– Former Calvin Klein CEO Tom Murry: Business Lessons Learned On An Oil Rig -
October 16, 2018
Tom Murry oversaw a period of tremendous growth at iconic fashion powerhouse Calvin Klein during his 17-year tenure as chief executive. Indeed, under his leadership Calvin Klein grew from $2.8 billion in global retail sales in 2003 to nearly $8 billion in 2013.
Since stepping down as CEO in 2014, Murry has focused on teaching up-and-coming managers and leaders the secrets of his success, and how they can excel not only in the fashion industry, but in any business.
Chief Executive caught up with Murry to talk about how his time working on an oil rig when he was a college student impacted his later career, the importance of company culture and how his leadership style evolved over the years. Below are excerpts from the conversation.
Lessons learned on an offshore oil rig
It was a summer job, 80 miles out in the Gulf of Mexico from Cameron, Louisiana, and I was in college at the time. I showed up out there and I was the only non-Cajun on the rig. And I showed up in brand new clothes and a brand new helmet—the whole thing. And I just stuck out like a sore thumb. I got on the boat and I had kind of a tough time fitting in.
As a matter of fact the first night there, there were a group of roustabouts, which is what they called the people like us that worked on the tinder attached to the rig, started to shove me back and forth in the shower. And, so I fought back, and I gained their respect. That’s the short version of it. But I think that one of the things I learned was the importance of teamwork and being able to get along with people from different backgrounds. We actually became quite friendly, all of us
The other thing I learned was the meaning of hard work—I mean, it was really hard. And being a newcomer, I got the hardest job, which was sandblasting the tinder in 100-plus degree temperatures and wearing a deep-sea diving outfit to protect me from the sand, holding my arm up for 14 hours a day to blast the old paint off the tinder. So, I learned about hard work. And I learned about being a team player.
The other thing is that it was an incredibly dangerous job at that time. It’s still dangerous, but nothing like it was back then. It was really life-threatening. I’m not even sure my father would have put me on the rig had he known that it was that dangerous, but I learned a lot from it. And, it was an experience that I wouldn’t trade.
How CEOs can create thriving corporate cultures
I worked very hard to build and maintain a team culture at Calvin Klein. I worked very closely with my management team. Everybody had opportunity to express their point of view. We were very close. We had frequent meetings, one-on-one meetings. And we had a weekly meeting with all my top direct reports, which was actually quite a number. It was like more like 10 to 12 because it was a licensing model, to a large extent. We had operating businesses as well. But a big part of our business was a licensing business.
So, it didn’t really require quite as many layers of management to operate that business. I would go around the room and just get up-to-date on everybody’s business area. And they would share that with the room, and I would ask questions. I found that to be a very important part of maintaining the team culture, which worked extremely well for us.
On how his leadership style evolved over the years
The first thing that comes to mind is obviously, you have to be a good leader, but you have to be a good listener. And if you’re not a good listener and people don’t feel as though they’re being listened to, you’re not going to be successful. And I pride myself and prided myself and always been a good listener, I was always very open to hearing what people had to say about their areas. And as I said, I had weekly management meetings with all of them and my door was always open for one-on-ones, anytime that they want to come in and talk about anything.
And so, I was a very good listener, and I think I provided good leadership. I think part of good leadership is being a good listener. My team was not only very talented but very experienced in the areas that they were responsible for. So, the whole thing just came together very well and I’m really proud of what we were able to accomplish.
On what inspired his forthcoming book, “A GREAT FIT: Finding the Work That Suits You Best”
I have to give the credit to my wife for the book, because she’s the one that said to me, ”Tom, you should write a book.” And she’s my wife for 44 years. So, when she has something to say, I listen to her. That was the whole reason that I wrote the book. And I think what readers should look for in book is, it’s not just about my time at Calvin Klein. That’s a prominent part of the book, but it’s about my whole life, my whole lifetime of experiences and all the things and all the jobs that lead up to my ability to be a successful CEO at Calvin Klein.
I think that readers will find it very interesting from that perspective, and I think that they’ll find it helpful. Particularly, young people that are growing up and want to become successful in whatever industry they’re in, fashion industry or other industries. I really hope that they enjoy it. And I hope that they learn from it.
