May. The latest addition to the group was Peter Charles, who was recently tapped as chief supply chain officer.

While Cole is bullish about the future, he is also well aware of the challenges ahead.

“Everybody is learning that this world is forever changing and has forever changed. When people say, ‘It will get better; we just have to hang in there,’ they usually don’t make it,” he said. “We have to look for creative alternatives.”

FN: The last few years have been difficult for the company. Looking back, what proved to be the biggest challenges?

KC: Change is hard. Management changes and personnel changes are obviously hard, and so are making the adjustments that come with that. We’ve had products that have lived up to their expectations and some that haven’t. In some cases, we’ve had some of the right product, but we didn’t have enough in the right place at the right time and in the right quantities, so we might as well not have [had] it. In some cases, we had too much of the wrong product. But we’re in good shape. The company has a lot of cash, and we’re in a healthy position in that regard. We’re focused on where this world is going, and we’re adjusting our resources to take advantage of that.

FN: How have the additions of a new CEO and creative director changed your role at the company?

KC: We have a diverse and strong management team. Jill [Granoff] is an extraordinary CEO. I’m a seat-of-the-pants entrepreneur, and she’s a classically trained executive, so the partnership is a good one. It frees me up to do what I love to do and what I’m good at, and allows her to do what the company needs done and what she is good at. I [also] have a great creative partner in Ingo [Wilts], who was at Hugo Boss for a long time. He really understands the [lifestyle] model and the realities of managing a creative process, [and that allows me] to play the bigger role and have somebody who can bring it to life. … [The hires] also allow me to focus on the greater strategic agenda, the product and classifications and focus on awareness, which is the biggest social message of the company.

FN: It feels like you’re aiming for a comeback by returning to your footwear roots. Is that how you see it?

KC: It is. We are rebuilding our relationship with our customers from the ground up and from the inside out. … We have cut back to our roots, [and] we’re very focused on the product and going back to women’s shoes.

FN: How does your life on the public stage complicate a business that is trying to turn around?

KC: Certain elements make it harder, but many make it easier. It’s very personal, which maybe isn’t the case with other companies that don’t have someone in my capacity. The company’s message is very much my message, and the voice is mine, but what is mine is ours. It’s a collective voice, but I’m the one communicating it. [As a result], I’m sometimes reluctant to put product out there that I should, and in some ways, it’s gotten in the way a little bit. There are the obvious benefits, as well, so you take the good with the bad.

FN: As the brand returns to its heritage, what’s the significance of the 925 Silver Edition launch?

KC: It’s significant in the sense that, for years, what I’ve always done is spend months and months creating good-looking product. Right before we went into production is when we made sure it fit. Now, [after acquiring the Gentle Souls business four years ago], we’ve learned that fit is the most critical element, [so] we’ve spent many, many months creating the best-fitting shoe [by] adding in every element of [comfort] technology we believed to exist. [Women] have given up the thought that they can wear a high-heel shoe and expect not be tortured throughout the process. … If we can deliver it, everybody wins, but we have to do it consistently.

FN: Few companies have successfully married fashion and comfort. How do you plan to achieve that?

KC: It is a challenge. There is the comfort shoe business and [there is] the other shoe business, [but] I’ve come to realize that there is only one business. Women today aren’t compromising, and to the degree you can service their collective needs at any given time, you win. … [The challenge] was to keep a woman in feminine, sexy shoes — 4 inches high, maybe even 5 — that are truly as comfortable as any shoes she has ever looked good in. [But once you] create this great product, how do you make it address the specific needs of the individual? So we’ve made efforts to do that with the patented comfort system and by finding authorities to tell the story [of the product] objectively, which can be risky sometimes.

FN: As part of this launch, you closed the Kenneth Cole New York women’s wholesale business. Why did you make that move?

KC: We knew that at the end of the day, unless we did that, we couldn’t fix it. We knew we had to discontinue typical production channels and needed to let that product run its course [before] reintroducing the [revamped] product. We also needed to introduce it in an environment we could control. … If we had to sell these shoes through a third-party process, the shoes would have been more expensive than they are. We cut out the middleman for [now], and our goal is to figure out how we can deliver the same value through the traditional channels.

FN: Why is now the time to offer Kenneth Cole consumers an entirely different product?

