Premium denim label Habitual is on the auction block and could find itself in the hands of new owners by next month.
Parent company Pacific Marketing Works Inc. filed for Chapter 11 bankruptcy protection in the Central District of California on Feb. 20 and is looking to sell its assets in an effort to repay as much as $10 million in liabilities. The Los Angeles-based company owns the Habitual label, in addition to two other brands that specialize in T-shirts and graphic tops.
According to bankruptcy court filings, PMW is "in severe financial distress as a result of...a sale or merger transaction that failed late last year." Sources said last year PMW had been in talks to merge with a Japanese company that abruptly pulled out of the deal and left PMW in financial disarray.
According to the filings, PMW has assets of between $500,000 and $1 million, and liabilities of $1 million to $10 million.
PMW did not directly respond to a call for comment. However, Brad Jaco, owner and partner of Namaste Showroom, which handles North American sales for Habitual, was asked to serve as a spokesman for the company. Jaco read a statement on behalf of PMW indicating that the bankruptcy filing would enable the firm to maintain operations and continue shipping to all its retail customers.
Jaco also said a new owner was coming on board. According to the court filings, PMW is proposing to sell all assets and intellectual property to New Fashion Products Inc., a Los Angeles-based company that has been PMW's primary denim supplier. The purchase price has been set at $475,000.
"I'm now working hand in hand with New Fashion on the transition," said Jaco, who added that New Fashion manufactures denim for brands such as Hudson, Ann Taylor and Armani Exchange.
PMW will entertain other bids on its business assets and is requesting that anyone interested be required to submit a deposit of $47,500 before being allowed to conduct due diligence. Final bids must be received by April 15. Regardless of who picks up the brands, they will not inherit responsibility for PMW's liabilities.
"It will go from something that was troubled financially to something vertical and stronger than it's ever been," said Jaco, presuming New Fashion as the purchaser.
Jaco said he has spoken with Habitual's retail customers about the situation and that sales have remained strong. "Considering the climate, we're pleasantly surprised with the momentum of the brand," he said. Habitual recently expanded into kids', maternity and men's wear.
PMW's bankruptcy filing has added another twist in a battle between the company and Habitual's founders and original designers that has stretched out for more than two years. Michael and Nicole Colovos founded Habitual in 2001 and were runners-up for the Council of Fashion Designers of America/Vogue Fashion Awards in 2004. The relationship between PMW and the Colovoses began to sour soon after the two parties signed an agreement giving each a 50 percent share in Habitual.
According to a cross complaint filed by the Colovoses in Los Angeles County State Superior Court, PMW "continually and repeatedly failed" to provide adequate support for fabric, production, marketing and sales. The Colovoses contend they were repeatedly pressured to reduce their share of revenues. The complaint also alleges that PMW failed to provide an accurate financial picture of the business despite numerous requests. Habitual sales had grown to reach between $12 million and $15 million in 2006, according to the complaint.
The complaint stated that in February 2004 Nicole Colovos was told she could no longer work at the Habitual offices. By March 2006, the Colovoses were told their agreement with PMW was terminated and that neither would be allowed on the premises. A settlement entitling the Colovoses to $2.4 million was recently reached, but the bankruptcy filing could prevent them from collecting.
"They are attempting to collect that money and their efforts were stalled and thwarted by the bankruptcy filings," said Douglas Dal Cielo, a partner in the law firm Ropers, Majeski, Kohn & Bentley, who is representing the Colovoses.
In honor the @CFDA’s announcement of @iamnaomicampbell receiving the Fashion Icon Award at the 2018 #CFDAAwards, which will take place on June 4, here’s a #tbt of the supermodel on @michaelkors’ runway in 1991. #wwdfashion #wwdarchive (📷: George Chinsee)
“I was making the guacamole when my scout saw me,” says model @stuckinteenage on being discovered just six months ago while working at @chipotlemexicangrill. Since then Williams has signed with @dnamodels, walked in her first show at @calvinklein and landed on the cover of @vogueitalia – a high point of any model’s career. To read @lisajlockwood’s full interview with the model on her experiences thus far, head to WWD.com – link in bio. (📷: George Chinsee)
“I love the idea of dialogue, period. It’s where I’ve always gotten my inspiration from: hearing other women speak, their journeys and their paths,” said @hereisgina, who delivered the keynote speech during @sxsw for @createcultivate in partnership with @fossil. For her two panels, Rodriguez chose female empowering, female-led and female entrepreneurs to focus on. Head to WWD.com to read more about her thoughts on Time’s Up, growing up in a family of women and why we “need a girls’ club.” #wwdeye #sxsw (📷: @jgreenery)
Leading luxury brand are shaking things up to keep up with streetwear. Case in point: the arrival of @mrkimjones as artistic director of @diorhomme. Jones, who succeeds @Kris_Van_Assche, is seen as one of the handful of designers who can actually straddle the luxury and streetwear worlds — which could lead to even more changes at established brands. What could this mean for the rest of the menswear landscape? Head to WWD.com to find out what experts predict #wwdfashion (📷: @franckmura)
“It’s like buying groceries. You’re going to buy the best mango, the best mozzarella, the best things. You have to, or others are going to take it all,” said @gabrielahearst on why she uses only the finest fabrics. Last week, Hearst received her first @cfda nomination for Womenswear Designer of the Year, and earlier this month she opened a permanent showroom in Paris. To read @jessiredale’s interview with the designer and find out why this is shaping up to be a big year for her, head to WWD.com. #wwdfashion (📷: @francoisgoize)
“It’s an interesting thing, playing a younger version of your mother. It’s an interesting concept. I adore my mom and love her in every capacity, but it was just something that had never crossed my mind,” says @anniemstarke on playing a young Joan Castleman in “The Wife.” The same role will be played by her mother Glenn Close. Read more about her growing up in the film industry as the daughter of producer John H. Starke and Close and what she has planned for the future #wwdeye (📷: @nataliamantini)
@asics is launching a new streetwear sneaker inspired by its latest ambassador, @steveaoki. The Hyper-Kenzen x Aoki, which will launch at @footlocker stores exclusively tomorrow, is a slip-on style that incorporates the brand’s proprietary Gel technology through beads integrated into the midsole for comfort and endurance. Read the full story on WWD.com.