Tom Murry is the former CEO of Calvin Klein, where ran the company for 17 years and facilitated the brand’s growth from $2.8 billion to $8 billion in sales. Prior to that, he worked for iconic fashion brands including Tahari and Evan Piccone. He has worked with (and learned from) the most recognized names in fashion, as well as titans of the business world. With the same no-nonsense approach that he applies to fashion, Tom shares his knowledge about business, leadership, and creating a career that one can be both proud of and one that is of service to others. Murry was also involved in the deal that saw PVH acquiring Calvin Klein in 2002, and bringing the Calvin Klein Jeans and Underwear businesses under the same roof. He and his beloved junior-high sweetheart, Lynda Murry, recently celebrated 43 years of marriage and now reside in Palm Beach, Florida.
Career Success Is All About Finding the Right Fit Says Former Calvin Klein CEO
Tom Murry says you know you are in the right fit professionally if you are engaged, curious, and open to learning whenever possible.
Having spent 17 years leading the iconic fashion brand Calvin Klein, Tom Murry knows firsthand the benefits of having a great fit – both in terms of the clothes you wear and the jobs you hold.
Under his leadership, Calvin Klein grew from a $2.8 billion company to a brand worth $8 billion. During his time with the company, Murry served as CEO, president and chief operating officer before retiring in 2014.
Prior to joining Calvin Klein, Murry spent much of his career working for other fashion brands, including Tahari and Evan Picone. But before all that, Murry worked on an oil rig in Louisiana. It was that job, he said, that instilled a grittiness that would serve him throughout his career at Calvin Klein.
We recently spoke with Murry about how you know if your job is the right fit for you and what to do if it isn't. In addition, we asked him some rapid-fire questions about technology, his career and advice he has received over the years.
Q: How do you know if the job you are in is the right fit for you?
A: One of the best indicators to know whether a job is right for you is your feelings about it. If you are genuinely excited about the work you're engaged in, then you're on the right track. If you find yourself curious and willing to learn as much as you can about your job and all that the work entails, you've found a good fit.
Another part of finding a good fit, of course, is competence. You tend to feel better about whatever work you're doing when you're good at it.
Q: Is finding the right career fit more than just being happy with what you do?
A: Absolutely. Feeling happy and enjoying what you do is great. It's a solid indicator. But don't get me wrong. It's not the only indicator. Not every day is going to be fun. Not every moment of work is going to make you happy. You'll set yourself up for disappointment and unrealistic expectations if you think you have to be "happy" every single moment of the workday.
I think a better measurement for finding the right career fit is curiosity and a willingness to be better. If you're engaged, curious, and open to learning as much as you can, you'll never be bored. You'll always be looking for ways to self-improve.
If you find yourself desiring to be better, desiring to want to learn as much as you can, desiring to excel in the workplace, then you've found the right fit. You know what you want and you're willing to work to get there, even if some of that work is hard work.
Q: If you are in a job that doesn't seem right for you, can you grow in the position to a point where it eventually is the right fit? If so, what steps should people take to grow and advance in their jobs?
A: I think anyone can learn to do a job. But the operative word is learn. You have to have a learner's mindset or what they now call a growth mindset when you approach any position.
No one knows every aspect of the job on day one. Experience is vital and often undervalued. Give yourself time to learn. Yes, you even have to make mistakes.
The first step you should take is to learn as much as you can. Ask questions. Don't pretend to know what you're doing to look competent. Instead, ask with a willingness to be better. Take peers out to lunch and find out what worked for them. Hire a mentor or a coach if you don't feel comfortable seeking counsel from coworkers. Then make a plan with your own manager and ask them what you can do to become more effective. Accept criticism and work with others to improve.
But the most important thing you can do is to have a good attitude. A positive, can-do attitude will really stand out. It shows a willingness on your part to be better.
Q: If you don't think you are in the right fit, what steps should you take to make a change?
A: If you have tried all of the above and you're still miserable at work, then you may have to take a good, long hard look at yourself. Analyze what's not working. Is it your attitude? Are you in over your head? Do you need more experience?
I am a firm believer in tenacity and hanging in there – to a point. If you've tried everything and it's still not working – and you're miserable – chances are your co-workers and boss are miserable too. That's when you know it's time to go.
Q: How long should you give yourself in a new job before deciding if it is the right fit for you? Do you need to give it time? Or will you know immediately?
