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Denim Dish

Novel Sees Deeper Loss<br><br>Hong Kong-headquartered manufacturer Novel Denim Holdings Ltd. said the sliding value of the U.S. dollar and the cost of closing one of its Mauritian manufacturing plants meant that its results for its fourth quarter,...

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Novel Sees Deeper Loss

Hong Kong-headquartered manufacturer Novel Denim Holdings Ltd. said the sliding value of the U.S. dollar and the cost of closing one of its Mauritian manufacturing plants meant that its results for its fourth quarter, ended March 31, would be worse than previously estimated.

The company said in a statement Monday that it expects to post a net loss of $11.5 million to $13 million on sales of $28 million. The loss includes between $9 million and $10 million in one-time charges. Previously, the company had told investors to expect a small net loss on sales of $31 million.

In last year’s fourth quarter, Novel reported a $9.4 million net loss, which came to $1.01 a diluted share, on sales of $37.5 million. Last year’s results included charges related to the company’s exit of Madagascar, where it had been manufacturing prior to an extended period of civil turmoil.

“The increasing weakness of the U.S. dollar is making our return to profitability more challenging in the short term, given that most of our garment sales are denominated in U.S. dollars,” said president and ceo K.C. Chao. “Like other companies in Mauritius and South Africa, we are increasingly concerned that a continuation of this trend will diminish our ability to compete in the global market.”

Novel said it has closed one of its Mauritian garment plants, with plans to transfer that manufacturing into its remaining four facilities on that island. The company said the move will save $1 million a year and contended it would not significantly reduce its production capacity.

But Chao warned that his Mauritian plants are facing intense competition.

“We will have to focus more on innovative, higher-value products to compete with manufacturing from countries such as China, India, Pakistan and Vietnam,” he said. “We are also exploring opportunities in some of these countries, which may either supplement or replace our existing production facilities.”

He added that the SARS outbreak has hurt business in the company’s Hong Kong sales and marketing office, but said operations at its Chinese textile factory have not been affected by the disease.

— Scott Malone

Seven Gets Bold

The new design team at Seven For All Mankind last week unveiled its first collection for the jeans brand, for holiday retail.

While the designers said it doesn’t mark a dramatic departure from the line’s past, there are some important differences.

“The biggest difference will be in the bolder color fabrics and washes,” said designer Tim Kaeding, who, as reported, last worked for Gap. “We will also be introducing new fits, which we are hoping to add each season.”

The new fits include the “Rocker,” narrow-leg jeans that flare out at the ankle with a higher back rise; the “Rebecca,” with utility pockets up and down the leg, and the “Hefner,” straight-leg jeans that feature a new pocket design.

But Kaeding emphasized that the brand’s fans will find the classics as well.

“The fit is remaining the same as it always has been,” he added. “The favorites will still be there.”

Kaeding’s team also includes creative director Stefano Aldighieri, who joined the company from Levi’s. To round out the design team, Rebecca Danenberg remains at the company, where she has been since September 2001.

“Holiday 2003 fabrics and washes are all about style and attitude,” Danenberg said. “It’s a combination of sophisticated, rich and worldly American classic with a splash of rugged, refined and subversive rock star. Our team is continuously coming up with ways to innovate and redefine the Seven For All Mankind brand.”

The holiday line also includes a larger men’s element, as well, and a small group of T-shirts.

The new washes include the “Amsterdam,” a vintage-inspired wash that is a vivid blue color; “Overdyed denim,” which is completely stripped of its original color and treated with a buttery finish, and the “New Orleans,” a faded, washed-out black.

As reported, former designer Jerome Dahan left Seven early this year and set out with Michael Glasser, another former executive at the company, to launch a new line called Citizens of Humanity.

— Julee Greenberg

Kaltex Taps Rausch

Mexico City-based denim manufacturer Grupo Kaltex late last month named Harlan Rausch as executive vice president of its U.S. subsidiary, Kaltex America.

Rausch, who reports to Kaltex chairman and chief executive officer Rafael M. Kalach, will oversee sales of the mill’s corduroy, piece-dyed cotton twills, flat woven cotton and blended apparel fabrics sold in North America, according to Nicholas Hahn, consultant for Stamford, Conn.-based Hahn International Ltd., who is working for the company. Rausch is based in New York.

Rausch last served as a vice president at Galey & Lord Inc., a maker of denim and twill.

Kalach said in a statement, “We look forward to expanding our corduroy and cotton piece-dyed business within the North American market.”

Earlier this year, Chris Glynn departed Kaltex after serving as executive vice president for denim. He has since joined another Mexican denim producer, Grupo Romano.

Hahn described Rausch’s post as different from the vacated one and said the company intends to hire another executive to handle denim sales. It has not yet been determined whether that person would report to Kalach or Rausch, he said.

—S.M.

Crowd Pleasing

Earl Jean proved it can fill a place last week.

Pianos, a bar on Manhattan’s Lower East Side, was packed with about 400 party-goers celebrating Earl Jean’s fall 2003 ad campaign, shot by Patrick DeMarchelier. While the photographer seemed to be camera shy, since he was nowhere to be seen for the majority of the evening, celebrities such as Natasha Lyonne and models James Penfold and Bill Gentle came to support the newly New York-based denim brand.

— J.G.

Guess Aims for Growth

Moderation was the watchword at the Guess Inc. annual meeting Monday at the Le Meridien Hotel in Los Angeles, where company officials said their plan for 2003 focuses on prudent expansion, as positive trends are emerging in the company’s wholesale and retail business.

Maurice Marciano, Guess co-chairman and co-chief executive officer, said the company’s change in direction in the last two years has begun to manifest.

“We’re more forward, more European, more jeanswear-oriented and that has helped differentiate us,” he said.

The outlook was tempered by Carlos Alberini, Guess president and chief operating officer, who said the company plans to rein in capital expenditures to less than $18 million in 2003 compared with $23 million last year.

“We have reason to be optimistic, but feel that the environment is challenging,” Alberini said.

Along with product repositioning, the company said it was able to pare down debt to $81.6 million in 2002 compared with $87.7 million the year prior, and managed to close 2002 with inventory flat compared with 2001.

A key goal for the company is building the wholesale business, which represented 27.4 percent of sales last year. Today, the company sells to 800 doors, down from a peak of 1,500 in 2000, as the department store sector was broadsided by the economy and consumer ennui. Marciano said he would like to see that number grow slowly.

In addition, the company continues to build its retail operation, which represents 65.9 percent of sales, with 15 store openings planned this year, bringing the total count to 260 stores by the year’s end in the U.S. and Canada.

Still, it’s been a tough year. Comparable-store sales fell 3.4 percent in 2002. Sales per square foot for domestic stores dropped 8 percent to $344 in 2002 from $374 in 2001.

The company started the year off in the red. For the first quarter ended March 29, the company’s net loss grew to $5.8 million, or 13 cents a diluted share, from $3.6 million, or 8 cents a share, in the year-ago period. The results for last year include aftertax charges of $400,000 for restructuring, impairment and severance. Net revenue was up 1 percent during the quarter, to $139.6 million from $138.2 million.

Topping the meeting’s agenda was a shareholder vote to approve the termination of the shareholder agreement established in 1996 by majority owners Maurice, Paul and Armand Marciano that offered the right of first refusal to the brothers regarding the transfer of shares of common stock. As reported, Armand Marciano resigned as senior executive vice president and assistant secretary on May 2.

Shareholders also elected to the board Alberini and Alice Kane, an independent director who serves as chairman of Blaylock Asset Management.

— Nola Sarkisian-Miller

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