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Saturday, Feb 4, 2023

Zipping Into The Future?

The company behind the Talon zipper, a well-recognized fixture on brand-name apparel, knows it will have to stretch to stay relevant in the garment manufacturing business. Though the Woodland Hills company still makes zippers, its future depends on TekFit, a proprietary technology that can transform non-elastic fabric into stretchable material without changing its look and texture. Since the early 2000s, Talon International Inc. has struggled financially, and its thinly traded shares sell for about 15 cents. Last year it reported revenue of $49 million, a 6 percent decline from the previous year. Net income was $572,000, a massive decrease compared to the $9.7 million the year prior. The company attributed the drop to the loss of a $7.5 million one-time tax adjustment in 2013, as well as investments made to expand the market for TekFit. More recently, longtime chief executive Lonnie Schnell resigned after 10 years with the company. Talon did not disclose the reason for his resignation, but it followed halting efforts to get the company back on track. New Chief Executive Larry Dyne plans to grow the company’s presence in foreign countries as its main customers – namely apparel contract manufacturers – relocate to Cambodia, Vietnam and India. “These are all hot markets for our primary customers so we need to essentially move with our customers to be able to support them,” Dyne said. “We’re trying to grow our footprint in manufacturing and distribution.” As for his predecessor, Dyne said that while Schell is still a significant shareholder, he no longer has any affiliation with the company. “The board made some decisions and asked me if I’d be interested to take the role,” Dyne explained. “It has always been the plan that I will eventually take the title of the leadership role, it just got accelerated a little bit.” Down-up market Talon’s orginal predecessor company was founded in 1893 as the first zipper maker. It was acquired by Tag-It Pacific Inc. in 1996 when changed its name to Talon in 2007. The company was once among the largest zipper manufacturers in the nation and even opened a state-of-the-art manufacturing facility in North Carolina in 2001. But the company soon learned that the investment was a mistake. Competitors such as YKK Group, now the world’s largest zipper manufacturer in Tokyo, emerged and followed apparel manufacturers as they began to relocate to Mexico and Central America. But Talon was not in a position to follow because it had sunk so much money into the North Carolina shop. By 2005 the facility closed shop, but by that time the majority of the company’s customers had relocated. The company accumulated $22 million in debt and its shares, which had traded for more than $5, fell below the $1 threshold required by exchanges. The company was dropped from the American Stock Exchange and its shares started trading over the counter. Since then the company has worked to recover. It still supplies zippers and other accessories for large retailers including Abercrombie & Fitch, Victoria’s Secret, J.C. Penney and Wal-Mart Stores Inc., not to mention iconic brand companies including Ralph Lauren Corp. and Juicy Couture. Last year, the company recovered San Francisco-based Levi Strauss & Co. as a customer after a seven-year hiatus. The loss of its Levi contract, which accounted for roughly $10 million in annual revenue, was the result of an eight-year legal battle that began in 2004 surrounding a patent for the TekFit technology. The battle dragged on until 2012 when litigation ended and Talon’s patent was secured. The company now incorporates a TekFit stretch waistband into Levi’s Dockers pants. It also has sold TekFit to Polo Ralph Lauren, Jack Nicklaus and Bobby Jones Golf, and Eddie Bauer. Dyne said Talon takes a two-step approach to selling TekFit. Step one involves convincing the brands, which are based in the United States, that Talon is a good supplier. Step two involves working with contract manufacturing, which are usually based in foreign countries with low-cost manufacturing economies. Ilse Metchek, president of the California Fashion Association –a trade association, remembers when Talon was the top name in zippers, but she points out that bygone brands don’t count for much in the fashion industry. “We know that they’re still here, but it’s a big secret,” she said. “The company needs to get on the ball with marketing. They have a proprietary product that I know about because I read it, but they really aren’t utilizing the tools of the industry to get it out there.” Dyne hopes that as TekFit grows in the industry and boosts sales for the company, a new group of investors will take interest in reviving the company’s stock. “We believe that’s one of the entrees to expanding into capital markets and getting a new segment of investors interested in the company,” he said.

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