A: There are a lot of steps to take before you throw in the towel. And time is relative. Some people have a quick learning curve. They can see the writing on the wall and plan their exit accordingly.
I think some people know immediately when it won't work. When I was young, I had a job where I knew I was in way over my head. I was totally unqualified, and I wasn't given any resources or support. My boss at the time said to me, "Tom, it's sink or swim!" And I said, "No, it's sink, swim, or swim away." I chose the latter. I knew if I stayed it would have been a disaster for me and the company. They needed someone with more experience. In that case, I seemed to know right away.
Q: If you like what you do but don't necessarily care for your co-workers and bosses, what is the best way to proceed?
A: I can't imagine a scenario where you like what you're doing but you don't like your boss or co-workers. Usually, they are a package deal and part of enjoying what you do.
Normally, when you enjoy your work, you enjoy the people you work with. It might be important to stop yourself and ask: Is it really the people I don't like? Or is it this job? Or is it my attitude toward the job that makes working with others so difficult? A good fit and good people go hand in hand.
Q: If you are a manager, how should you handle an employee who doesn't seem like they are happy with their fit in your company?
A: I would spend some time analyzing the situation. I would call them into my office and ask them to share their frustrations with me. So many people just need to be listened to. If they're a valued employee, I am going to try to make them feel heard, understood, and I would also try to work out a plan to help them feel more comfortable, competent or happy, whatever the case may be. But if someone was unhappy and incompetent, I would probably advise that they look elsewhere for work. There isn't much you can do with a negative and incompetent employee.
Q: What piece of technology could you not live without?
A: I can't live without my iPhone. I do everything on it.
Q: What is the best piece of career advice you've ever been given?
A: Someone said to me early on, though I can't for the life of me remember who it was, "Find something you enjoy doing." And nothing has been truer. When you enjoy what you do, you're more effective. It's that simple.
Q: What's the biggest mistake you've made?
A: When I was about 40 years old, I took a huge risk and bought the company Intuition. My business partner and I thought we could turn the apparel company around, but we didn't do enough due diligence, and it turned out to be a financial and professional disaster. It took me a long time to recover, and it was difficult to get back on my feet.
Q: What's the best book or blog you've read this year?
A: I read for pleasure and I always enjoy James Patterson's books. I recently read "All-American Murder" and look forward to reading his latest.
Q: What's the biggest risk you've taken professionally? Did it pay off?
A: I suppose some people may have seen leaving a solid job at Tahari as a risk. I was making a lot of money, working with people I liked and doing what I loved. But I saw it as an opportunity. Getting to work with Calvin Klein was the best thing I ever did. It paid in dividends. I spent the happiest years of my professional life at the helm of Calvin Klein.
Q: What's the one thing you want to accomplish this year?
A: To help as many people as I can find a great fit at work. Part of that goal is working on a book that is all about that.
For over 17 years (1999-2016) I served as the CEO of Calvin Klein and I had the distinct pleasure of being able to work with one of the world’s most preeminent creative geniuses of our time, Calvin Klein, not to mention his incredible design team, specifically the legendary designer and Creative Director Zack Carr. It was an amazing experience, and truly the highlight of my 40-year-career working in the fashion industry. However, one of the most challenging parts of my tenure at Calvin Klein was overseeing the purchase of Calvin Klein by PVH in 2003. The challenge wasn’t working with PVH, but rather it was making sure that the brand that Calvin and his partner Barry Schwartz worked so hard to create not only maintained its excellent reputation, but that it continued to be a profitable company.
The latest financial releases from American luxury stalwarts Tapestry (Coach, Kate Spade and Stuart Weitzman) and Michael Kors (MK and Jimmy Choo) showed strong performances this year. With retail up 5.5% year-over-year through July, prospects look good for the rest of the year.
Both companies reported outstanding gains on the topline: Tapestry up 31% in both 4Q18 and full year and Michael Kors Holdings growing 26.3% in 1Q2019. But both companies got a big boost from recent acquisitions, Kate Spade by Tapestry and Jimmy Choo by Kors.
Each company's results in its flagship brands were more modest. Tapestry’s Coach advanced 5% in the fourth quarter, reaching $1.1 billion in sales, with comparable store, including e-commerce, up only 2%.
