Lacoste's Alligator Sheds Its Skin

The alligator has made a comeback.

Lacoste, the privately owned French company, lost a good measure of the hip quotient it had in the 1980s when it started appearing in mass-market retailers in the U.S. So the company spent much of the '90s refining its strategy and polishing its image as an upscale sports-lifestyle brand.

The first step: buying back various licenses. The comeback also got a hand from hip-hop's influence on style -- it made sports brands fashionable. Leveraging that trend, Lacoste expanded from polo shirts to ladies' apparel, shoes, fragrances, and leather bags. At the same time, it pursued an aggressive U.S. strategy by opening boutiques in marquee locations like Rodeo Drive and New York's Madison Avenue. These stand-alone stores showcased its new polished look.

The strategy worked and sales have roared. Although the intensely private outfit won't share dollar figures, it says U.S. sales have soared 1,000% in the past five years, making it Lacoste's largest and most profitable market. Recently, Philippe Lacoste, grandson of founder René Lacoste, and a director in charge of the footwear and bags division, visited New York City. He sat down for a chat with BusinessWeek Online reporter Pallavi Gogoi, during which he talked about the story behind the alligator, his tennis champion grandfather, and the evolution of the brand. Here are edited excerpts from their conversation:

Lacoste has been around forever and yet seems recharged lately. What has changed?

Fashion and sportswear didn't mix in the past. In the 1980s, you wouldn't wear a sneaker with a suit like you do today. And jeans weren't considered sportswear -- that was casual wear. Today all of that is crossing over, and it's given us an opportunity to develop connections to fashion.

How did you orchestrate Lacoste's fashion comeback?

Lacoste was not in fashion 10 years ago. Rather, we were a sports brand. We had the traditional classic image known for the polo shirt. And even though for 40 years we have never had a down year in sales, our customer was growing older. We weren't attracting the younger generation. Clearly, if your customer base isn't renewing, it can cause a problem going forward. We needed a modern twist.

How did you find that twist?

In the 1970s and '80s we had a strong reputation in the United States, which eroded over time because we expanded our distribution channels, and even were sold in J.C. Penney (JCP). But we couldn't control our image, and it ended in disaster. Today we have bought back the rights of the brand and the licenses.

In 1995 we opened the first boutique in the U.S., in Bal Harbour, Fla. We decided to go with a high positioning, and then went on to open boutiques on Rodeo Drive and on Madison Avenue in Manhattan, all prime locations. And our products were manufactured with the highest standards and quality, and were presented at higher price points.

Our boutiques have grown. We introduced modern furniture into our boutiques five years ago, made it white, more modern, and introduced interesting design. Even our ads capture the changed image. It was hard to steer the image around, but we put in a lot of effort.

Why boutiques?

We have more control over the environment, and it's the best way to display our collection, which has much more breadth and depth than ever. The boutique presents our best image, and that drives sales both in our shops and at other sales places. It's a global strategy, but has worked especially well in the U.S. In the past four years, our U.S. sales have gone up by a multiple of 10, and today it's our No. 1 market in terms of sales. In the U.S., we have 39 boutiques, with 11 new stores planned for 2006.

Didn't you also introduce new lines like women's apparel and leather goods?

We already had ladies in the stores buying for the men in their family -- moms and wives. So, it made sense for us to expand into ladies' fashion. And today our customer makeup has completely changed. In 1997 our customers were 7% ladies, 3% kids, and 90% men. Today they are 30% ladies and 70% men.

In fact, it's 55% men and 45% women in the U.S. That's because in the U.S. our image wasn't that deep-rooted, whereas in Europe the image of the crocodile brand is very masculine, and it takes time to change the perception.

What's the story behind that crocodile, or alligator, logo?

It was the nickname of my grandfather, René Lacoste, who was a tennis champion who won three French Opens, two Wimbledons, and two U.S. Open titles.

In 1927 my grandfather made a bet with the captain of the French Davis Cup team, after they both saw a suitcase made from alligator skin in a Boston storefront. His captain promised to buy it for my grandfather if he won the next day's match for the French team. René didn't win the match, but in reporting it one newspaper said something like: "Young Lacoste didn't win the game or the alligator-skin suitcase, but he certainly fought like an alligator."

The name stuck with Ren&eacute, as he later continued to win matches and display his tenacity on court. So, René had a friend who embroidered the crocodile on his blazer, which he wore to the tennis courts.

But Lacoste isn't known for blazers...

My grandfather was also a great inventor. When he played tennis, many of the championships were held in the summer, and the players wore long-sleeved shirts, which made a player feel even hotter. So, he worked with researchers and invented the "polo shirt," which had a light-weave fabric and short sleeves, which he wore when he practiced. It was very comfortable, and he even distributed it among his friends.

That was the first polo shirt?

Well, the story goes on: It was not considered decent to wear short sleeves during those times, and my grandfather had to wait before actually wearing that shirt in any big match. Around 1929, when he qualified as a finalist in the French Open, he told the officials that he was going to wear a short-sleeved shirt.

The officials tried to cajole him out of his decision, saying, "René, listen, you cannot wear short sleeves. It would be against the tradition." But René said that there won't be a final match if he was barred from wearing his short-sleeved shirt, and that was the start of the trend.

Soon after that, a friend told him, "Unless you build a company and make these shirts, somebody else will make a fortune with these designs." So René and his friend founded a company in 1933, setting the stage to sell the shirts, and he also sewed the alligator logo on them. That was the first time that a brand name appeared on the outside of an article of clothing.

From polo shirts to fragrance today?

Our product began with a polo shirt of one color: white. Then, in 1951, we introduced color, and gradually we became a clothing company. It's only in the last 20 years that sports clothing has also become the same as leisure wear. And it's all part of a lifestyle, so of course we had to have shoes, bags, and fragrances.

In 1998 our product mix was 93% clothing. Today it's 62% clothes, and 38% is in other products. And shoes have done exceptionally well -- along with bags, they make up 7% of our total sales.

Today, nobody can stop talking about fast fashion like H&M. How does that affect your business?

We have a unique identity and are immediately recognizable. It embodies the spirit and esthetics of a certain type of people, who look for style and quality of product. What we do is interpret our values and history in a modern way, but we don't change with every season.

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