Phat Fashions LLC

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Phat Fashions LLC

512 7th Avenue
New York, New York 10018
U.S.A.
Telephone: (212) 391-9443
Fax: (212) 391-9448
Web site: http://www.phatfarm.com

Division of Rush Communications
Founded: 1992
Employees: 30
Sales: $150 million (2001 est.)
NAIC: 315223 Men’s and Boys’ Cut and Sew Shirt (Except Work Shirt) Manufacturing; 315224 Men’s and Boys’ Cut and Sew Trouser, Slack, and Jean Manufacturing; 315232 Women’s and Girls’ Cut and Sew Blouse and Shirt Manufacturing; 315239 Women’s and Girls’ Cut and Sew Other Outerwear Manufacturing; 315999 Other Apparel Accessories and Other Apparel Manufacturing

Phat Fashions LLC, using the Phat Farm and Baby Phat labels, is the apparel segment of Rush Communications, one of the most successful African American-owned media companies in the United States. “Phat” is street slang for “the ultimate,” and according to some is an acronym for “pretty hot and tempting.” For almost 20 years founder and CEO Russell Simmons has successfully marketed rap and hip-hop music and culture to a mass audience. Phat Fashions since its inception in 1992 has moved beyond the design and marketing of urban hip-hop male clothing to include fashions for women and children. In more recent years, Simmons’s wife, former model Kimora Lee, has assumed a large measure of responsibility for growing the business, helping to transform Phat Fashions into a true lifestyle brand, including the introduction of perfume and jewelry, and plans for cosmetics, bedding, and other non-fashion items. Not only is the merchandise sold in two company-owned Phat Farm stores in New York and Montreal and on the company’s web site, its clothing lines are carried by some 3,000

U.S. retail locations, including distribution through Federated Department Stores, Macy’s, and Bloomingdale’s.

Russell Simmons and Rap Music: Late 1970s

Russell Simmons grew up in a lower-middle-class neighborhood of Queens, New York, a short distance from a well-known drug-dealing area. As the age of 13 he entered the drug trade, was arrested twice, but managed to avoid serving any jail time and by 1975 enrolled in college at New York’s City College, studying sociology. Around this time rap music was beginning to emerge from the streets of Harlem and the Bronx. He not only became enamored with the music and its lifestyle, he recognized a business opportunity. He made friends with party promoters and began to put together his own shows on campus and even at an area roller rink. He also turned to managing some of the acts he promoted, creating Rush Management, drawing on his childhood nickname of “Rush” for the name of his new venture. He quickly proved that he had a knack for knowing how to sell rap, and eventually dropped out of school to run the business full-time.

Simmons first gained widespread attention as the founder of Def Jam Records, which he established with Rick Rubin in 1983. On the surface they were an incongruous pair. Rubin, white and wealthy, grew up in Long Island listening to progressive punk music of the 1970s, dismayed that most of the students at his high school were far more interested in the rock sounds of such groups as the Doors, Led Zeppelin, and Pink Floyd. Rubin then discovered rap music, years later telling Rolling Stone, “I liked rap but might not have been as interested if people had accepted the Ramones and the Talking Heads at first.” Rubin began to attend rap shows at New York University, where he began his studies in 1981, but in addition attended clubs where he realized the importance of the DJ in rap and the technique of scratching on records. He planned to attend law school, but as a hobby began to produce rap records employing scratching on his own independent label that he called Def Jam, running the enterprise, funded by his family, out of his dorm room. By now Simmons was also involved in producing some records, essentially as a way to promote his acts. When Simmons met Rubin, he was surprised that the young producer was white, but very much respected his work and the two became friends.

It was Rubin who suggested in 1982 that he and Simmons form their own record company using the Def Jam name. Simmons was reluctant at first because he wanted to sign many of his artists to a production deal with a major label. According to a Rolling Stone interview with Rubin, he convinced Simmons by saying, “Look, you already think this record is a hit. Here’s what we’re going to do—I’ll produce all the records. I’ll do the business. I’ll run the company.” Simmons signed on and by 1985 Def Jam had achieved enough success to gain the attention of CBS Records, which offered a generous distribution deal that took the label to a much higher level. A year later, Def Jam debuted one of the most influential artists in rap, 17-year-old LL Cool J. The label followed that success with the unlikely act of The Beastie Boys, three white Jewish boys from the Bronx.