From left: Francisco Costa, Italo Zucchelli and Kevin Carrigan, the creative directors of Calvin Klein's fashion lines, with longtime house muse Christy Turlington in a Calvin Klein Collection top and skirt. Calvin Klein Collection top.
ELEVEN YEARS AGO, when Calvin Klein, along with his longtime business partner, Barry Schwartz, sold his company to Phillips-Van Heusen (PVH), the designer had just turned 60. In 36 years at the helm of his fashion line, he had gone from selling coats in the now-defunct New York store Bonwit Teller to having his name recognized around the world. In a way, it was time. Klein had endured a bitter lawsuit with his largest licensee, the Warnaco Group, and unbeknownst to the public, his company's earnings had begun to slip. In the next year, he would give an interview describing his battles with addiction. PVH's $700 million offer must have seemed like a lucrative reason to lay down his sword. "He's at the top of his game. He's a living logotype, and now he wants to rest a bit," said his spokesman, Paul Wilmot, at the time. But the question everyone outside the company asked was could Calvin Klein Inc., survive without its charismatic founder?
The naysayers were voluble, especially given that PVH was known for making workaday button-downs, not marketing sexy minimalism. The luxury landscape is tricky terrain where many an able executive has lost his way, and PVH, then worth $1.5 billion, would have to balance the high with the low: selling $4,000 coats as well as $17 pairs of underwear. Even more surprising was a plan that did not replace Klein with an equally central figurehead. Instead, PVH (which owns several other labels, including Tommy Hilfiger, Izod, Arrow, Van Heusen, Warner's and Olga) decided to forge ahead with the relatively unknown team that Klein had already put in place: Francisco Costa as head designer of the ultra-luxe women's collection; Italo Zucchelli at the head of the men's collection; and Kevin Carrigan at the helm of the more moderately priced bridge lines. The initiation of these three creative directors for the fashion lines was a departure from the cult of personality that marked Klein's reign, during which he fulfilled countless roles. "He was a merchant, a businessman, a marketer and a creative," says Carrigan, who has been with the company since 1998.
"Any time a designer leaves a major name like that, the risk is high," says retail consultant Robert Burke. "We can count more times when it hasn't worked." When Tom Ford left Gucci in 2004, his position was filled by three designers: Alessandra Facchinetti for womenswear; John Ray at menswear; and Frida Giannini for accessories. The strategy floundered both commercially and with critics, until Giannini took over the creative direction of the entire brand. "Part of the reason it works [at Calvin Klein ] is that everyone understands the Calvin aesthetic extremely well," says Calvin Klein Inc. CEO Tom Murry, pointing out that Klein hired all of them. "Each creative director is a specialist in his area." (After a brief tenure as a consulting creative director, Klein officially stepped away in 2006 and now does not speak publicly about the company he cofounded.)
Any hiccups came from quality and distribution issues with licensees, who help produce enough goods to outfit an entire Calvin Klein lifestyle, from jeans and underwear to jewelry, watches, fragrances, cosmetics and home design. "We had some missteps early on," says Murry, who along with PVH CEO Manny Chirico has overseen a significant expansion of Calvin Klein Inc. Part of Murry's strategy is maintaining a delicate status quo, and a key tool in his arsenal is using the luxe women's Collection line, designed by Costa, as an ambassador for the rest of the house. "You don't get into that business to make money. You get into it to create image," he says. "It generates $400 million a year in the cost equivalent of editorial coverage. It's hard to quantify, but for example, we got the September cover of Vogue, and in US Weekly there were 10 celebrities wearing Collection dresses." Jennifer Lawrence, Gwyneth Paltrow, Emma Stone and Kerry Washington all regularly wear Costa's creations. "That's what sells the [lower-priced] dresses."
"I look at what we do as the think tank of the company," says Costa. "We have the white label, we have jeans. They all serve their own purpose. I could not compete with my own company. When I do a fashion show the objective is to create excitement and talk." His spring/summer 2014 collection was inspired by references as diverse as Pablo Picasso, Phillippine villages and contemporary movie posters. It employed typical Costa flourishes: architectural pieces that both reveal the body and stand apart from it, including a finale of slashed and fringed gowns. "I was apprehensive it wouldn't be in the realm of Calvin," he says of the clothes. "But we successfully managed to create a language of modernity in this very edited Calvin way."
