Mr. Nice Guy

Joe Ouaknine, CEO of Titan Industries—maker of Bebe, Betsey Johnson, L.A.M.B. and several other women’s fashion labels—continues to thrive based on his corporate rule of thumb: do business with nice people only.

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CEO of Titan Industries

CEO of Titan Industries

Joe Ouaknine has been in the footwear industry long enough to have experienced the good times as well as his share of the bad, but he candidly says this past year as a whole has been the worst he’s seen in his 30 or so years of experience. And while the consumer-spending tourniquet didn’t squeeze his company out of making a profit in 2009, he freely admits that these days one must work “50 percent harder for 20 percent less.” Put simply, these are not fun times.

The CEO of Titan Industries—the Huntington Beach, CA-based maker of Badgley Mischka, Charles Jourdan, Bebe, L.A.M.B., Betsey Johnson and Harajuku Lovers footwear, plus the recently added Penny Loves Kenny brand—defied the odds last year, outperforming the company’s record sales in 2008. Yet when asked to assess the industry’s overall health, Ouaknine’s diagnosis is blunt and bleak: “[The footwear industry is] hurting and limping but still walking,” he says. “Full-price merchandise is very difficult to sell at retail, and that is hurting the business as it gets passed up the line.” As for any signs of recovery, Ouaknine doesn’t foresee any cropping up in the near future. “I was in denial because we had a great 2008 and managed to make a profit this year as well. I thought, we aren’t really in a recession. But now I believe the worst is not over.” He cites the growing number of unemployed people in America as contributing to this fear. “Now when reports say ‘100,000 people lost their jobs [this] month,’ we think it’s OK,” he notes. “It’s not. It’s terrible.” Between the unprecedented devaluation of the housing market and virtually empty malls, Ouaknine views unemployment as a huge obstacle for retail sales. “Until that changes for the better, I don’t see any real improvement in our industry overall.”

But Ouaknine is a self-described optimist and says that wallowing in the negativity any further would only be counterproductive. “I always believe in a better tomorrow; that’s how I was raised,” he says. Luckily, the American tendency to always look toward a sunnier future is a comfort. “We still have hope that things are going to get better. I think we are still looking for that turn, and job growth would be a start.” And in the short term, he cedes, “It’s not the end of the world. There are people still vacationing and restaurants are pretty full.”

Rather than take the slash-and-burn routes of many of his contemporaries amid these tough times, Ouaknine has overseen the expansion of Titan’s branded portfolio and pushed ahead with the company’s extensive private-label operations—all the while remaining debt-free. The secret to the past year’s success? According to Ouaknine, it boiled down to doing the same thing as the year before. “We didn’t change anything. We kept working hard, being nice to our customers and offering them a lot of choice.”

Badgley Mischka proved an especially bright spot in 2009. “It was our jewel in the second half of the year,” the CEO says, noting it took several seasons to establish the brand’s business. “The [’09] occasion shoes were just so beautiful. It’s a combination of design at an affordable price.” Retailing for around $200, Badgley Mischka’s price point may have been attractive to luxury consumers trading down from the $400 retail tier. Another nice ’09 surprise, Ouaknine says, was Betsey Johnson’s bounce back. “We had a tough time the year before, but what a rebound we have experienced,” he says, attributing the off year to the normal ups and downs of established designer labels. “The past year, the collection was just so bright. It’s beautiful,” he attests.

One Titan label that has shown no let-up is L.A.M.B., the brand designed in part by singer Gwen Stefani. Ouaknine says L.A.M.B. has totally exceeded expectations, and he attributes its strength to Stefani’s fabulous image. “She is such a wonderful, warm person, and that’s what people believe she is as well,” Ouaknine offers. “A lot of women want to be like her—married with kids—and she’s not all over the tabloids for the wrong reasons. She is also very talented and loves her fashion.” But Ouaknine admits he was initially hesitant about pioneering the celeb’s footwear venture, having recently gone through a fiasco with a namesake Jennifer Lopez collection. “Jennifer rarely wore her own clothes or shoes and, at the time, was involved in some controversies,” Ouaknine recalls, noting the experience resulted in one key lesson: It’s not always smart to use the celebrity’s name. “With Gwen, [L.A.M.B.] is pretty much all she wears. That makes a big difference.” Another difference is the actual product. “We have an amazing team of designers who make the line look great. It’s a lot of original creations with over-detailing on the shoes.”

