Calvin Klein:An American Icon

[00:00:09] Morning folks, and welcome to today's episode. It's called Calvin Klein: An American Icon. And look, I'm not into fashion, and I really didn't know anything about Klein before I did my research for this episode, but I found him to be such a fascinating character. Like this story about how he, together with Ralph Lauren and Anne Klein, who by the way is no relation, how they dragged American fashion out of the shadow of Paris and made it a new character.

[00:00:39] It stand on its own two feet. How he didn't do it on his own, because Calvin Klein the business was always two people, Klein and Barry Schwartz. How Klein pioneered designer jeans. How he built his company while partying in Studio 54 and burning the candle at both ends. And how the business was just days from bankruptcy before David Geffen came to the rescue.

[00:01:07] And also there is Klein's marketing genius. He was behind some of the most controversial and influential marketing campaigns of the 80s and 90s. He makes for a cracking story. Enjoy.

[00:01:22] So Calvin Klein, born November 19th, 1942, in the Bronx, New York. His father, who had a grocery store there, he was an immigrant from Austria-Hungary, current day Ukraine. But it was his mother and his grandmother. They were the biggest influences on Klein when he was young.

[00:01:39] He describes his mother as having this intense appreciation for design, for tailoring. She specifically liked beige, cream, white and brown colours. And as a result, Klein said that he spent the first 10 years of his life absorbing these colours. Laying the foundation really for what would become his signature minimalism.

[00:02:05] Then his grandmother, she ran a seamstress shop in the Bronx and she taught Klein how to draft, how to choose fabric, how to alter garments properly. So while other kids on the streets were playing sports, Klein was sketching designs and sewing. And then from his father, mother and grandmother, all of them instilled in Klein this huge work ethic.

[00:02:29] And this is something we'll see throughout the story. As he said, I came from a family in which all they did was talk about work. Now when he left school, he went to the Fashion Institute of Technology, graduated in 1963. But crucially, while the other top graduates from his class went to Paris for haute couture apprenticeships, Klein didn't go. He stayed in New York because he believed that his vision, his aesthetic was fundamentally American.

[00:02:57] So he had a vision of what he wanted to make from the very get-go. Now he started working in various fashion businesses in New York, but the early years, he didn't enjoy it. A lot of his work entailed copying collections that came from Paris. And while this gave him great technical expertise at a very high level, he didn't like copying. He wanted to do his own designs. Now he got married in 1964 to a textile designer, just a year out of college.

[00:03:27] When he was just 21, she was 20, which is way too young in fairness. And they had a daughter, she was born in 1966. And when you combine the pressure of young fatherhood, providing for his family, together with the fact that he wasn't enjoying his work, Klein was at a bit of a crossroads. And this is when the second most important person in this story comes into play, Barry Schwartz.

[00:03:54] I had never heard of Schwartz, and he's a very, very low profile guy. So Schwartz and Klein, they had been best friends since they were five years old. Both their fathers ran grocery stores. And Schwartz had been in the army, but had to return to run the family store when his father was murdered in a robbery in the store in 1964, when Schwartz was 21. So when Klein spoke to Schwartz about his frustration with his design career,

[00:04:22] initially, Schwartz proposed that they start a grocery business together, start opening up loads of stores. Now, fortunately for Klein, he also went to his parents for advice. And Klein expected that his father, who was this practical, hardworking shopkeeper, that he would advise him to go with Schwartz's plan, and that his mother would recommend that he stay in the fashion business. But that's not how it worked out. His mother said nothing. His father did all the talking.

[00:04:49] And here's a passage from an excellent Vanity Fair article on Klein that was a great resource for this episode. So here's the quote. His father advised his son to stay the course, and see his fashion vision through. Otherwise, he'd be sorry. Calvin recalls the conversation as the best advice anyone has ever given him. What he was really telling me is, it's not about money. It's about being happy and feeling good about what you're doing.

[00:05:18] I just sailed out of there. I mean, when I read that, you just think, fathers can really surprise you sometimes, can't they? I love that story because it pretty closely resembles the few times I ever asked my dad for advice. Because whenever I did those few times, he surprised me. He gave such good advice that I wasn't expecting, just like Klein's father did. I don't know why I never asked my father for advice more often.

[00:05:48] Anyway, Klein took his father's advice. He turned down Schwartz's offer. But he did ask Schwartz for money to help him fund his first designs. And Schwartz immediately gave him $10,000. That's about $100,000 in today's money. So a huge gamble. But this is what Schwartz said of Klein. I always believed in him. It was pretty easy to believe in him because he's a pretty impressive guy. And Klein must have been a very impressive figure.