"For me, it's very easy to work within this kind of aesthetic. It's like my second skin," says Zucchelli. His men's collections are known for their innovative tech fabrics, futuristic references and lean lines. The latest, presented this summer, featured cloud-patterned T-shirts inspired by artist James Turrell and Zucchelli's own Fire Island summer home. "In my work, I keep the idea of the sophistication and elegance, but I like to inject the iconography of [the rest of the house]. This is a hyper-modern brand, so for me, innovation is very important."
"Innovation in all aspects of clothing will take us forward," agrees Carrigan, who oversees "everything under Collection," including the lucrative jeans and underwear lines. He is clear that his designs serve a different purpose from the ultra-luxe black-label collections. "I love both the commerce and the design aspects. I'm a businessman and an artist," says Carrigan, who sees himself as the conductor of an immense worldwide orchestra and whose heroes are designers and architects like Florence Knoll and Le Corbusier. "I've never been the type of designer who wanted to design a one-off dress. I like the industrial design of creating something that has mass appeal.
"I'm very reverential to the archive; I constantly instill the ethos of what Calvin put in place," adds Carrigan. "You can walk down the street and know the Calvin Klein brand."
Tom Murry will be retiring as chief executive of Calvin Klein Inc. on June 30 after 17 years with the company — nine as president and chief operating officer and six as chief executive. He will remain in an advisory role as chairman through January.
Q. Tell me about the first time you became a manager.
A. After I graduated from college, I didn’t know what I wanted to do, except that I wanted to ski a lot and play tennis. I sold men’s wear after school as a student and I met some people at Head Ski and Tennis Wear. They hired me in a sales job, which was a lot of fun. The C.E.O. and founder of the company took a liking to me. He thought I had a feel for product and made me the merchandise manager of the company. I had zero experience and I didn’t have a clue what I was doing.
Q. I take it that didn’t work out well. What happened?
A. The problem was, I was not qualified. So after about six months, I decided to resign. I told him that while I was flattered, I wasn’t doing him or me any favors, because I wasn’t qualified yet. I knew it was what I wanted to do, but I wanted to start at a lower level. So he gave me the sales job back and ultimately I got back into merchandising later on.
The most important thing that I learned is that you have to have the support of the people. They will make you or break you, and to have their support you have to know how to do the job.
Q. Do you need to know everything?
A. Obviously I need to know certain aspects of the business more than others, but I believe one needs to have at least a working knowledge of the entire mechanism to be effective.
Q. Describe your leadership style.
A. For me, it has been very important to develop a team culture, because if you don’t have an organization that works together as a team, you won’t get much done — unless you’re running a candy store. You can’t successfully run a big corporation without team culture. Certainly, our company has that.
Q. What were the key decisions you made to build this team culture?
A. First, we created an organizational structure and job descriptions that were very clear. One of the worst things you can do is have a structure that is not symmetrical and understandable, and when you have job descriptions that overlap it’s very difficult to function properly.
The other thing that we did was make sure that the people we hired had a lot of talent and experience, but they were also nice people. Why? Because nice people are team players — after all, you spend more time with people at work than you do at home, so you don’t want to be around people who are difficult.
Then it’s all about communication and delegation, which is another big part of my management style. We have formal meetings but we also have a big informal meeting once a month, where all my direct reports and many of the next level down all get together, and we just go around the room. There is no set agenda, you don’t have to talk if you don’t want to, but if you think there is something going on in your part of your business that would be interesting and beneficial for the rest of the group, then it’s great to share.
And, by the way, no one doesn’t talk! I personally really enjoy these meetings — you walk out and your head is just full of information.
Q. Tell me about hiring. What do you look for in a résumé?
A. I’m looking for longevity in jobs. When I see a year here, or two years there, I’ve already lost interest. It’s over, unless it’s a kid who is just getting started, because it says to me they lack tenacity and staying power. Not every day is going to be a good day and you have to work through the hard times. I’m pretty tenacious. I’ve been married for 40 years [laughs] and I’ve had the same administrative assistant for 17 years.
Q. Have you made hiring mistakes?
A. Of course — hiring is always a shot in the dark, and you take your best shot. I’ve done much better over the years because I have learned. Going back to the question before, those people who stay on with a company for a short time tend to be great interviewees — they tend to have maybe a two- to three-year cycle, they can sell you on themselves, but then they can’t do the job. So I’ve learned to do more reference checking and be more cautious, because mistakes are costly.