Not all of Titan’s brands have been surefire successes. Ouaknine notes the Charles Jourdan launch, which rolled out over the past past year, is behind schedule. After fits and starts that included the replacement of two head designers, he says things are now in place. He believes the label’s Spring ’10 collection looks fabulous. “We should catch up and surpass our initial projection by this June,” he maintains, noting the branding addition of red lining should help. “It’s a great name, especially now that we have a clear identity, which we didn’t have at the launch.”

All signs point to a solid 2010 for Titan, the exec notes. For starters, the company will once again count Bebe sales (having re-acquired the license) as part of its overall volume as well as Penny Love Kenny, which marks the company’s foray into the volatile but potentially lucrative juniors business. “This January [was] a lot stronger than last year, and last year was better than the year before,” Ouaknine offers. “We are trying to keep our eye on the ball. We just want to stay the way we were in 2009 and anniversary the numbers.” The status quo sales goal does not mean the Titan portfolio will remain unchanged. While he is currently not seeking any further acquisitions, Ouaknine says the company will announce a major licensing deal this June. “It’s a huge brand—we just have to do it,” he says. “Also, there’s always one in the portfolio that might weaken. You always need something else to make up for any potential drop-off. That’s just how this business works.”

Might our industry’s current limp be a permanent condition?

Well, the limp started maybe five years ago. And here’s my analogy: Imagine you break your foot and people see you limping around in your cast. A year passes by and they see you still limping, even without a cast. They ask you how you are feeling and you respond, “OK.” But they point out that you are still limping. You say, “I know, but I got used to it.” That is exactly what has happened to this business: We got used to past situations. We got used to working in tough conditions. Specifically from a wholesale perspective, we’ve lost way too many customers. The consolidation has been the worst aspect. We simply have fewer and fewer customers to deal with. That’s the problem.

And a big part of that problem is that the terms and conditions being offered are not as favorable as before?

That’s right. [Retailers] have the leverage. That’s why you’ve got to go back a while to when the landscape was much different. Here’s another analogy: It’s like a processing plant for [crap]. Once it explodes, it smells everywhere and it hangs around for years, but then you get used to it. That’s what has happened to this industry. Is it going to get better? I don’t think so. You just have to learn how to live with it.

Titan is doing relatively well despite the general stench.

Yes, we’re doing OK. My motto is only doing business with people I like. If someone is going to try and take advantage of me, then I’m not going to do business with him. [I’ll do that] until there are no more customers. Then I’ll pack up and say goodbye.

Are there still enough likeable people for you?

Yes, absolutely. The people we do business with are all nice. I really mean that.

But how can they afford to be nice given these unfriendly conditions?

Well, you have to learn how to give and get. Once they want to get and give, then we are able to be friends. If they don’t want to make it a two-way street, then we’re done. I’m strictly speaking for myself here: We do business with people who are nice—the same way we are nice to them. [Otherwise] it’s not worth it.

What do you believe has been the biggest change of late with respect to your target audience of female consumers?

First of all, they have gotten lazy, because the online industry grew so much that it enables them to easily order from home and return as many shoes as they want. They don’t even have to face the salesperson when they return the goods. Personally, I used to shop in stores, but now I’m lazy and I’d rather go online and order. If it doesn’t fit, I’ll just send it back. Before, if it didn’t fit, I would never go back and return it. But online, it’s so easy—I just have to give it to my shipping department. The online business has taken a bite out of the [brick and mortar] stores. It’s one of the reasons why there are vacancies in almost every mall.

What is it that women really want when it comes to shopping for shoes?

They still mostly look at the celebrities to see what they are wearing, and often they want the same thing at an affordable price. They want to look like their idols.

Are these women as good of customers as they used to be?

Any customer will always be a “good” customer. But they are looking for bargains—they don’t want to spend as much money as they used to. That’s why the luxury market is suffering right now. And consumers are taking advantage of the situation. They release their dollars only when they see a deal they like. They are in the driver’s seat. So the retailer is freaked out.

What’s your advice for freaked-out retailers?

