Denim Brand Wears Well.

Lucky Jeans has been building market share by creating buzz around its pants

GENE Montesano and Barry Perlman were smart enough to figure out that blue jeans are a lot like perfume -- the trick is mostly in the marketing.

Working out of a small downtown office, their dream was to create a line of blue jeans that were hip, hot, high quality and sold for more than your average pair of 501 Levi's. The brand: Lucky Brand Dungarees, a line of jeans for men and women that sell for $70 to $88 -- and which have become ubiquitous among teens and trendy adults who shop at Bloomingdale's and Fred Segal.

"We don't sell to just anyone, but to the better stores," said Perlman.

Three years ago, sales were $60 million. This year: $140 million.

No wonder Liz Claiborne Inc. bought 85 percent of Lucky two years ago in a deal that eventually could total $145 million. "I think we knew three years ago we were going into a large denim cycle. And in our portfolio, it was only 10 percent of our business," said Angela Ahrendts, Claiborne's senior vice president of corporate merchandising and group president.

Montesano and Perlman consider themselves very lucky. But luck is only part of it. These guys live, eat and sleep blue jeans. They've also benefited from their off-the-wall ad campaigns and clever marketing (such as the red label positioned next to the front zipper on their jeans that says "Lucky You").

None of this is by accident.

"Their success is completely market driven," said Brian Watson, president of Watson Circle, a public relations and marketing agency in Silver Lake. "Right there in the beginning they had that whole idea of putting the Lucky You on the fly. That's fun yet racy, a nice double entendre. These guys just understood the power of marketing."

Denim popular again

The standard blue jeans market has been shrinking or some time -- marked by declining revenues at Levi Strauss & Co. since 1999. The Gap, purveyor of khakis and jeans, recently announced it would curtail its store expansion plans and slash 5 to 7 percent of the 10,000 jobs at its San Francisco headquarters.

But retailers are banking on the renewed popularity of jeans. "Denim is definitely coming back in a big way," said Stuart Berman, president of Bregman & Associates, a Los Angeles apparel consulting firm for department and specialty stores. "Denim is approaching a strong cycle next spring and summer."

Claiborne's purchase gives Lucky the chance to expand its retail store chain that totaled only six stores when Claiborne bought the company. Now Lucky has 39 stores with another 11 scheduled to open by the end of the year.

The stores now make up 30 percent of Lucky's annual revenues, compared with 5 percent two years ago.

As the stores have expanded, so has Lucky's product mix. The company, which recently moved to a larger 122,000-square-foot warehouse and headquarters building in Vernon, has been producing T-shirts, sportswear, activewear, underwear, fragrance and accessories for men, women and children.

"You always need that new thing to keep you excited," said Montesano, 52, sitting in the spacious office he shares with Perlman, 46.

Friends for years

The Lucky entrepreneurs have known each other since the early 1970s when they both worked in a men's clothing store in Miami. They later started their own store called Four Way Street. It carried blue jeans and other apparel.

Their concept was as haphazard as the store they built themselves. It was not unusual to see the two standing in a Laundromat in the middle of the night, dying rows of blue jeans different hues of blues.

By the late 1970s, Montesano had moved to L.A. He first worked for Guess Inc., another blue jeans manufacturer and later founded Bongo, a jeans company that a decade ago had a loyal following among teenagers. Sales eventually reached $100 million before it was sold to Candies Inc. in 1998.

But Montesano wanted to create an upscale blue jeans line that was not geared to the mass market. A line that used better fabrics, had pocket linings and unusual stitching techniques. In 1991, Montesano and Perlman, who by this time had moved to California, started Lucky.

"They have great brand identification, which is not true of most jeans," said Use Metchek, executive director of the California Fashion Association. "Their ads are on every bus bench, and they are into the young, hip, hot Hollywood community."

Ironically, one of the first stores that bought their blue jeans was not in Hollywood but in the Midwest -- The Buckle, a large young men's chain based in Keamey, Neb. Nordstrom was another early entrant.

"Anything with the Lucky Brand label is on fire," said Lanette Krum, vice president, denim buyer, for Nordstrom in Los Angeles.

With that in mind, Lucky is looking to grow 20 to 30 percent next year by adding 20 more stores and making a few more blue jeans.