Q. What’s the best way to ensure a successful hire?
A. Hire someone who has a track record of doing exactly what it is you are going to ask them to do. One of the mistakes senior managers often make, and I did it myself early on in my career, is to think that if an employee can do something very well, they can do anything. So you give them increased responsibility and if they fail, and it’s not their fault, it’s your fault. The mistake is to move them out of their element where they don’t have experience and a comfort level.
Q. You have announced your retirement after many years as C.E.O. How do you prepare the transition?
A. Actually, our parent corporation, PVH Corp., does a very good job at formalizing the succession planning process. Every year we meet to discuss succession plans. It’s a good program and it works very well. In my instance, I was very fortunate because Steve Shiffman, who is currently president and chief commercial officer of Calvin Klein Inc., has been with PVH for many years and worked for me for seven years, so we know each other very well. He already has the tools to do the job, which is why I accelerated my departure. Originally I was going to work until 2016, when I turn 65, but the Warnaco integration is on schedule and I felt that the time was right. If we had had to go outside, it would have been a much lengthier process and then we would have taken the risk of bringing in an unknown.
Q. Is it going to be difficult to let go of the reins?
A. Not at all. There are two kinds of people: people whose job is the end, and people whose job is the means to the end, and I’m the latter. I like my job, and sometimes I love my job, but it’s not only who I am. I plan to do nothing for six months to a year besides playing golf, skiing, and traveling. And then I think one day I’ll wake up and say, “I’m ready to do something.” It probably will be some sort of charity work. I’ve always wanted to do more for charity and never had the time. Now is the time.
Following what feels like a series of CEO shakeups in the fashion industry, Calvin Klein is getting ready to enter into an era of new leadership.
The PVH-owned brand announced Tuesday that longtime CEO Tom Murry would be stepping down from that role and transitioning to the position of Executive Chairman, in which he'll advise the new CEO, Steve Shiffman, presently the company's President and Chief Commercial Officer. The transition will officially be put into place July 1, with Murry planning to fully retire at the end of the fiscal year.
Murry, who joined Calvin Klein 17 years ago, is credited with bringing the company tremendous growth. “Under his leadership, Calvin Klein has grown from $2.8 billion in global retail sales in 2003 to close to $8 billion in 2013, having evolved from a licensed only model to a more directly operated business," explained Emanuel Chirico, Chairman & CEO of PVH in a statement. Murry was also involved in the deal that saw PVH acquiring Calvin Klein in 2002, and bringing the Calvin Klein Jeans and Underwear businesses under the same roof.
It sounds like the company will be in good hands: Shiffman has 30+ years of retail experience, 20 of them with PVH (where he's held several positions), and seven with Calvin Klein, where he's overseen North America retail and e-commerce. The brand is unique in that there are several businesses within it -- from luxury ready-to-wear to mass-produced underwear, much of it licensed out -- and thus, it requires someone with varied retail experience, like Shiffman, to lead it.
Tom Murry Breaks Down Calvin Klein’s Business Model
BoF’s Imran Amed talks to Tom Murry, chief executive of Calvin Klein, for an inside look at one of the most successful American fashion businesses of the last 25 years.
LONDON, United Kingdom — It’s not every day that you get to meet a CEO who oversees a fashion brand which does more than $7 billion in sales at retail. Indeed, Calvin Klein is one of the most successful American fashion businesses of the last 25 years.
But the Calvin Klein business is markedly different from many of its peers (particularly those based in Europe) in that it is almost entirely a licensing business, with scores of different agreements with partners who design, produce and sell Calvin Klein branded products from underwear to jeans to fragrances, and then pay a royalty on sales back to Calvin Klein.
In recent years, while some other fashion brands have been buying back their licensees, Calvin Klein has continued to push forward with a model that was born early in the history of the business, when Calvin Klein himself was still designing for the brand. Based on the success of this model, the Calvin Klein business was acquired by PVH Corporation in 2003, a massive brand conglomerate which also owns other licensed fashion brands Tommy Hilfiger, Van Heusen, IZOD, ARROW and Bass.
The day after a dinner in London to celebrate the Design Museum’s new home at the former Commonwealth Institute, I sat down with Tom Murry, chief executive of Calvin Klein, to learn more about how he makes this licensing model work.
