Clothing Companies Pleading Their Case for Space at Macy’s

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Hot Kiss Inc. hit it big with May Department Stores Co.


After only two years, the retailer was stocking the Los Angeles-based clothing company’s lines of pants, tops and dresses in 175 Robinson-Mays, Filene’s, Marshall Field’s and Foley’s outlets. May even created stand-alone sections within its department stores dedicated to Hot Kiss merchandise.


Now, the party could be over.


With St. Louis-based May Co. about to be swallowed up by rival Federated Department Stories Inc., Hot Kiss’ position as a department store supplier has been thrown into limbo, forcing the manufacturer to aggressively plead its case to retain a prominent role with the merged company.


The problem is that Hot Kiss doesn’t have strong ties with Federated, having only intermittently sold clothes to the Cincinnati-based parent of Macy’s.


“We are presently doing substantial business with May Co. Our challenge certainly is to position ourselves with Federated in a similar manner,” said Jay Kester, president of Hot Kiss. “They are the people that have risen to the top, and we obviously want to be a part of that success.”


Hot Kiss’ dilemma is far from unique. With Federated recently announcing that 330 May stores will become Macy’s and 68 Robinson-Mays will close, including more than 20 throughout Southern California, scores of vendors run the risk of being squeezed.


And it’s not just the Federated deal. Apparel companies are already in a tough environment as department stores lose market share to specialty shops such as Abercrombie & Fitch Co. and Forever 21 Inc., as well as discounters like Wal-Mart Stores Inc. and Target Corp.


That has left May Co.’s suppliers among the biggest losers in the Federated acquisition.


“The people who are selling May and Federated are going to be fine. The people that are selling Federated are going to be fine. The people that are selling May are going to have a problem,” said Richard Clareman, a partner in Montebello-based All Access Apparel LLP, maker of Self Esteem Clothing, a line of teen clothing available in both May and Federated stores.



Pleasing Federated


It’s not as if Hot Kiss was caught unaware.


Even before Federated announced the closures last month, the eight-year-old clothing maker, which recorded $80 million in sales last year, was working hard to make its way into Macy’s. But the closure announcement has given the company even greater urgency, especially since a large chunk of its sales have come from May Co. stores.


Already, Hot Kiss has lined up presentations this month to Federated clothing buyers and executives to showcase its products. Goal No. 1: Hot Kiss must convince Federated that its merchandise doesn’t duplicate what the department store operator already sells.


Kester has his arguments lined up. He says that Hot Kiss is different from many Federated vendors because it doesn’t just focus on a specific clothing line, like jeans or sweaters, but makes an assortment of clothing, from denim to tops to jackets.


Hot Kiss also plans to present its looks for spring. That includes vests with military elements such as army-influenced buttons and full-bodied gypsy skirts. Denim will stay a critical part of the Hot Kiss wardrobe, and short tops called shrugs will be a staple.


“It is a very competitive marketplace. They are looking for newness,” said Kester. “We have to bring to the table something different and give them a reason to have your product.”


There are other important issues, especially price. At May stores, Hot Kiss clothes are aimed at 16- to 25-year-old females and are sold in the juniors department, where jeans retail for $49 to $59. Tops are $39 to $49, and sweaters and jackets sell for about $49.


That moderate price point could pose a problem for Hot Kiss. May shoppers have been slightly more value conscious, with an average price tag at $17.36, compared with $17.90 at Federated, according to data collected by Robin Lewis Inc., a retail consulting firm.


Closely related to price is the larger issue of financial performance. Kester won’t specify margins, but said that Hot Kiss regularly performs above the 42 percent to 45 percent average margins that department stores demand from vendors.


For its part, Federated spokesman Jim Sluzewski said the focus, at least initially, is determining who has the most promising designs. “We are looking for products that resonate with customers,” he said.



Outside the walls


But with Hot Kiss among scores of apparel makers trying to get on the floor of Macy’s and other Federated stores, it and other vendors may have no choice but to find alternative sales outlets.


One frequent tactic: become retailers themselves. Liz Claiborne Inc. now runs 283 specialty stores, including Lucky Brand Jeans and Juicy Couture stores that generated $294 million in revenues in the second quarter.


But establishing a chain of retail outlets is far different than simply supplying clothing to a major department store a transition that many clothing manufacturers have stumbled at. “Every single CEO would agree that there are too many stores out there,” said Robin Lewis, president of Robin Lewis Inc.


Manufacturers are also coping with the narrowing field of domestic department stores by going global. Hot Kiss had made a decision not to open stores in the United States, fearing that it would compete with the company’s existing retailers it supplies, including specialty stores Wet Seal and Rampage.


Hot Kiss does have plans to open 30 retail stores in the Middle East in three years, 150 stores in China in five years and 100 stores in Korea in five years. The company, whose chief executive Moshe Tsabag, a native of Israel, is projecting international sales to be one of the fastest-growing elements of Hot Kiss’ business.


For now, Hot Kiss is focused on getting top Federated players to listen to its pitch. “I do feel like we bring the right product to the table. I am a born optimist,” Kester said.

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