By Cotten Timberlake
Feb. 10 (Bloomberg) -- When Tory Burch Shoes opened her first women’s apparel and accessories store in downtown Manhattan in 2004, her goal was to have three. Today, she has 25 locations and plans an additional 100 namesake stores worldwide in the next three to five years.
Burch is seeking a location on Madison Avenue in New York, and plans openings in Rome and London this year, she says in the Feb. 22 issue of Bloomberg BusinessWeek magazine. She also is in talks with a potential unidentified partner to develop a cosmetic and fragrance line.
“There were a lot of eyebrows raised when I said I wanted to start this company and many people thought it would be a vanity project,” the 43-year-old entrepreneur said. “But I had an idea that something was missing in fashion.”
Burch identified a market for youthful, easy-to-wear, and affordable fashion for women age 25 to 40, neglected by other apparel companies chasing younger customers, says Kathryn Deane, a fashion industry expert. After a career in public relations and marketing with designers Ralph Lauren and Vera Wang, Tory Burch started her business with former husband Chris Burch with an initial investment of $2 million, according to people familiar with the company.
Burch says she generates enough cash flow to fuel growth at the New York-based company, whose items mostly sell for about $195 to $595. She runs a profitable, debt-free business, she says.
‘Polished And Ladylike’
Last year, the Burches and other investors sold a 20 percent stake to Mexico City-based Tresalia Capital, an investment firm run by a granddaughter of one of the founders of Grupo Modelo SAB, Mexico’s largest beer company, according to people familiar with the transaction. The Burches jointly and equally control more than 50 percent of the business, the people said.
Burch’s look is “polished and ladylike” with a “cool retro 1960s-1970s vibe” that is updated with her own modern sensibility, said Ken Downing, Neiman Marcus Group Inc.’s fashion director.
Burch says she partly derives inspiration from travel. A blue-and-yellow splattered white wall she saw in India last year inspired a print for items including skinny jeans. Burch will present her fall collection on Feb. 17 during New York’s Fashion Week.
Deane, who retired from her role as president of New York fashion-consulting firm Tobe Report in December, estimates Burch’s revenue will rise to $1 billion in five years to 10 years. Sales are projected to jump 36 percent to $300 million in 2010, according to people familiar with the company’s plans.
‘Accessible Luxury’
Burch, who majored in art history at the University of Pennsylvania, opened her first store in downtown Manhattan’s Nolita district in February 2004 with a spring line.
During the economic downturn, she sold for $400 to $500 an experience similar to one that cost $2,000 to $3,000 elsewhere, said Robert Burke, founder of the luxury consulting firm Robert Burke Associates in New York.
“It’s a lot about accessible luxury,” Burch said. “That’s what women are relating to now. There is resistance to excess.”
Her audience has broadened. The $195 Reva ballet flat shoe, sporting Burch’s double-T logo medallion and named after her mother, attracted teenagers, she says. Her figure-forgiving embellished tunic tops -- a silhouette she seized on in a Paris flea market -- attracted older customers, including Oprah Winfrey, who tipped them among her favorite things in 2005.
Burke remembers hearing about Burch when she was working out of her apartment. Burke, who was fashion director at Bergdorf Goodman at the time, invited himself over and saw she had figured out the logo, the store design, the fashion.
“She thought it through, soup to nuts,” Burke said.
Saks, Nordstrom
Her collection debuted at Bergdorf’s in her second season, and is now sold at 450 specialty and department-store locations around the world, including Saks Inc. and Nordstrom Inc.
She benefited from the product-sourcing contacts of her former husband as well as her industry friends, Burke said. Her clothes are made in China. In 2005, the year she says she turned profitable, she lured Brigitte Kleine from Michael Kors to be her president.
Burch’s title is co-founder and chief creative officer, and Chris Burch is co-founder. They divorced four years ago after a 10-year marriage.
Now 56, Chris Burch started a sportswear line called Eagle’s Eye in 1976 while he was a student at Ithaca College. He now runs his New York-based firm, J. Christopher Capital LLC, and says he has invested more than $100 million of mostly his own money in ventures that have included Aliph Jawbone wireless accessories.
‘Good Partners’
“We’ve managed to get through all of our differences and become good partners,” she says.
Burch’s clothes aren’t to everyone’s taste.
“It’s nice to have one or two pieces from her line but if you have a bunch, you scream ‘Tory Burch,’ because she does use that medallion logo on a lot of her things,” said Jennifer Prentice, 42, a medical equipment saleswoman in Minneapolis.
In April, Burch will open a store in Seoul after debuting her first international locations in Tokyo and Manila in December.
A too-rapid own-store expansion could pose a financial risk, by saddling her with locations that are both a drain on earnings and a distraction, said Steven Dennis, president and founder of Dallas-based SageBerry Consulting LLC.
“We’re pretty smart financially,” Chris Burch said in an interview. “We’re very conscious of not getting ahead of ourselves.”
Related news and information: Top retail stories: {RTOP <GO>} Saks peer comparison: {SKS US <Equity> PPC <GO>} News on clothing industry: {NI CLO BN <GO>}
--Editors: Cécile Daurat, Andrea Snyder
To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net
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