Lord & Taylor Courts Peter Som

[lucy92]

Lord & Taylor Owner
Tries On Peter Som

NRDC's Investment
In Designer Would Start
Its Vertical Integration
By VANESSA O'CONNELL

NRDC Equity Partners, the giant retail developer and owner of department-store chain Lord & Taylor, is near a deal to invest in New York fashion designer Peter Som, according to people familiar with the situation.
Although the deal would be small -- the investment is expected to be less than $10 million -- it would represent an unusual move by a department-store chain to invest directly in high-fashion designers. It would also be a first step in a strategy by NRDC to become more of a vertical retailer, owning everything from shopping centers to department stores to the vendors the stores carry.

Designer Peter Som's mauve silk organza taffeta short sleeve velvet/lace bust dress: $2,095 at Bergdorf Goodman.
Terms of the deal between Mr. Som, 36 years old, and NRDC aren't yet final, and the negotiations could still fall apart. But people familiar with the deal say the most recent scenario discussed calls for Peter Som Inc. to continue to own the Peter Som trademark and license his name to a new entity -- a company that will be roughly 35%-owned by Peter Som Inc. and 65%-owned by NRDC, though the specific percentages could change slightly. The deal is expected to be finalized next week.
Lord & Taylor wouldn't immediately gain exclusive access to Mr. Som's collections for its 47 stores. The department-store chain doesn't currently carry the Peter Som label, which is priced at the highest-end designer level, with blouses in the $800 to $950 range, and dresses generally $1,600 to $2,000 and up. However, Lord & Taylor would likely get first dibs on any lower-price lines Mr. Som develops in the future, through a right of first refusal, the people familiar with the deal said.
The deal would come at a time of growing conflict between department stores, which are clamoring for "exclusive" designer goods, and their key vendors, which are trying to limit distribution of their brands and open their own stores. Department stores that once counted on lines such as Liz Claiborne Inc.'s Juicy Couture, VF Corp.'s Nautica, privately held David Yurman and Polo Ralph Lauren Corp. as key suppliers are now competing with the well-known designers' own stores in malls across the U.S.
NRDC Equity Partners acquired Lord & Taylor from Federated Department Stores, now Macy's Inc., for $1.2 billion in June last year. The firm is a joint venture between real-estate developer William Mack and Lee Neibart, who are principals at private-equity firm Apollo Real Estate Advisors, and father and son Robert C. Baker and Richard A. Baker, co-owners of shopping-center developer National Realty & Development Corp.
Any deal between NRDC and Mr. Som would represent the culmination of more than six months' negotiations, a person familiar with the talks said.
Lord & Taylor, which generates annual sales of about $1.5 billion, has long been plagued with an aging customer base and merchandise that failed to draw younger, wealthy shoppers. But NRDC has been revamping the chain and aggressively pursuing partnerships with American designers. Earlier this year, the retailer signed contemporary designer Cynthia Steffe to help build up its accessories assortments, in a deal that might later expand into high-end contemporary apparel. It arranged for Bryan Bradley of the designer label Tuleh to create an exclusive collection. And it also hired designer Charles Nolan, formerly of the Anne Klein brand, to overhaul its private-label Kate Hill bridge line -- such lines are a notch lower in price than designer lines -- in a partnership that also could ultimately result in an exclusive collection for the chain next fall.
Mr. Som, who last month was named creative director of women's apparel for fashion brand Bill Blass, owned by NexCen Brands Inc., will have wholesale volume in his own namesake line of about $5 million this year. Sales are expected to grow to close to $10 million in a year or two. Like many young designers, Mr. Som is looking to expand and needs financial backing to do so, two of the people familiar with negotiations said. Any deal he reaches with NRDC isn't likely to provide Lord & Taylor with first dibs on his Bill Blass looks.
"It's no different from the way Karl Lagerfeld did his work for Chanel and for his own brand," said NexCen Chief Executive Bob D'Loren, noting Bill Blass has a three-year contract with Mr. Som. "Whatever Peter does personally with his own brand is his own business."
By allowing the designer the ability to retain some control of the brand, the deal means Mr. Som might be able to avoid situations like those faced by a number of designers who lost control of their namesake brands after disputes with new owners. Mr. Som didn't return messages yesterday seeking comment.
Mr. Som's eight-year-old label is known for feminine party dresses and taffeta trench coats, in the tradition of designers such as the late Mr. Blass and Michael Kors, where Mr. Som once apprenticed. Regarded as one of the young Turks of fashion, his work appears regularly in fashion magazines and on movie stars, and he enjoys a following among trendy shoppers. His clothing is now sold at more than 40 upscale specialty stores in the U.S., including Bloomingdale's -- owned by Macy's -- Nordstrom Inc. and Saks Inc.'s Saks Fifth Avenue, as well as about 35 stores internationally.
The move by NRDC is expected to be closely watched by competitors. In the past, some department stores' acquisitions of suppliers haven't always worked out. Earlier this summer, Nordstrom sold its Façonnable apparel and retail line to M1 Group, a private group in Beirut, Lebanon, for $210 million. Nordstrom paid $169 million for Façonnable in 2000 but soon found operating the chain of French boutiques was fundamentally different from the business of running a U.S.-based department-store chain.
In the late 1990s, Neiman-Marcus Group Inc. also tried branching into fashion businesses, acquiring majority stakes in Kate Spade accessories and the purveyor of Laura Mercier makeup. Neiman has since divested itself of both stakes.

wallstreetjournal.com

 

[kissmesweet]

Wow, this sounds great! I love Peter Som and I think that bringing his clothes to a more affordable price range sounds great.