[00:06:16] Here's what Barry Diller, one of his lifelong friends, had to say of him. In any place, in any business, in anything, Calvin would succeed. With him, it's a force of curiosity and willfulness. So we are in December 28th, 1967. Klein Incorporated, Calvin Klein Limited. With Schwartz as a 50% silent partner. Because he wasn't involved in the business quite yet. He was still running his grocery store. Now, Klein stayed working at his day job. He needed, of course, the security and the money.

[00:06:46] And he was working on his own small collection. Just six coats, three dresses, every night and at weekends. But then his boss found out about his double life. And Klein, he said the following. I felt terrible. I had a contract with them and I was close to one of the owners and I betrayed them. They asked me to leave immediately and I did. So this was now early 1968. Klein was operating out of a small showroom in the York Hotel on 7th Avenue. And then came a stroke of luck.

[00:07:15] And this is a massive stroke of just pure luck. So what happened was a guy called Donald O'Brien. He was the merchandising manager from Bonwit Teller. Which was one of the premium luxury retailers back then. And he was visiting an established designer in the same building as Klein. But the elevator opened on the wrong floor. It stopped on Klein's floor. O'Brien stepped out, saw Klein's work and loved it.

[00:07:43] He told Klein to bring the collection immediately to Mildred Coston. The president of Bonwist Teller. And one of the most powerful fashion retail figures in America. And again from the Vanity Fair article. The next part of the story is firmly entrenched in fashion lore. Instead of taking his goods in a taxi, which might have led to the clothes being creased, Klein put everything on a rack and wheeled it himself from 7th Avenue and 37th Street to 5th Avenue and 56th Street.

[00:08:13] A distance of nearly a mile and a half. This way everything could be perfect, Klein remembers. Perfect is a word that comes up a lot with him. Anyway, Custon loved his designs as well. So what was it about Klein's designs that O'Brien and Custon loved so much? Well, for context, the 60s, it was a time of huge cultural upheaval.

[00:08:38] And American fashion, it was still heavily influenced by European and especially French style. But at that time, the fashion coming from France, it was loud, chaotic, very experimental. And here you had Klein with these beautifully tailored wool coats and simple dresses. Klein had the vision. He was betting that underneath all this cultural upheaval, women still wanted finely tailored,

[00:09:08] simple but classic clothes. And he was right. And this was Klein's DNA from the get-go. What was described as stripped-down elegance paired with a bold, modern attitude. Now, those aren't my words, of course, because, as I've said, and I'll say again, I know nothing about fashion. Anyway, Custon was also impressed with Klein's confidence, the way he presented, just his overall persona. And here's a quote describing what he was like.

[00:09:37] He is down-to-earth, direct, and has an easy sense of intimacy. He also has a seductive boyishness, not to mention good looks, cool, and a magnetism that attracts both sexes. And I would suggest that you look at photos of Calvin Klein from the 70s and 80s. He was very, very cool. So Custon placed an order of $50,000 on the spot. But she also insisted on exclusivity.

[00:10:05] And Klein refused. Which shows the level of confidence and bravery. This was his first big order. But he insisted that he could also sell to other retailers. And Custon relented. He got what he wanted. And as a result, he got large orders from other major retailers. And in its first year of operation, Calvin Klein, the company, grossed a million dollars. Now, also in 1968, following the assassination of Martin Luther King Jr.,

[00:10:35] riots broke out across American cities. And Schwartz's grocery store in Harlem was destroyed. So he decided to leave the grocery business and go full-time into the fashion business. He invested another $25,000 to ensure that they could fulfill the orders that were coming in. And he took over the business side of it. And of course, this freed Klein from the financial side of things entirely. Which meant he just had to concentrate on design.

[00:11:01] And it was that division that made the company work. As Schwartz said, it was the ideal partnership because we didn't compete. So with this initial success, a real buzz was starting to build around Calvin Klein. In 1970, Klein produced his first formal runway show. And the fashion press in the US loved it. By the end of 1971, the company had hit $5 million in annual sales.

[00:11:29] And in 1973, Klein won his first Coty or Coty Award. It's the Oscars of the fashion business. He was 30 years old and the youngest designer ever to receive it. Also in 1973, and this is crucial. He pivoted and changed from wool coats and formal dresses to casual everyday clothes. You know, kind of relaxed blazers, comfortable pants, simple sweaters.

