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NYC FLAGSHIP CELEBRATES ESPRIT'S U.S. RETURN

By Kathy Showalter

Esprit, an apparel brand that burst onto America's fashion consciousness in the 1970s as part of the San Francisco counterculture, but then lost its way and faded from U.S. malls, is seeking a comeback on these shores. In November Hong Kong-based Esprit Limited Holdings, which operates 640 stores worldwide, opened a 15,000-square-foot flagship on New York City's Fifth Avenue. The store is Esprit's fourth in the city and its 24th U.S.-wide.

“It was a once a superhot brand, and it went away,” said Howard Davidowitz, chairman of Davidowitz & Associates, a New York City-based retail consulting firm. “But then it got reinvented in Europe and developed a worldwide penetration. Now they're re-energized and coming back to attack the U.S. market.”

Jerome Griffith, president of Esprit North America, says the Fifth Avenue store provides the visibility necessary to draw not just fashionable Manhattanites but international tourists as well. About 85 percent of Esprit's $4 billion in yearly global sales comes from European customers, who are especially familiar with the brand. Esprit continues to be among the world's largest apparel retailers. For the six months ended in December, Esprit Holdings posted some $2.4 billion in sales, up 27 percent year on year, while same-store sales rose 7.9 percent. The company said in a press release that a weakening global economy presents an opportunity to gain market share.

Esprit founders Susie and Doug Tompkins started out selling homemade clothes from the back of their station wagon in 1968 and built their business into a $700 million-sales company. The Tompkins' divorce created financial difficulties, perhaps not surprisingly, and the company was sold. Esprit Holdings acquired the brand logo and the U.S. rights in 2002 and then came back to open the first New York City stores four years ago. “A lot happened outside the United States,” Griffith said. “We have 600 stores worldwide. We have 1,400 franchises and sell wholesale to department stores and independent stores. We have an online business in 44 countries. We don't look at just doing business one way.” In addition to its own U.S. stores, Esprit operates shops in many Nordstrom department stores.

Though Esprit sells to the whole family in a variety of styles, Griffith says the chain's largest customer group is middle-income women in their 20s and 30s who are more fashion aware than trendy. “They know the latest trends, but they like to be smart and casual,” Griffith said. “Our customer wants updated classics. That's 40 percent of our business.”

But Esprit has branched into other niches as well. Its EDC line, which is not yet sold in the U.S., targets customers who are in their late teens and early 20s, while its Collections line appeals to those looking for business wear or to dress up. Typically, Esprit customers also shop at Banana Republic, Gap and in department stores. “It's not so much an age, as an attitude,” Griffith said.

Despite Esprit's long absence from U.S. malls, shoppers have not entirely forgotten about it, even if what they remember might now be off the mark. “People remember the brand from the 1970s and 1980s,” Griffith said. “What they recall and what we are today is different. We've grown up a bit.”

Griffith says Esprit's North American sales — which include Canada, Mexico, Panama and Venezuela, as well as the U.S. — have been growing at 30 to 50 percent per year, thanks largely to Internet sales. Online sales to U.S. customers are helping the company identify which markets can support physical stores. “Two-thirds of our online customers come from the New York metro [area], and another third live on the West Coast,” Griffith said.

U.S. expansion is probably a wise move. The U.S. is likely to continue to be the world's largest apparel and shoe market through 2011, with spending projected to be some $419 billion, according to TNS Retail Forward, a Columbus, Ohio-based analyst firm. The firm predicts that global apparel and footwear spending will grow to $1.8 trillion over that time period.

But with competition heating up among European apparel names, many retailers in Europe are introducing new product lines and pushing into the U.S. for growth, TNS Retail Forward says. This is why Esprit's U.S. expansion makes sense to Davidowitz, who sees the American apparel market in a shambles, following department store consolidation and private-label merchandise growth.“Where should Esprit go from Europe?” Davidowitz said. “The United States is a tremendous possibility for them. I think they also see a gap in the United States. With all the mess going on in apparel, they may see an opportunity. Their model is strong.”

Is this a good time to enter the U.S., though, given its overall economic uncertainty? “It's a pretty good time if you have excellent product to come in with,” Davidowitz said. “This company has 700 stores. We're not talking a little company, plus they've made a success of themselves. It's a fine example of a giant revitalization, which you rarely see in apparel.”