They have to buy smart. Even though we would like to sell them as many shoes as possible, now they have to be more careful. The fact is more and more retailers are paying for their goods with personal credit cards. Most independents can’t even get approved for [business] credit these days. That means they are buying less because they have to pay right away. Think about that: All of these people who used to take advantage of revolving credit—and if things didn’t work out, well, it wasn’t too big of a deal—now they have to pay basically with cash, so they are buying less. As a result, there’s less choice and less depth in the market. There’s a ripple effect with wholesalers, because we are selling less. So we are telling our retailers to be careful.

Is Titan designing fewer products as a result of this cutback?

No, because without design and product you don’t exist. That is the aspect you can’t compromise on. You have to keep pounding away with good product. We have no choice.

Have consumers noticed this tighter selection at retail?

The consumer doesn’t care. She has $100 in her pocket and it’s [marked] for spending, so she goes out and finds the best deal. The lack of choice is not an issue.

A lot of what you’ve been saying doesn’t sound very pleasant. What keeps you going?

Well, the people in our company have our lives invested in this deal. We still take great pleasure in doing this.

That’s good to hear. And I suppose 10 years ago a lot of people would have said that they wish they could go back another 10 years to when the business was easier.

That’s true. And that’s why I need to hire a genie to bring me back 20 years (laughs). But 10 years ago would be fine. My numbers from back then were pretty good. And while our company has grown since then, it’s just not as easy. But who said it was going to be easy to start with?

Many pundits say luxury is a permanent casualty of the recession. Do you agree?

There are still luxury customers out there. But we hear it every day: Customers want lower prices. They don’t want to spend $400 or $500 on shoes anymore. So we are listening and adjusting. That said, the luxury business will never die, and the business the way it was—let’s say, two years ago—will come back. Just when that might be, I don’t know, but I believe it will come back.

Part of the problem, I think, is luxury just got too watered down. The luxury brands went downmarket and muddied their image.

With luxury you have so much room where you can adjust down and still make money versus when you have small margins and there’s nothing you can really do. Maybe it was a mistake and now they realize that. But today you’ve got to do what you can in order to survive. So you might make some bad moves and then you hopefully can try to correct some. That’s why so many people are running around like chickens with their heads cut off. They don’t really know what to do yet.

Well, I hope we won’t see Christian Louboutin selling $99 shoes.

(Laughs). You never know. At some point, he might. Look at Christian Audigier—that’s what he’s doing with Ed Hardy. They’re all over the place.

Speaking of the juniors business, what do you see in Penny Loves Kenny that warranted an acquisition?

It presents a good opportunity for us. We’ve always been known for sexy shoes, but we’ve never had a strong juniors business. Every time we tried, we didn’t really succeed. Penny Loves Kenny was affordable acquisition and it’s a good little brand that they have going. And now that it is under our umbrella, we can manage it better. We’ve brought structure, and I think we are going to show some solid growth there. Already we are very surprised and enthusiastic about the brand’s potential. I never expected to have half of the success we are having with it so far.

What do you believe is the brand’s full potential?

If we come up with the right items, Penny Loves Kenny could be huge because of its relatively affordable pricing. Those consumers want the latest styles at a price. That’s what the junior business is all about; it’s hit and go, hit and go.

We are just going to let that learning curve come into effect, and I would say in about a year we should be up and going real fast and far with it. In the meantime, Penny and Kenny [Robinson] are two of the happiest people in the world [now that they] no longer have any financial aggravation hanging over them. They are now only responsible for the design and selling of the line.

Are you involved at all in the design process for any of your brands?

I’m only approving some buys and involved in financial matters.

But after all of these years, you must know a good-looking shoe when you see one.

Absolutely. Believe me, what I bring to the table is that I know which shoes will not sell. I whack them right away. I’ve been there before and I know that they didn’t work the first time around. Fashion is cyclical, but there are always some lemons that try to get reintroduced. I just try to make sure it doesn’t happen.

Do you have a vision of where you see Titan in three years?

I see further growth. There are some good opportunities and there are some things that may come about that we don’t know about yet. We have a good base, and in three years I’d like to see the same company a little bit bigger in size. That’s about it.

And remaining privately owned?

Absolutely. I went through the public offering once in my life with Guess, and I don’t want to be a part of that process again. What I do is private and I do what I want and I don’t have to answer to anybody. And we don’t have any debts.

What do you love most about your job?

The fact that nobody is looking over my shoulder and that I’m surrounded by incredible people. I also love working with great customers; it’s always such a pleasure to see them. —Greg Dutter

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