 

[seanutbutter]

Interesting development. I hope the plan follows through as I'd like to see the transition between his expensive clothing to moderately priced pieces, since Peter Som is known as one of the more high-end brands today.

 

[LostInNJ]

Lord & Taylor Owner
Tries On Peter Som
However, Lord & Taylor would likely get first dibs on any lower-price lines Mr. Som develops in the future, through a right of first refusal, the people familiar with the deal said.

So, this means if he creates a lower priced line? It seems he has a lot of projects going on at them moment, his own line and now he is designing Bill Blass women's collection. Lord & Taylor needs the re-haul however, the store has no personality or identity on its own IMO.

 

[Caffeine]

So, this means if he creates a lower priced line? It seems he has a lot of projects going on at them moment, his own line and now he is designing Bill Blass women's collection. Lord & Taylor needs the re-haul however, the store has no personality or identity on its own IMO.

totally agree. My guess is also that Peter Som will have either a diffusion line or design a line for Lord and Taylor.

 

[lucy92]

well, when the bryan bradley of tuleh deal was announced. he was originally going to just retool the store, and now he's designing the fall advertising and doing a lower priced line. im guessing the peter som deal is going to be similar.

this is exactly what department stores should be doing here. they need exclusives.

 

[lucy92]

its a done deal.
excerpt from wwd.

In Acquisition Mode: NRDC Buys Peter Som, Says More Deals Ahead
By David Moin
NEW YORK — In a small deal presaging potentially bigger developments, NRDC Equity Partners LLC has bought a majority stake in Peter Som Inc. and has high-end retail on its radar.

NRDC has been eyeing other designer brands, with a deal in men's wear brewing, and is fueling a revival of its trophy acquisition, Lord & Taylor, purchased for $1.1 billion in 2006 from Federated Department Stores Inc., now called Macy's Inc. The Som deal confirms a report in WWD on Feb. 8.

"We're very intrigued with high-quality luxury brands, whether they are retailers or designers who could have their own retail stores, among other things," Richard Baker, chief executive officer of NRDC, told WWD exclusively. "Peter Som is a designer with no stores but could wake up one day with a retail chain of stores — in a short period of time."

Asked specifically if he was considering a high-end retail acquisition, Baker replied: "We look at everything. We look at all kinds of different things."

But he emphasized American design talent is where NRDC is "actively" searching. "We are very interested in investing in American designers for a variety of reasons."

NRDC has already established partnerships and financial arrangements with a handful of American designers, who in some cases will provide product and new lines for L&T and possibly other retailers. NRDC is in the process of creating an entity to manage its growing stable of designer-contemporary businesses. Internally it's been dubbed Creative Design Studios. The structure is not yet formalized and Baker said he's seeking a manager to oversee it.

Prior to Som, NRDC established arrangements with contemporary designer Cynthia Steffe, where an ownership interest has been taken. The designer, no longer associated with the label that bears her name, will be providing product for L&T.

In addition, Bryan Bradley was recently named creative director for Bryan by Bryan Bradley, a contemporary line exclusively for L&T launching late this month. Bradley, owner-designer of Tuleh, said he has no plans to sell a stake in his business.

Baker declined to spell out the structure of his designer arrangements for competitive reasons, other than saying, "We are very creative in financially structuring transactions. There will be more to come. NRDC is in the deal business. We sometimes buy things that are big, sometimes they are small. But we are aggressively out making financial partnerships."

The Som purchase was inked Wednesday night after a 10-month process that began with Baker being introduced last November to Som and his collection by Lividini Weisenfeld Partners, a marketing and communications firm that represents NRDC.

"It's a very simple story," Baker said. "We met Peter Som and were very impressed with his creativity and the work he has produced. We believe there is a huge future for Peter Som. It has a lot to do with our interest in supporting American designers. Peter Som represents a generation of talent that has become the future of the American fashion industry. NRDC is committed to supporting the industry by investing in and nurturing American brands with tremendous potential for international growth."

"I'm really excited to have a new financial partner," Som said. "It relieves the pressures that come with being a totally indie fashion house. We are really focused on continuing to build our current retail distribution, which has been very loyal to us, and continuing to build the women's line into a true lifestyle brand. We are definitely looking to expand into other areas in women's products, and home, but for now the growth of our business in women's apparel is strong and we're really focusing on that. Essentially, our company is going to be run the same way as it has."

Market sources said NRDC paid about $10 million for a two-thirds interest in Peter Som Inc., which has a wholesale volume of $7 million to $8 million, has been breaking even and is getting closer to profitability. NRDC has a master license agreement with Som, who will remain as creative director. Elixir Advisors, a New York boutique investment bank, represented Som, who in July was appointed creative director of Bill Blass. His first collection for Blass is expected to be for pre-fall 2008.

One particularly attractive element to the deal was that Som has control over the use of his name even if the partnership ever dissolves. Currently, Som said there are no plans to wholesale his collection to L&T, which sells price points in the better-to-bridge range, a rung under Som's designer collection prices.

Still, after being queried about the risks inherent in the designer business and its limited consumer audience, Baker cited the possibility that one day Som might create a lower-priced diffusion line for distribution at L&T and possibly other stores, and optimistically said Som could be catapulted into a brand generating hundreds of millions of dollars in volume with expanded offerings and distribution.