Oshkosh B'gosh May Be Risking Its Upscale Image

Trendy tots are easy to spot. Many of them are wearing the pint-size bib overalls made by OshKosh B'Gosh Inc. OshKosh has established an image of high-quality hip for the under-seven set by selling mostly to pricey department and specialty stores. But now, the company is overhauling its strategy to reach parents like Kristin Posey.

A mother from Elmhurst, Ill., Posey shops for her 20-month-old son, Sam, at Sears, Roebuck & Co., Kids `R' Us, and the outlet malls. "I want him to be trendy-looking," she explains. "But I don't want to spend lots of money."

That poses a big question for OshKosh, a 96-year-old company that got its start by outfitting railroad workers and farmers in overalls: Can OshKosh retain its stylish allure if its children's overalls, cotton separates, and dress clothes are sold at Sears and Penney's?

BIG PLUS. In June, Sears announced plans to sell the OshKosh line in 206 more stores this summer. On July 1, OshKosh will also begin test-marketing a line of women's sportswear at 30 Penney's stores. "Their image is very, very powerful," says Warren E. Flick, group vice-president for men's and children's apparel at Sears. J. C. Penney Co., the nation's top seller of kids' clothes, began rolling out OshKosh in its 1,400 stores in December. Analysts figure they'll add $65 million to OshKosh's 1991 sales.

For years, the Oshkosh (Wis.) company resisted selling to these stores. "Chain stores had kind of a negative connotation," says Douglas W. Hyde, who as senior vice-president for marketing masterminded the new strategy. But then OshKosh's department-store clients began losing share to the chains and discounters. Longtime clients such as Federated Department Stores were suddenly in bankruptcy proceedings. And new rivals such as GapKids began flooding the market with children's wear. So OshKosh gave in. Says the 40-year-old Hyde, who became president of the family-controlled company on July 1: "We're exposing our brand to a new consumer."

That may be. But OshKosh's strategy has already ticked off some department-store customers. "We believe eventually it will hurt their brand name," says Shelly McGinniss, an infant-wear buyer for 58 Dayton Hudson and Marshall Field's stores. It's already hurting sales: OshKosh's sales to these core department stores dropped about 7% in 1990 and are expected to fall about 5% this year. That's due partly to the sluggish retail environment. But the mounting pressure from the chains has also led department stores to cut margins on OshKosh lines, making them less profitable to carry.

OshKosh is betting that brisk sales to chain stores will easily make up the difference. Indeed, Deborah Bronston, a Prudential Securities Inc. analyst, figures the sales to Sears and Penney's will exceed lost sales to the department stores by about $50 million.

LEARNING FROM LEVI'S. The company didn't chart its new path without plenty of research. OshKosh carefully studied the experience of Levi Strauss & Co., which expanded its distribution channels to include Penney's and Sears in the early 1980s. Penney's now says it is Levi's biggest customer. But R. H. Macy & Co. discontinued its Levi's jeans because it felt their image had been cheapened. OshKosh hopes to avoid this fate by offering its department stores exclusive, higher-margin items, such as a novelty denim line it plans to introduce next spring. Says Hyde: "It's important that OshKosh stays on the shelves at Saks, Bloomingdale's, and Marshall Field's."

OshKosh is also looking overseas for growth. Last year, it formed a joint venture with Poron Diffusion, the children's wear maker based in Troyes, France. Poron has sold OshKosh its Absorba brand. OshKosh hopes the French company will help it break into the lucrative European market.

At the same time, the company is broadening its line beyond the children's wear that accounted for 95% of last year's sales (chart). OshKosh figures many women are familiar with the brand, so it plans to test a "misses" line of traditional sportswear at Penney's.

But kids remain the company's biggest business. And OshKosh bets that even upper-tier retailers will stock its lines if parents want them. Much depends on how well OshKosh keeps up its quality. As long as the goods are durable, predict marketing experts, so will be the demand.

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