Denim Dish: Avondale Trims Loss … Antik Sees Public … Diamonds and Denim …
Avondale Trims Loss
Denim and twill maker Avondale Inc. reported a narrower loss in its second quarter, despite a 4.1 decline in sales resulting from the shutdown of its Graniteville, S.C., plant following a Jan. 6 train...
Denim and twill maker Avondale Inc. reported a narrower loss in its second quarter, despite a 4.1 decline in sales resulting from the shutdown of its Graniteville, S.C., plant following a Jan. 6 train crash.
The company posted a $3.5 million net loss in the quarter ended Feb. 25, compared with a $5.4 million loss a year earlier. Sales were down 4.1 percent to $124.3 million.
During the early morning of Jan. 6, a Norfolk Southern train hit another train parked on a siding near the Graniteville facility and derailed, releasing a cloud of chlorine gas. The gas killed nine people, including six Avondale employees, damaged equipment at the plant and led to a two-week shutdown of the mill.
The company noted in a filing with the Securities and Exchange Commission that much of its manufacturing equipment and computer hardware at the site was damaged by the corrosive chlorine. “Due to the progressive nature of damage resulting from chlorine gas exposure, further equipment failures will occur over time, with a corresponding reduction in productive efficiency and temporary loss of capacity,” Avondale said in the filing.
The firm noted that it had $2.3 million in labor costs for continuing salaries and $5.6 million in repair costs since the accident. Of that sum, $5 million has been covered through an advance from Avondale’s insurance carrier, with the balance accounted for as a receivable that will be paid later.
The company’s apparel fabrics unit swung to a loss in the quarter, reporting a $2.9 million deficit compared with $479,000 in income a year earlier. Sales were down 8.7 percent to $86.2 million. The firm noted that a 5.5 percent increase in average selling prices was more than offset by a 13.6 percent decline in the volume of fabric sold, which it blamed on the shutdown.
At the yarn unit, profits soared to $4.5 million from $470,000, as sales rose 7.6 percent to $49.5 million. The firm’s yarn plant was not affected by the accident, and Avondale noted that yarn set to be shipped to the Graniteville plant during the shutdown was sold to external customers.
Other revenues, including the firm’s trucking business, came to $6.4 million in the quarter, less than half the prior-year level. The decline primarily resulted from the firm’s shutdown of an unfinished gray goods fabric plant in May 2004.For the six-month period, the company reported a $3.3 million net loss, compared with an $8.9 million loss a year earlier. Sales were up 5.5 percent to $275.4 million. — Scott Malone
Antik Sees Public
For a growing number of Americans, jeans costing $100 and up have turned into a powerful status symbol in recent years. But for the executives who sell those jeans, the latest badge of status appears to be a ticker symbol.
Paul Guez said in an interview that he plans to take Antik Denim LLC public through a reverse merger.
In a filing with the Securities and Exchange Commission last month, Marine Jet Technology Corp., a Vero Beach, Fla.-based company, said it planned to acquire Antik in exchange for issuing new shares to Antik’s owners representing a 95.8 percent stake in the company.
Marine identified itself in the filing as a “shell” company, a public enterprise that has no functioning business operations.
Shell companies offer an appealing route for small businesses that want to be publicly listed, but wish to avoid the expenses associated with hiring an investment bank to conduct a full initial public offering.
It also allows the new owners to sell off smaller portions of stock as they wish to raise capital. In a traditional IPO, investors typically want to see management selling all or a large majority of the firm’s shares to the public.
True Religion last year used a reverse merger to take itself public, and Guez credits that firm’s chief executive officer, Jeffrey Lubell, with giving him the idea.
“I taught him what he knows in denim and he taught us how to reverse merge and be successful,” Guez said of Lubell.
Lubell said he had the “utmost admiration” for Guez, but sniped that Antik makes “beautiful product, but it’s too fashion-oriented.”
Commerce, Calif.-based Antik is known for its intricate embroidery, vintage fabrics and steep price points, between $89 and $200 wholesale.
Marine Jet said in the filing that it expects to close the deal during the second quarter. The shell company’s shares, which trade under the symbol “MJET,” closed at 38 cents Wednesday, up 3 cents in Over-the-Counter Bulletin Board trading.Antik is projecting between $20 million and $30 million in sales for this year, said Guez.
Antik is one of the denim companies, including Yanuk, under the Blue Concepts umbrella headed by Guez. At the moment, said Guez, there are no plans to take the Blue Concepts public. — Michelle Dalton Tyree
Diamonds and Denim
As premium and superpremium jean prices escalate, designers are having a harder time finding the right gimmick to stand out in the crowd. But Joyce Azria — daughter of BCBG chief executive officer Max Azria — thinks she’s found a new angle.
