LOS ANGELES -- The tough times in apparel are hurting the West as much as the East.
This city's apparel manufacturers are feeling the pinch just like their New York cousins. For local vendors, the events of Sept. 11 and the recession have created a painful game of limbo -- as retailers demand lower and lower prices, producers are finding it tougher to shimmy under the bar without losing their footing. And the poor Christmas at retail is expected to only increase the pressure on manufacturers on both coasts, further raising the specter of cutbacks, bankruptcies and closures this spring.
Los Angeles-based companies generally are not in as perilous a state as New York's Chinatown factories, which have been severely impacted by the recession and attacks on the nearby World Trade Center. Still, many manufacturers here are struggling and are sharply cutting their workforce as a result.
Los Angeles and New York are the top apparel manufacturing cities in the country and those sectors have seen severe job losses in recent years. Nationwide, apparel jobs fell by 11,000 in November to 532,000, or 79,000 less jobs then a year ago.
The pressure has forced companies to pare back everywhere they can: reducing head count, curtailing travel allowances and even getting frugal about office supplies. The list of companies laying off workers includes such large players as Guess, BCBG and Tarrant Apparel Group.
Rob Greenspan, managing partner of Moss Adams, an accounting firm with 300 apparel clients, said apparel vendors' sales volumes have dropped an average of 10 to 15 percent this year.
"Some can handle that and make cutbacks," he said. "But for others, a 10 to 15 percent sales drop throws them into a loss position."
Talk of possible bankruptcies has percolated through the industry. Many analysts predict that the usual spate of post-holiday filings will be more severe this year.
Vernon, Calif.-based BCBG, which in August received a $10 million cash infusion from Nine West co-founder Vincent Camuto, has remained slow to pay its suppliers."We may be a slow payer, but we improve every day," said chairman and chief executive officer Max Azria. "We are a very strong company and continue to pay our vendors daily."
Azria said the firm has procured additional funding, but declined to specify the amount or the source. He acknowledged that "relatively substantial" cost-cutting of 10 to 15 percent across the board was in store for the brand. He has already reduced staff by 10 percent.
As reported, contemporary brand Bisou Bisou is struggling with its retail division. The company closed six of its 20 stores in recent months and may close as many as four more locations, according to ceo Marc Bohbot.
For Alby Amato, ceo of San Diego-based full-package garment contractor Mad Engine, it has been "a horrible year."
The company, which does business with J.C. Penney Co. and Polo Jeans, among others, has laid off 110 of its 200 employees over the past nine months because of recession, the state's skyrocketing gas and electricity costs, and orders lost following Sept. 11.
Amato said his company's revenues have been sliced in half this year. He expects them to come in at $12 million, compared with $26 million recorded in 2000. He estimated that he's lost $500,000 in orders since the terrorist attacks.
"We had an unbelievable year last year," he said. "This year, it's been a matter of survival."
Calling the current economy "sobering," Tarrant Apparel Group ceo Gerard Guez said he has laid off 30 employees in the company's Los Angeles headquarters.
However, he has not reduced his Mexican staff, which makes up the bulk of the private label denim producer's workforce.
"We reduced the workweek to 4.5 days and so have not had any massive layoffs," Guez said. "Every company needs to look at their own efficiency models and see how many people they need to remain stable. You can end up cutting your overhead to death."
Last month, denim label Lucky Brand shaved 13 staffers from its 700-person operation in an effort to "tighten things up a bit," said president Barry Perlman."We're keeping an eye on the business," he said. "But everything at Lucky is OK."
During a year of cost-cutting, Guess Inc. has reduced its workforce by about 200 people, said Carlos Alberini, chief operating officer.
Alberini said the company's strenuous efforts to reduce expenses meant it was "probably better prepared than most" for recession.
"When Sept. 11 came, it found us with a pretty conservative business plan," Alberini said.
The company has aggressively funneled old inventory through off-pricers such as The Marmaxx Group and Ross Stores, and company outlets. As a result, Alberini estimated that the company will reduce its inventory to $96 million, a 15 percent drop over last year.
Iron-fisted inventory control is critical to surviving the economic downturn, said Doug Smith, managing partner of accounting firm Smith, Mandel & Associates.
"Anyone who speculated too much on inventory is definitely fighting an uphill battle right now," Smith said.
Greenspan of Moss Adams concurred that, "To survive in this market you have to be liquid, which means your inventory has to be low."
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