[00:11:55] This was the emergence of what was called luxury sportswear or casual chic. And this was very much a time when American fashion was really starting to break free from its traditional French and European influences. And Klein, together with Ralph Lauren and Anne Klein, again, no relation. They were leading the charge. And the timing, it was perfect. The market was ready for what they had to offer.

[00:12:24] But Klein was by now working 18-hour days, often sleeping in his showroom. And so his marriage ended in 1974. And by the end of 1975, revenues were at $17 million. And Vogue said the following. If you were around 100 years from now and wanted a definitive picture of the American look in 1975, you'd study Calvin Klein.

[00:12:47] But by 1977, Klein's social life had become hectic and very, very public. So this all coincided with the burgeoning and hedonistic nightlife scene in New York at that time, which was perhaps best exemplified by Studio 54, which opened in 1977.

[00:13:09] And it really was with Studio 54 and all the publicity, the paparazzi, the crazy stories that came out of it. That's when Klein emerged as this fashion icon. He was appearing in photos on all the fashion magazines and in newspapers with the hottest celebrities, like Andy Warhol and Bianca Jagger. And I really recommend that you Google Calvin Klein Studio 54 and look at the photos. He looks so stylish and cool.

[00:13:38] And again, from the Vanity Fair article in relation to Klein and Studio 54, the club where the creativity and license that were coursing through the 1970s flowered seems to have been made for him. For a few years, the disco was the nerve center for New York's fashion, art and entertainment worlds. And as Klein himself said, it was an amazing time in New York City. Everyone from all walks of life, from any part of the world, I had the opportunity to meet them

[00:14:08] and get inspired by the way people looked and by what they did. So while Klein drew inspiration from those wild nights, he also picked up a pretty big coke habit. And again, a quote from him, I burned a candle at both ends. When you're young, you can do that to a certain degree. The thing is, we were successful. We managed to be very high functioning people. And that's the thing about Klein.

[00:14:34] For a few years, until he eventually went into rehab, and he actually ended up going into rehab a few times, he was able to work and produce the goods while still having this wild party lifestyle. As Bruce Weber, the photographer, said, he could be out all night and might not go home. But he was in that office, on time, ready to go. So while Klein was able to work and produce the goods, he had this drug addiction.

[00:15:01] So his life must have been very, very chaotic. So it's really hard to imagine how in the middle of all this chaos, Klein dealt with what must have been the most traumatic event in his life. Because in February 1978, his 11-year-old daughter was kidnapped by her former babysitter and two accomplices. A ransom of $100,000 was demanded.

[00:15:28] The actual exchange of the ransom, like it is straight out of a Hollywood movie. A terrified Klein had to walk into the bustling Pan Am building in Midtown Manhattan, carrying $100,000 in a brown paper grocery bag. He took the building's main escalator and dropped the bag on the steps at a particular location. But the kidnappers, like they were complete amateurs.

[00:15:53] What they didn't realise was that the entire lobby was crawling with undercover FBI agents tracking Klein's every move. So the kidnappers were caught quickly and Klein's daughter was released. All three kidnappers were sentenced to 8.5 to 25 years in jail. But it must have been such a harrowing experience for Klein. Anyway, back to Studio 54, because it was there in the late 70s at 4 o'clock in the morning

[00:16:20] that Klein came across an opportunity that just catapulted the brand into the mainstream. So a guy danced up to him and asked Klein, how would you like to put your name on jeans? Now, this concept of designer jeans, it was very new back then. And even though the music was blaring, as Klein said himself, when it's about work and business, I don't miss it. I thought this could be really interesting.

[00:16:47] So that morning, after Klein gets back into the office from Studio 54, he asked Schwartz to contact the guy who he met in the nightclub. That guy worked for a company called Puritan Fashions and they struck a deal. The agreement gave Puritan the exclusive license to manufacture and distribute Calvin Klein jeans. Within the first few weeks of launch, they were selling 200,000 pairs per week.

[00:17:12] And sales of the jeans increased massively when the hugely controversial TV ads featuring a then 15-year-old Brooke Shields were released in 1980. Now, critics argued that these ads were overtly sexual and exploitative of a minor. Personally speaking, I don't have any problem with most of Calvin Klein's ads. He's in the fashion business and sex sells.

[00:17:39] But using a 15-year-old in a sexualized context, that is not good. Several TV stations banned the ads outright. Conservative groups called Klein a child pornographer. The backlash was enormous. And of course, the jeans sold out everywhere. At their peak, they were selling 500,000 pairs per week. So by this stage, we're in 1981-1982,

[00:18:06] the brand's total global retail sales was hitting $750 million. But what's crucial to understand here is that the actual business was really just a highly profitable licensing operation. They charged other companies a 7% to 8% royalty fee, just to use the brand name, and they had very little overhead. And Klein and Schwartz's personal income in 1981 was $8.5 million each.