Acknowledging that “the denim market is so saturated right now it’s a joke,” the 23-year-old designer said her contemporary line, Joyann, will roll out jeans accessorized with diamond buttons for fall retailing.
The denim line, under the Aristocrat label, will feature two styles, each with a half-carat diamond button, in a choice of a white gold or yellow gold setting. The wholesale price of the white gold style is $271 and the yellow gold is $498.
“When the jeans don’t fit anymore, you can have the button removed and wear the diamond as a necklace,” Azria said.
Each pair of jeans will ship with an insulated drawstring pouch that can be placed over the diamond-studded button to prevent the loss of the stone during washing.
“Then you can go ahead and throw them right in the washer and dryer,” she said.
Azria said the diamond buttons would be a way for her jeans to stand out.
“If I want to play with the big boys, I have to give my consumer something different,” she added.
While she has a well-known surname, Azria said she’s on her own in business, independent of her father.
The jeans will be available in September in department stores and specialty boutiques such as Harvey Nichols in the U.K. and Saudi Arabia. Azria said she expects the wholesale volume for denim to reach “close to a quarter of a million dollars” in its first year.Azria’s interest in jewelry predates this venture. She codesigned a pair of diamond earrings that wound up on the lobes of none other than Elizabeth Taylor when the star graced the cover of French Vogue in September. — Lauren DeCarlo
Pay Drops at Warnaco
The compensation of most of Warnaco Group Inc.’s top executives dropped last year. In most cases, the decline was the result of the comparison with 2003, when the firm emerged from bankruptcy and paid out hefty restricted stock awards.
President and chief executive officer Joseph Gromek’s combined salary, bonuses and other compensation came to $1.8 million, down from $2.6 million in 2003, when he received a $1.4 million restricted stock award. Factoring out that award, Gromek’s pay was up for 2004, his first full year with the company. He joined Warnaco in April 2003.
Executive vice president and chief financial officer Lawrence Rutkowski’s combined compensation came to $924,316, down slightly from $1 million in 2003, when he received an $837,500 restricted stock award. Rutkowski came on board in September 2003.
Stanley Silverstein, executive vice president of corporate development and chief administrative officer, garnered a total of $1.1 million in 2004, down from $1.4 million the previous year. Silverstein received restricted stock awards in both years.
Roger Williams, group president of swimwear, was paid $1.1 million, down from $1.8 million a year earlier. He received a $627,000 restricted stock award in 2003.
Frank Tworecke, who joined Warnaco as group president of sportswear in May 2004, received a total of $1.6 million last year.
In 2004, Warnaco recorded $42.5 million in net income on sales of $1.42 billion. That compared with a net loss of $22.5 million on $1.37 billion in sales a year earlier. — S.M.
Notify Throws a Curve
Notify will introduce jeans for fall that are sized based on its new Body Sculpt system, which accentuates a woman’s shape by creating both a waist and curve size.
“After observing what the current denim market had to offer, I definitely felt there was a gap in the market and a need for the Body Sculpt concept,” said Maurice Ohayon, founder and designer of Notify Jeans. “Women want to follow fashion, but not every style of jeans fits them properly. So this concept was developed in order to prevent gapping and other fit problems.”Each pair of jeans will have a waist size, ranging from 25 to 31 inches. In addition, they will have a sculpt size based on the distance from the base of the spine through the curve of the behind. Body Sculpt sizes will be called A, B and C, ranging from smallest to largest. Each size, therefore, will be available in three size options (for example, 27A, 27B and 27C). The jeans will look identical, but there will be a subtle difference in the fit.
“We don’t believe there is one ideal body type, and as a designer it is my responsibility to address the needs of real women with a variety of body types,” Ohayon said.
The Body Sculpt sizing technique will be introduced in a five-pocket style called Ornatus that will be available in traditional blue denim and black denim. Each pair of jeans will come equipped with a booklet describing the system to customers. The jeans will wholesale for 74 euros, or about $95 at current exchange rates, said the Paris-based company. The jeans will hit shelves in department stores and specialty boutiques in July.
“We could eventually offer every style in the collection in the sculpt sizing if the market indicated a need and desire for this to happen,” Ohayon said.
Ohayon said the Ornatus style Body Sculpt jean already accounts for 20 percent of Notify’s fall orders. — L.D.
Tolles Tapped for 1921
Ray Tolles has been named national sales manager for 1921, a premium jeans line owned by the same company that produces Silver jeans.
It’s a new position for the premium line, which launched in 2003. Tolles, 49, last ran his own company, an active-inspired contemporary line called Gym Dandy. Prior to that, he worked at Lucky Brand Dungarees.
Silver and 1921 are owned by Winnipeg, Manitoba-based Western Glove Works. Tolles is based in Los Angeles and reports to Michael Silver, president of the firm. — S.M.
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