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Friday, Mar 29, 2024

Apparel Industry is Alive and Kicking

The Valley is home to a wide variety of apparel companies; some design, produce and distribute their own product, while others are more like management entities. Here we look at the four largest apparel businesses in our coverage area. K-Swiss When you think of K-Swiss, you probably think of the “Classic:” an all-white, leather tennis shoe that has been the company’s best-seller for more than 40 years. Generally you don’t mess with a classic, but in the world of footwear, there’s a good chance you’ll be left in the dust if you don’t expand your horizons. That’s why, said David Nichols, executive vice president, they are making some bold moves. “We’re retooling,” he said. “K-Swiss is getting more into real performance-level running shoes for triathletes and marathon runners,” while at the same time returning to the company’s roots in tennis. “We’re signing tennis athletes again,” said Nichols. The company launched a provocative new advertising campaign featuring some hot tennis up-and-comers during the Final Four basketball tournament last month. Nichols said the ads got noticed. “We noticed a jump in our website traffic,” after the first ‘Keep It Pure’ ads premiered,” said Nichols, “and it’s part of our further entrenching of our positioning in, as we refer to it now, Premium Sport getting the sports part back to K-Swiss really. They have also gone into the apparel business with K-Swiss clothing now in Barneys stores and on Saks.com. Rather than just putting the K-Swiss brand on someone else’s designs, Nichols said, the company has chosen to do it internally with an in-house design team. You can even design your own tennis shoe on the company’s website. In 2001, K-Swiss bought Australian foot-wear company Royal Elastics. This wholly-owned subsidiary is edgier than the more traditional line of its parent company, with current shoes sporting designs licensed from Andy Warhol’s estate, and rocker Gwen Stefani’s L.A.M.B. and Harajuku Lovers lines. With Royal Elastics, the company is making its first foray into being a retailer, with the opening of its first physical store on trendy Main Street in Santa Monica in January. “We’ll be able to use it as a design presentation center, said Nichols. “It gives us an unedited way to speak to the consumer rather than deal with buyers and everything.” The publicly-owned, but family-operated company is hoping that all this re-tooling will be the medicine its ailing bottom line needs. Its 2007 annual report shows that net income at year end was roughly half of the previous year, dropping from $76,860,000 to $39,070,000. Domestic sales revenues dropped 36 percent, offset partly by a 14 percent increase in worldwide sales. Nichols is not expecting things to look much better in ’08 but, he said, “We have the luxury to take a long-term view.” He cites the management team’s track record of coming back after tough times plus its solid supply and distribution infrastructure, cash reserves and lack of debt as the reasons investors in the company have not fled in panic. “Our major stockholders know our plan,” said Nichols. “They’re not looking at K-Swiss as a short-term opportunity.” Jerry Leigh Another family-owned, but privately-held apparel business is found at the other end of the Valley; in Van Nuys, where Jerry Leigh has its international headquarters. President Andrew Leigh runs the business but still shares his office with his father Jerry Leigh. Mr. Leigh, as the founder is fondly called by employees, still comes in two days a week. And although Andrew’s children are a little too young to be worrying about what they’re going to be when they grow up, they do come into the office regularly. “They love the clothes,” said Licensing Manager Melissa Moskowitz. “Every time his 12-year-old is here I talk to her about (our new Abbey Dawn line).” Moskowitz is referring to the new clothing line being designed by rock star Avril Lavigne that will be launching at the beginning of July, exclusively in Kohl’s department stores. “It’s the first time as an organization in our 46-year history that we’ve actually been the brand owners,” she said, adding that it’s a new experience being responsible for licensing product to others. Usually Jerry Leigh is the licensee. The company designs apparel with images licensed from a multitude of sources; from old favorites Winnie the Pooh and Smurfs, to contemporary brands like Hannah Montana and Harajuku Lovers. But that doesn’t mean they’re not designers. Usually, Moskowitz said, a brand owner creates a style guide, provides graphics to the licensee and the apparel company will just slap that art on a t-shirt and sell it. Not Jerry Leigh. “We look at the style guide for inspiration, but our art department creates its own creative art,” she said. “I think (the brand owners) appreciate how innovative our artists are and the unique spin our brands have.” They will now be putting that spin on another new license from Palomita, a line of clothing designed specifically for Latinos. Palomita is the brainchild of Molly Robbins, who was born in Mexico City and is a veteran of the apparel industry. “It’s a market we all know is there and we’ve made attempts to penetrate it in some way,” said Jerry Leigh sales executive Phil Roddy. “We have tried in the past taking Disney characters and having them ‘saying’ something in Spanish or having Betty Boop saying ‘ & #380;Que Bonita?’ but for some reason it didn’t work. It didn’t translate to the Latino community.” The Palomita line will use authentic Latino brands like Lulu, a soft drink sold throughout Central and South America, and Bimbo, as common to Latinos as Wonderbread is to North Americans. “We’re testing it with Mervyns, Sears and K-mart,” said Roddy, “because they have Latino regions and know where to ship them within those regions.” These three corporations have marketing people that do nothing but focus on the Latino market, he added. “So when I presented the licensed property to them, they took it to those (marketing) people and they got very excited about it.” Palomita will be shipping to stores by the end of May. Jerry Leigh does not release financial information, but one might surmise that with 400 employees in Van Nuys alone (the company has a total of about 700 employees in the U.S. and overseas) that they’ll be around long enough for yet another generation to put their own stamp on the company that started out making polyester suits in the ’60s. Cherokee Inc. Van Nuys-based Cherokee, Inc. started out as a footwear company in 1973, moved into apparel in 1981 and transitioned into a licensing company due to a Chapter 11 bankruptcy in the mid 1990s. “A new shareholder (Bob Margolis, who co-founded apparel division) came in and had the idea of using the Cherokee brand for licensing rather than manufacturing its own goods,” said CFO Russell Riopelle. “We’re really more of an apparel/brand management company.” In addition to the Cherokee brand, the company also represents many others, including Sideout and Carole Little. In February, Cherokee Group completed a multi-year licensing agreement between Norma Kamali, Inc. and Wal-Mart Stores Inc. The publicly-held company released its year-end financial report earlier this month, and although on the face of it the numbers sounded really bad net income dropped nearly 53 percent from the previous year, from $34,791,000 to $16,435,000 the company explained that 2006 income included an extraordinary event. “2007 was pretty similar to what we had the year before,” said Riopelle, “Not taking into account the extraordinary revenues from the Mossimo finder’s agreement sale.” Regardless of the explanation, shares in Cherokee closed down at $30.13. The company has paid a dividend of $3 per share in the last year and expects to continue to return excess cash to the shareholders in the form of dividends. Riopelle said that growth is expected to come more from the international arena than from domestic sales. “We want to bring international brands to us, and also take our brands international,” he said. “We’ve built a nice set of relationships with international retailers.” The company has announced it will be launching new initiatives over the next 12 months in Peru, Israel, Brazil, the Middle East, India. Earlier this year, Cherokee announced that they had hired the firm of Goldman-Sachs to evaluate strategic alternatives for the company. Riopelle said he couldn’t speak about that right now as the process is ongoing. Juicy Couture When you think of high fashion, you don’t generally think Pacoima. Yet, this oft-maligned part of town is actually the birth place of Juicy Couture. The company was founded by Gela Nash-Taylor and Pamela Skaist-Levy in 1996 but really started making waves with a collection of low-riding terry and velour “track suits,” that had the word “juicy” splayed across the rear end of the pants. In April, 2003, the company was acquired by Liz Claiborne, Inc. and has since become one of Claiborne’s fastest-growing divisions. According to the year-end annual report in 2007, “The Juicy Couture brand is on a rapidly expanding trajectory.” One of four “direct brands,” under the Claiborne umbrella, Juicy’s net sales in ’07 were $170 million, up a whopping 43 percent over the previous year in a rather lackluster retail environment. Last year, 19 specialty stores and six outlet stores were added to bring their total retail space inventory to 37 specialty stores and 15 outlets. More are coming. The Valley will be getting its very first boutique in May, when the new Americana at Brand mall debuts. Although Claiborne is headquartered in New York, the Juicy brand is still primarily managed locally. “We have over 200 employees in the Pacoima corporate office,” said Diana Duran, public relations director. (Technically, it’s in Arleta, but old habits die hard.) “Pamela and Gela, the co-founders and co-presidents are still designing,” said Duran, “We have design, merchandising, production, PR and customer service and finance here.”

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