[00:18:35] And the growth and brand exposure kept increasing in 1982, when Klein launched his men's briefs, with an ad campaign showing Olympic pole vaulter Tom Hintonis, I think, in nothing but white briefs against a whitewashed wall. The Times Square billboard apparently caused rear-end collisions as drivers slowed down to take a look. Teenagers used crowbars to break open bus shelter casings to steal the posters.

[00:19:04] While also, the underwear line, which this was totally new, there wasn't an underwear line like this before, it became an immediate cash cow, while the ad campaigns also, of course, amplified the brand. Getting back to the jeans, by 1982, they had become a commercial juggernaut. But while the manufacturer, Puritan Fashions, was pulling in $250 million in wholesale, Calvin Klein's company was taking home only about $15 million of that in royalty checks.

[00:19:34] So, wanting a bigger piece of the pie, Klein and Schwartz bought Puritan in 1983 for over $60 million. But, you see, now they're entering a totally different business. They were moving from a hands-off approach where they simply controlled design and marketing to suddenly owning a massive manufacturing business. Now they had to manage a huge labour force, fabric costs, warehouses, mountains of unsold inventory

[00:20:03] because to make matters worse, the buyout happened at the exact moment the American designer jean market began to cool. And within a year, this manufacturing arm of the company posted a loss of $11.3 million. So, to keep the company from going under, they had to refinance their debt by issuing $80 million in high-interest junk bonds that they got through, you know who, the junk bond king, Michael Milken.

[00:20:32] And so now this was a perfect storm. They went from making, you know, effortless profits from royalty checks to bleeding cash on factories, machinery and wages, all the while that high-interest junk bond debt compounded in the background. So with the jeans business in big trouble, the brand's survival fell on its fragrance business. And they were lucky because this is when the fragrance business

[00:21:00] really came to the fore. First, in 1985, with the launch of Obsession, the men's aftershave came out a year later, 1986. It's still one of my favourites. For the last 30 years, I just used Obsession and Fahrenheit. Jeez, I'm so stuck in my ways. Anyway, the launch of Obsession was backed with a $13 million advertising campaign. The print ads featuring nude bodies and again resulted in huge condemnation from conservative groups. And again, sales went through the roof,

[00:21:30] as did the sales for eternity, which launched in 1988. So these successes provided the company with a bit of a financial cushion, but the overall business was still in big trouble. The payments on those junk bonds, they were crippling the business and the banks refused to advance additional credit. And by 1992, the company was about to default and looking at bankruptcy. And this was also happening at a time

[00:21:58] when Klein was back in rehab in Arizona, having relapsed after being clean for several years. But the company was saved just weeks before the default deadline by one of Klein's best friends, David Geffen. He had sold his record company just two years earlier, walking away with $700 million. And he lent Calvin Klein $62 million. No strings attached. As the New York Times wrote at that time,

[00:22:27] Geffen is the kind of friend many businessmen could use during this recession. So this money, it helped give the company some much needed breathing room. Now, while all of this was going on, Klein had gotten married again. And I know that might surprise a lot of people because for the last 20 years or so, Klein has been dating men. And the reason I bring this up is because I already mentioned how New York's vibrant nightlife scene helped inspire Klein.

[00:22:57] Because like all great creatives, Klein drew his inspiration from his personal life, his lived experience. And he has had, I suppose you'd call, a very vibrant lifestyle. He has dated men. He has dated women. He has partied hard. Here's a quote from the Vanity Fair article. I've fallen in love with women. I've married women and I have a family. I have experienced a lot of things that have influenced my world. I am, for good or bad,

[00:23:26] a real example of whatever I've put out there. It's not something where we tried to say, well, let's outdo the other people and see if we can be more outrageous. It was real. And while I know nothing about fashion, I believe his marketing was so good because it was inspired by the lifestyle he was leading. Combined, of course, with his own instincts, his creativity and originality, it wasn't contrived. It was intrinsic to who he was.