Despite their success together, Rubin and Simmons eventually began to grow apart, and by 1990 dissolved their partnership, with Simmons and CBS retaining Def Jam. Simmons also began to launch a number of other ventures, which he organized under an umbrella company he called Rush Communications. In 1991 he teamed with top Hollywood producers Bernie Brill-stein and Brad Grey to develop “Def Comedy Jam,” featuring emerging African American comedians. The show proved to be an immediate hit for HBO, further establishing Simmons’s reputation in the entertainment industry. His move into fashion was not surprising, given the importance of clothing to hip-hop culture, the fans imitating the looks that their favorite artists assumed on stage and in their videos, but his admitted motivation was more basic: He liked to date models.

Launch of Phat Fashions: 1992

Simmons created Phat Fashions in 1992 and began selling his Phat Farm line of clothing at a small shop located on Prince street in Manhattan’s trendy SoHo district. To help him in an unfamiliar business he teamed with Marc Bagutta, who owned his own Soho boutique. The line’s designers, neither formally trained, were a pair of 22-year-old former skateboarding graffiti artists named Alyasha Jibtil Owerka-Moore and Eli Morgan Gesner, who grew up together in New York. Perhaps Simmons’s most important contribution to the venture was his ability to put prominent rap artists in Phat clothes. Nevertheless, both he and the designers shied away from the hip-hop tag or being pigeonholed simply as makers of clothes for urban teens. Rather, they suggested the line offered classic clothes, and in truth the designers were clearly influenced by Ralph Lauren, Timberland, and Tommy Hilfiger. This connection was not surprising, however, because these were the clothes, albeit sized too large, that teenagers from Brooklyn and the Bronx were wearing when the hip-hop style evolved. Phat Fashions, no matter what its philosophy, was successful from the outset, generating some $2 million in sales during its first year of operation, and subsequently was picked up by specialty stores across the country.

The initial clothing for Phat Fashions was geared towards the urban male, but in 1993 a women’s line, Baby Phat, was launched. A fitted T-shirt line not only proved popular, it also helped in building brand awareness. To help grow the burgeoning apparel company, Simmons brought in Martin Kace in 1996 to reorganize the business and serve as the first independent president and CEO of a Rush Communications’ division. Kace had considerable experience in the industry, his latest post before joining Phat being the chairmanship of Joe Boxer Corp. Kace oversaw the design of a 4,500-square-foot showroom and office, but otherwise results did not meet Simmons’s expectations and in 1998 he elected to again restructure the company, which he felt had been plagued by sourcing and production problems.

Simmons now chose to follow a licensing strategy for Phat Fashions, and after meeting with a number of potential partners, decided to form a joint venture with Turbo Sportswear, a 20-year-old Perth Amboy, New Jersey, active outerwear manufacturer known for producing such brands as First Down, Triple F.A.T. Goose, and Phenom. The partners formed a new company, American Design Group (ADG), which would be awarded the master license for Phat Farm apparel. Simmons retained ownership of Phat Fashions and became president of ADG. Through the new venture, the partners hoped to achieve the kind of upscale distribution that Simmons had originally envisioned for Phat, expanding beyond urban ethnic to compete more evenly with the likes of Tommy Hilfiger, Calvin Klein, and Ralph Lauren. As part of the deal, a sub-brand called All-City Athletique was formed under ADG to produce more athletic-styled looks at a lower price point to complement the Phat Farm label. In addition, ADG would relaunch the Baby Phat line through a licensing agreement. ADG signed a number of initial licensing agreements for Phat Fashions, including outerwear to Turbo Sportswear, underwear to Ruby Azark, children’s to Parigi, a casual walking shoe to Vida, and leather to Comet International.