BoF: Having grown up in North America, Calvin Klein was a brand that was everywhere I looked. But here in Europe, the brand doesn’t seem to have as much of a presence. Could you talk a little bit about your priorities for the European market and how this compares to your presence in Asia, where I understand your business is quite big?
Tom Murry: It’s deceiving what you observe, and sometimes this is different from reality. We actually do about 30 percent of our business in Europe, 50 percent in the US and about 20 percent in Asia. So we actually do more business here [in Europe] than we do in Asia.
We also have more free-standing stores here than we have in Asia. Our business model for Europe is primarily a free-standing store model. We do sell to department stores, but the most important part of our business model for Europe and Asia is free-standing stores.
BoF: Stores directly owned and operated by you?
TM: No, not directly owned by us. We operate primarily a licensing model, so we want our licensees to operate a lot of those stores directly. It’s a model that works very well. If you have really good licensees and philosophically they are on the same page — that is, as it relates to protecting the brand while they are growing revenue — then it works very well.
We are fortunate enough to have this today, but it wasn’t always that way. We have been here for 15 years now and we have weeded out the bad [licensees] and replaced them with good ones, Warnaco is our biggest licensee and we have a very good relationship with them, it’s a global jeans license; a global underwear license.
BoF: Yes, I understand that in all there are more than 40 licensing agreements across multiple geographies, and product categories. I’m curious about the decision to operate the business in the way that you do, when so many other brands seem to be buying their licensees out to take things back in-house. When a lot of the operations and consumer-facing elements are managed by others, you might not have as much control as you would were you to own everything. But the flipside is that to grow the business you require less capital to open stores, for example.
TM: Actually the way it works, we have complete control. We control everything. Our contracts are incredibly comprehensive. If you were to walk into a store, there is nothing about that store that we didn’t design or approve. The location, the design of the store, retail fit out, the fixtures, often the product mix that goes in there, all the creative, all the advertising, whether it be institutional or co-op advertising, the visuals.
Now having said that, we have over 700 free-standing stores around the world, and many, many more points of sale and shop in shops, but we really track the free-standing stores as they are really important branding platforms as well as revenue drivers.
BoF: How do you oversee such a vast network of stores to ensure the consumer experience and brand communication are in line with your vision?
TM: It’s difficult. We can’t really keep an eye on 700 different stores and more, so that part relates back to my earlier comments about having a licensee that’s on the same page and understands that it benefits them as much as it benefits us to protect the brand and do the right thing for the brand, and follow the guidelines we set.
We do spot checks all the time, all over the place, and we do have offices in Milan, Hong Kong and Tokyo. If we do see something we are not happy with, or we don’t agree with, then we communicate immediately with the licensee and get it fixed up.
We didn’t really sit back 15 years ago and say, ‘You know what, we are going to operate a licensing model instead of an operating model.’ What happened was we already had a big licensing business.
BoF: From the legacy of Calvin Klein himself?
TM: Yes. I remember sitting with Calvin, probably 14 or 15 years ago, and talking about [our] need to hire people all over the world to watch everything, not quite to that effect, but we need this large army of people to make sure all of licensees are doing the right thing wherever they are.
I said, ‘I understand the concept but it’s not practical, we’d have to hire thousands of people.’ From a financial standpoint that would not be feasible. What we needed was to get rid of some of these bad licensees, and replace them with world class, top quality, professional people that want to protect the brand as much as we want to protect the brand. So that’s what we set out to do..
BoF: And you also control all the marketing in-house?
TM: Yes, we have an in-house advertising agency, we have an in-house PR firm, we have a large in-house design organization, which either designs virtually every bit of product in the whole world or approves it. Philosophically, We don’t always care as much who designs it as long as it’s great product and looks like Calvin and we approve it.
BoF: Do you think the consumer understands the relationship between all of the Calvin Klein sub-brands? You’ve even launched apparel off CKOne, which itself started as a fragrance line. With so much different branding around Calvin Klein, how do you keep it straight in the consumer’s mind?
TM: Anytime you operate in multiple price zones, there is a risk of some confusion, whether it’s us, Armani, Ralph Lauren or any others. Ralph Lauren is an incredible company, and they have even more zones than we do.