[00:23:55] And while much of his marketing playbook has been copied so much over the years, at the time, Calvin Klein ads were so original, so authentic, and that's why they worked so well. Anyway, having stabilised the business in the early 90s, 1993 saw the launch of the CK brand. This was a lower-priced, youth-oriented line, and it was a huge hit. The New York Times said

[00:24:24] it looked like an incubator for everything exciting in street-level fashion. 1993, revenue hit 1.5 billion. It reached 5.1 billion by 1997, and 6 billion by the year 2000. Now, by this stage, they had sold the jeans manufacturing business, so they were back to being purely a licensed business. The company was just handling the design and advertising. Now, of course, to maintain the illusion of a traditional luxury brand, they also had these

[00:24:53] ultra-minimalist flagship stores on Madison Avenue, Paris, London, Tokyo. But these stores, they barely broke even. But that wasn't the point. They were, I suppose you'd call them physical billboards. They were promoting the brand's luxury prestige. But then, in 2000, they hit serious trouble with one of their biggest licensing partners. This was a company called Warnico, and they held the licenses

[00:25:21] for Calvin Klein jeans and underwear. And here's what happened. Warnico were in huge debt, and they were under pressure to shift volume fast. So what did they do? They started dumping Calvin Klein jeans and underwear directly into high-volume retailers like Costco and BJ's wholesale. And to Klein, this was like an absolute nightmare. Because the whole point of the brand, the premium position, the aspirational image

[00:25:50] he'd spent 30 years building, depended on where the product was sold. And by sticking it alongside, you know, bulk toilet paper in Costco, that was just so damaging for the brand. So they filed suit against Warnico for breach of contract, trademark dilution, brand equity degradation, and it got very, very public. Klein even went on Larry King Live and compared what Warnico were doing to counterfeiting. The case was ultimately settled

[00:26:20] in 2001. Warnico kept the licenses, but they agreed to strict limits on mass channel sales. However, for Warnico, the legal costs on top of their existing debt, it pushed the company into bankruptcy in 2001. But this whole case, it exposed something much bigger. The licensing model that had made them so wealthy, it also made them vulnerable. You know, to partners over distributing the product, to quality drift,

[00:26:50] to expensive legal wars that were messy and damaging. And by this stage, Klein and Schwartz, they were in their 60s, they'd been running the company since 1968, the whole thing was privately held. They came to the conclusion that maybe now was the time to sell. Took a few years, but eventually, in February 2003, they sold the company to Phillips Van Hoosen, PVH, for $430 million. Now, PVH also owns Tommy Hilfiger. And interestingly, I looked them up,

[00:27:21] the company had been founded in 1881, selling shirts to Pennsylvania coal miners. That's a great story. Might be worth doing an episode on them at some stage. Schwartz took his 50%, or $215 million, and walked away completely, retiring to focus on his great passion, which is thoroughbred horse racing. Klein got his $215 million as well, and worked with the brand up until 2006. Plus, because they were obviously going to use his name going forward,

[00:27:50] he also had a 15-year earn-out based on global sales, which ultimately brought his total remuneration to somewhere in the region of $865 million. Now, as for the brand itself, by 2025, global retail sales of Calvin Klein products were running at just under $9 billion. So, where do I stand on Klein? I mean, it's hard to overstate the impact Klein has had, not only on fashion,

[00:28:19] but on culture. He helped shift American fashion from under the shadow of Paris and establish its own identity. Alongside people like Ralph Lauren and Anne Klein, he helped define what modern American style looked like. Clean, simple, confident, understated. And again, they aren't my words, I got them from a retail expert. He turned designer jeans into a global phenomenon.

[00:28:49] Men's underwear from something that nobody thought about into a fashion category of its own. And he created an advertising playbook that has influenced nearly every fashion brand that came after him. Now, you can argue about some of the campaigns and some of them rightly deserve criticism, but there is no denying that his marketing was powerful and truly original. And what I like

[00:29:19] about Klein the person though, is his authenticity, his vulnerability, his honesty. He never hid from who he was. The New York nightlife, the relationships, the struggles with addiction, he was open about all of it. And then all of that fed directly into what he created. And this openness and honesty, it obviously made him a good boss. Yes, he was a perfectionist and obsessive about details, but the overwhelming

[00:29:48] impression I got from all my research is that people really liked him. Here's how one of his former executives described working with him. We were all in love with Calvin, as were all the editors. He was the most seductive person. You wanted to please him. Men, women, everyone. In short, Klein is probably one of the most significant fashion and cultural icons of the last 50 years and he makes for a fascinating story. And that brings us

[00:30:18] to listeners' emails. And this one comes from Ali, who'd love to hear the story of Ben and Churries. Great recommendation, Ali. Thank you so much. And remember, if you have any comments, any corrections or any story that you'd like me to cover, email me at info at gbspod.com. All the best, folks.