By  on May 10, 1994

NEW YORK -- Struggling to pull itself out of Chapter 11 and prop up its sagging business, The Leslie Fay Cos. is about to implement two major moves -- dropping domestic production and selling its flagship brand to J.C. Penney.

Although retailers declined to discuss the matter, both steps are regarded by manufacturers and industry analysts as smart choices -- but not without risk.

Leslie Fay's decision to close its manufacturing facility in Wilkes-Barre, Pa., announced last month as the opening salvo in talks with the ILGWU on a new three-year contract, is being greeted as a tough tactic, but one that could help the apparel maker regain its footing and allow it to become more competitive in the moderate-to-better-price dress and sportswear market.

The ramifications of selling to Penney's, however, could be less sanguine for the 47-year-old company, testing the loyalties of longtime accounts as well as the potency of the brand for mainstream department store retailing.

Leslie Fay and Penney's acknowledged in March that they were in talks about distribution. Late Friday, Leslie Fay confirmed that it will start selling the retailer the Leslie Fay brand in dresses and sportswear with the fall collections.

Kathryn Connors, Leslie Fay's senior vice president for corporate affairs, said the move to sell to Penney's was an outgrowth of a study done by Walter Levy Associates, which concluded that 87 percent of consumers felt that Penney's was a major department store.

"J.C. Penney felt our product was a good fit for their customer and merchandising, and we're looking forward to a productive partnership," Connors said. "Everybody knows the label is strong, and as long as it's retailing well -- and it is right now -- we don't think we'll have much negative reaction from other department stores."

Jim Hailey, president of the women's division at Penney's, said the chain will stock a broad assortment of Leslie Fay dresses and sportswear this fall in misses', petite and large sizes in about 500 larger stores nationwide. It also will be sold in the catalog, but that merchandise may break later than the fall due to the long lead time in catalog merchandising.

"We feel the customer wants the product and our research indicates tremendous brand recognition," Hailey said. "We've had some initial spring merchandise in about 30 stores in order to get procedures down and work out the bugs, and the sell-through has been exceptional," he noted. "We have had stores trying to reorder because they sold virtually all of it."

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