Also in 1998 Simmons married Kimora Lee, who would soon have a major impact on Phat Fashions through her designs for the Baby Phat line. Lee, half-Japanese and half-African American, grew up in St. Louis. By the age of ten she stood 5’8” and reached her adult height of six feet as a teenager. Because Lee was the object of childhood taunts, her mother enrolled her in a modeling workshop at the early age of 11. Her exotic look did not go unnoticed for long: By age 13 she was appearing on Paris runways, ultimately becoming the face of Chanel. She first met Simmons in 1992 when he was 35 and she was just 17. They later became better acquainted when Lee served as the host of Simmons’s magazine-format television show, Oneworld, devoted to urban youth culture.

Key Dates

1983:: Russell Simmons helps found Def Jam Records.
1991:: Simmons begins operating on a number of fronts through an umbrella company named Rush Communications.
1992:: Phat Fashions is created.
1993:: Baby Phat is launched.
1998:: Phat Fashions turns to licensing strategy.
2001:: Baby Phat does first solo fashion show.

In 1999 worldwide licensing rights to Baby Phat were awarded to Aris Industries, renewable for up to 25 years. Aris’s CEO, Arnold Simon, brought with him nearly 30 years of experience in the apparel industry and involvement in the licensing of such recognizable brands as Calvin Klein Sportswear, Perry Ellis, Members Only, and FUBU. Both Phat Fashions and Aris expressed a desire to grow Baby Phat into a global brand. Later in 1999 Aris also received a license to design a line of junior sportswear under Baby Phat. Unlike the male Phat Farm line, the new junior clothes were intended to be less street influenced.

Phat Fashions continued to broaden its horizons in the year 2000. It launched a lingerie line, licensed to International Intimates, and designed and inspired by Lee. The first collection targeted the 18- to 34-year-old woman and was intended to be sold in department stores and specialty boutiques, as well as Phat Farm stores. Also in 2000 plans for a Harlem flagship megastore were announced. In addition to Phat clothing, the 14,000-square-foot outlet planned to carry other lines such as “Puff Daddy” Combs, Polo, and Versace, plus merchandise that ranged from home furnishings to jewelry and even pagers. According to Simmons, the Harlem operation was a lifestyle store, “the first of what should be many, many stores.” He took another step in transforming Phat into a lifestyle brand later in 2000 when he signed a licensing agreement with Stern Fragrances to produce a fragrance collection for the Phat Farm and Baby Phat labels. The first offering, named Premium, a Phat Farm product, debuted in 2001. It was supported by the launch of a small clothing collection called Premium, which was also positioned as part of Phat Fashion’s ten-year anniversary.

First Solo Show for Baby Phat: 2001

Highlighting 2001 was Kimora Lee and Baby Phat’s first solo show of its sportswear collection, presented at the prestigious “7th on Sixth” annual event in Manhattan’s Bryant Park. Although everything produced under the Baby Phat label was made under licenses, Lee’s influence was considerable, ranging from design aspects to advertising. In only two years since the relaunch of Baby Phat, the line reached $30 million in annual sales, a mark that Phat Farm took six years to accomplish. Also debuting at the show was Baby Phat’s new costume jewelry line, produced by Lee Angel. In the spring of 2001 Baby Phat, under a licensing agreement with Noho Leather, did a test launch of leather outerwear and sportswear, which received a major rollout later in the year. Baby Phat also made plans to open its first freestanding shop, to be located near the Phat Farm store in Soho. Moreover, Phat Fashions prepared to relocate to a larger showroom at 512 Seventh Avenue, a move finally accomplished in August 2002.

In 2001 Phat Fashions looked to improve its footwear business. Phat Farm, attempting to find a niche not dominated by the likes of Nike, launched a new athletic footwear line that combined casual uppers with athletic outsoles, as well as attempted to reflect an attitude shared by the company and its customers. Baby Phat, as well, made plans to launch its own footwear line. By now the Baby Phat line under Lee’s guidance was the driving force behind Phat Fashions and was very much the spearhead for making Phat into a lifestyle brand. Unlike other fashion companies influenced by the hip-hop culture that burned brightly for a brief moment of time, Phat Fashion after ten years in existence appeared to have established itself as a business poised for growth beyond the fate of the music scene that originally inspired it.