KC: It’s only during truly tough times that you can do these things. People say the industry is difficult right now. They say, “I can cut my overhead, I can lower my inventory.” These are the typical things you read about in everybody’s financial reports. Or you do all of the above [and] you reinvent the model and make it more relevant. When things are good in a consumer-driven economy, [we] create more of what’s working and we deliver it in more places. We change nothing. It’s only in difficult times that we look to create alternatives: Show me something that I’m not doing because I need to look at it. That’s our intuitive sense and what we are trying to do.

FN: With that said, how has the Kenneth Cole customer changed since you launched in 1982?

KC: She’s a little more thoughtful. She’s very conscious of not just her own personal circumstances but [of] the world around her. She defines her style; the product she wears doesn’t do it for her. She’s cool, confident and clever. [But] it’s a very different world we live in today. Things that appear to be frivolous are not doing well, and things that are fashion for fashion’s sake are not doing well. But things that address the individual’s needs on a different level are doing well. And that’s not just in fashion, but in other consumer goods.

FN: One thing you’ve done well is create ads that are identifiable with the brand’s platform of awareness. Do consumers want to buy socially conscious labels?

KC: [It] makes the brand more relevant. At the end of the day, the product needs to be great, and we don’t discount the importance of having appropriate product. [But] some people will give us a second chance, and they’ll look twice when maybe they wouldn’t have otherwise. … [People] want to feel like they’re doing the right thing.

FN: Retail plans for the company include opening more boutique-like stores. Why this approach, and what are the anticipated results?

KC: The environment will become more intimate, a little more specific, and will make our store a little more compelling. … People have less of an attention span right now, and they are a little more skeptical. They have seen all our products at all different price points [and] at all different points of distribution. Our goal is to create more credibility [in] the quality of our products, their design and the distribution. It’s absolutely reined in.

FN: How do you balance your own retail stores against wholesale accounts?

KC: The competitive landscape is all about the culture being vertical and operating more efficiently and effectively. [Wholesale accounts] are much quicker in their responsiveness to trends, and they’re much quicker in their ability to address the needs of the consumer. We need to be that in our own stores. We need to work closer to the season, we need to be more responsive, test better, respond more effectively, and we need to do the same for our wholesale partners.

FN: Kenneth Cole does roughly 10 percent of its business internationally. What are your plans for global expansion?

KC: Most of our competitive brands do as much as 40 or 50 percent [of their business internationally], so the opportunity is significant, [and] we’re identifying partners around the world that have the ability to tell the brand’s story, have the resources and are prepared to commit [those resources] to what we do. … You’ll start seeing that expansion in the not so distant future.

FN: You’ll return to New York Fashion Week next year after a hiatus. Why did you take a break from the runways and what have you accomplished in that time?

KC: The purpose of the runways today isn’t what it used to be. [Now] you’re speaking more to the consumer than you are to a very elite wholesale and editorial audience. Everything today is aired and communicated simultaneously. You can see anyone’s runway show within 15 minutes and understand the message. [Now], we’re just trying … to get focused on what the consumer wants to see. I felt we had strayed [before]. We were very focused on creating product that would look good in a magazine as opposed to what would look good in the stores. We’ve used [the break] as an opportunity to change that.

FN: What are some of the biggest changes you’ve seen in the footwear industry since starting your brand?

KC: There is no real wholesale business as we used to know it. There are myriads of alliances and partnerships, and people ultimately agreeing to service their collective needs. … Years ago, in the wholesale universe, if you did a lot of business, you made a lot of money. If you did a little bit, you made less. My role was finished once I sold the product. Our role today is to service the needs of the consumer from creation to consumption, and after that, we have to be sensitive to what they want. The consumer knows what they emotionally respond to and what they’re looking for. Our job is to give it to them, but maybe not quite exactly like they expected it. … It has to create an aspiration and succeed in its delivery consistently. It also has to do [that] across all classifications, in this country and abroad, and for men, women and children. The other big change has been the consolidation of the industry, and in many cases, it’s the competitive landscape.

FN: What will be the lasting effects of this recession on the industry?

KC: Everybody is thinking twice. For years consumers [were] a little more spontaneous and compulsive … when it came to our wardrobe choices. People are realizing … that they don’t need to buy something [they won’t] need [for another] three months. You can wait until you really need it, and not only will it still be there, it will be there at half the price. … You’re going to see a lot more buy-now-wear-now. People are going to create product, offer product and consume product much closer to the reality of their needs, and there will be more attention to value than there will be on price.

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