To Live And Thrive In L.A.

Juicy Couture's founders are spinning gold from Valley Girl "casual chic"

There are the conventional measures of success in business: healthy profits, high stock prices, happy employees. Then there's the way 44-year-old Gela Taylor and 41-year-old Pamela Skaist-Levy, the two women who founded Juicy Couture, the very L.A. line of clothes, measure success: "We had our biggest honor this year," says Taylor. "We're Barbies now." That's right. Mattel Inc. (MAT ) designed dolls based on the Juicy ladies, dressed in their signature sweat suits, pet dogs at their sides.

It doesn't get much better than that for this pair, who often do wear matching outfits, call each other "Fluffy," and can take much of the credit for bringing L.A.'s casual chic to the rest of the world. Juicy clothes are laid back, sometimes cheeky, and priced just this side of outrageous. Ripped jeans with a rhinestone heart on the front sell for $178; a hooded sweatshirt lined with rabbit fur goes for $395. And, although you won't hear this from them, paying more helps account for the 4% rise in U.S. apparel sales in 2004, to $173 billion, the first increase in three years. "People are identifying with that affluent celebrity lifestyle," says Marshal Cohen, an analyst at market researcher NPD Group Inc. "Everybody wants to go to the gym with Madonna, or at least look like they did."

WORKING OUT WELL
Juicy couture is also a rare example of a corporate takeover that has worked. Liz Claiborne Inc. (LIZ ) acquired the company in April, 2003, for what Skaist-Levy calls a juicy price: $53 million plus an additional sum based on future earnings, which Claiborne estimates could reach $92 million. Juicy Couture has become one of Claiborne's fastest-growing divisions. Since the deal, Juicy revenues have quadrupled and are nearing $200 million. And while the number of retailers that carry the brand remains steady (1,400 worldwide), Juicy has been able to get into swimwear, shoes, sunglasses, jewelry, and handbags. Sweat suits, the item that made them famous and is now knocked off by everyone from Wal-Mart Stores Inc. (WMT ) to Prada, make up half of Juicy's sales, down from 70% two years ago.

In October, Juicy opened its first store, in Las Vegas. Sales top $1,000 per square foot, three times the industry average. Five more stores are planned this year. "The backing from Claiborne has allowed them to move into new markets much faster," says Frederick Schmitt, an investment banker at Sage Group LLC in Los Angeles who helped negotiate the sale.

Another plus: Claiborne took over tasks the founders weren't so fond of -- accounting, manufacturing, and distribution -- and left the designing and marketing to them. This is part of Claiborne's strategy of buying fledgling retailers' brands to compete with discount and specialty stores. Acquisitions helped Claiborne's earnings climb 12% last year, to $313 million, on sales of $4.6 billion.

The relationship has had its rocky moments, though. Last year, Claiborne Executive Vice-President Angela Ahrendts got word that Juicy was planning to give away condoms with its men's blazers. She didn't think that exactly jibed with Liz Claiborne's more traditional sensibility, so she called Taylor and Skaist-Levy to "get inside their thought process." Which was: It seemed funny. Ultimately the pair gave up on the notion because it proved impractical, they say, not because of any corporate kibosh. Now Ahrendts can magnanimously say of the two: "Anything the consumer sees, they control. Their inspiration is totally their own."

WHAT ARE "MARGINS"?
Taylor and Skaist-Levy are still totally into their ditzy Valley Girl image. Frank Doroff, top women's sportswear buyer at Bloomingdale's, says Taylor pretends not to know financial terms such as margins and dollars per square foot. Taylor adds: "I asked him: 'Do you have a department store dictionary?"' Doroff says it's endearing, and sounds like he means it.

The pair have also introduced a little Paris Hilton-esque attitude into the conservative Claiborne organization. At a corporate retreat two years ago, Taylor and Skaist-Levy were asked by a colleague if they would ever design a moderately priced line. They looked at each blankly. Then Taylor replied: "What's that?"

The Juicy founders met at a mutual friend's clothing store in Los Angeles 16 years ago. Taylor was a struggling actress with a baby on the way. Skaist-Levy, a fashion school grad, was designing hats. Their first creation was maternity blue jeans: They spent $200 adding elastic to some old Levi's and sold them at maternity clothes stores. After a photograph of actress Melanie Griffith in their jeans appeared in Glamour, sales took off. Now their approach to celebrity endorsements is a little more calculated. Juicy Couture spends nothing on traditional advertising, preferring to send thousands of free outfits to the famous as well as to fashion editors and stylists every year. "Anybody can buy an ad in Vogue," Skaist-Levy explains.

Maternity jeans aside, it was their reinvention of the sweat suit in 2001 that got the world's attention. It was cut to show off curves, came in pastel colors and plush fabrics such as velour and terry cloth, and cost about $200. Later, they splashed the word "Juicy" across the rear end. Celebrities such as Britney Spears and Jennifer Lopez wore the sweat suits everywhere. Taylor says she realized they had created a fashion phenomenon one afternoon while standing on Rodeo Drive in Beverly Hills: Women on all four corners were wearing their sweats. "It was what we call a major Juicy sighting," she says.

The fashionistas, of course, may one day tire of Juicy Couture, especially if it's available everywhere. A few years ago, Barneys New York (JNY ) dropped Juicy, sensing it had lost its exclusivity. The store added the line back fast, though. "Our customers kept asking for it," says Terence Bogan, the women's sportswear buyer at Barneys.

The Juicy take on these shoppers is simple enough. At the company's warehouse, Skaist-Levy holds up a mini-handbag, intended to hang from a belt loop or one of their bigger purses. "Our customers are addicted to stuff," she says. "They need stuff on top of their stuff."

That's why the pair say they'll never retire. "It's going to be Juicy Geriatric," Skaist-Levy says. And their Barbies will be wearing robes and slippers.