In the research that we do, when speaking to consumers [we find that] they look at it more simplistically than we in the industry do. To them it’s all Calvin Klein and if they come into a store and they like the product, they buy it. They don’t think ‘Oh wow this is confusing to me, because which Calvin Klein is this?’ It’s Calvin Klein and they purchase it.
We’ve done seven or eight studies over the years, not only in the US but throughout Europe, I think that’s the way it breaks down. But each one of our sub-brands stands for something different: the prices ranges are different; the target consumer range is different.
But having said that, I think we are in all the businesses, for the most part, that we should be in. We get requests every week. Almost anything you can think of comes across my desk and of course we turn things down. The first thing we [ask] in any new business category is: ‘Is this going to be brand enhancing?’ And if we are sure it’s going to enhance the brand then we will start to think about the revenue opportunity.
BoF: Of course, the one business that you do own and operate in house is Calvin Klein Collection, designed by Francisco Costa and Italo Zucchelli. And just based on my very rough, back-of-the-envelope calculations, it’s a very small part of your overall business and probably represents quite a large cost: the shows, the advertising, the designers. What is the role you see for Calvin Klein Collection as a marketing tool and what role does it play as a business that actually contributes to the bottom line?
TM: Well it’s not a business that contributes to the bottom line and it probably never will be. For us, it’s a marketing expense and we generate an incredible amount of editorial that is based on being in that business. The PR department creates over $400 million a year in equivalent editorial, which is massive and which we believe has a very significant impact on our brand image globally. It’s a very small business, but a very important business. It’s the only business we are in that doesn’t lend itself to the licensing model. The reason for that primarily is that it requires a lot of investment to do it right and it’s usually not a money maker, and if it is a money maker it’s fairly minimal in terms of the return.
The business was slowly going down, so we brought it back in house with Spring 2009 and we’ve steadily been improving the business: the execution, the delivery, the quality, the consistency, all of those things which requires a lot of capital. But, we feel that it’s worth it and we are still not anywhere near where we expect to be. It’s a ten year project, it’s not a five year project. We are very, very committed to it because we really want to develop a commercial success that matches the press success that we are currently enjoying and that’s going to take time.
Right now, our fastest growing business is in Asia. We are doing very well there and we are talking to a luxury retailer over there about them taking over all of Asia, opening flagships in Shanghai, Beijing.
I spend more time on that little business than any single little business, because (a) it’s very important and (b) because it’s the most complicated business we’re in.
BoF: If Calvin Klein Collection is generating $400 million of press coverage for you, is that ultimately what drives the sale of underwear and fragrance? Have you been able to draw links between the two?
TM: It’s very hard to quantify. What we do hear when we do consumer research is that it impacts what they think about the brand; what they see as the brand image. From a practical standpoint, every time we dress one of these celebrities they end up in all of the grocery tabloids. Those absolutely influence the department store consumer for example. The people that generally shop in grocery stores and read those magazines aren’t luxury consumers, but that consumer is influenced by that and we get a tremendous amount of coverage. This year, the increase in coverage we had at all of the awards shows was amazing. It was like three or four times the previous year, so that’s really important, really significant. We believe as a return, it’s probably more brand image than it is driving someone to a store to buy something, but we still consider it to have very significant value.
BoF: If they can’t buy a Calvin Klein Collection gown, then maybe they can afford Calvin Klein underwear?
TM: Underwear is usually how a young person is introduced to this brand, more on the men’s side than the women’s side. We’ve learnt this from research too. The first item they’d have was a pair of Calvin Klein underwear.
BoF: When I think of Calvin Klein underwear I think of those Kate Moss ads; those Marky Mark ads. It was really the first aspirational product for that kind of consumer with that kind of fashion branding. But that model has been rolled out, not just by fashion companies like Armani and D&G, but by all sorts of other companies. Can you tell me a little bit about how you see your position in the market and how you protect the equity that you’ve built?
TM: There is more competition and it is more difficult, yet it’s still great business and it’s still growing between five and ten percent every year off a big, big base. The way that we do that is through very frequent product innovation and very powerful marketing that supports it. That’s the way you stay ahead.
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by BoF founder and editor-in-chief, Imran Amed.
Tom Murry, CEO, Calvin Klein, explains why the American fashion house isn't worried about the ongoing graft crackdown in China.
For press inquiries please contact Adrienne Fontaine: Adrienne.Fontaine@finnpartners.com