By  on July 20, 2005

NEW YORK — After 25 years in business, Rafaella Sportswear's growth spurt has really just begun.

Last month, 75 percent of the better sportswear line was purchased by Cerberus Capital Management, a private equity firm based here. Cerberus' plans for Rafaella are substantial, and executives at the sportswear company have no doubt that, in the next few years, Rafaella easily will double its $250 million wholesale volume.

The company last month hired a new chief executive officer, Glenn Palmer, who had been ceo of Amerex Group. Previously, Palmer was ceo of Best Manufacturing, a division of Institutional Apparel Manufacturing. Earlier, he was a division president at Liz Claiborne and began his career at Macy's, where he rose to vice president of merchandising. He succeeds founder Ronald Frankel, who was ceo and is now chairman.

"There's a huge opportunity for growth with this company," said Robert Newman, executive vice president at Rafaella, who started as a salesman for the brand when it opened for business in 1980. "Cerberus is really planning to build on its success with possibilities for licensing, opening new divisions or even building Rafaella into a megabrand. There's so much that can be done."

Cerberus officials declined to be interviewed.

Newman said that, since Rafaella is strictly a sportswear company, there are many new divisions the brand can enter, including dresses, accessories and children's wear. In addition, Newman said the company is planning to launch an ad campaign within the year.

Cerberus' confidence in Rafaella's potential seems valid. The private equity firm has been getting deeper into the fashion industry in recent years — it already owns Mervyn's and Fila, and once considered acquiring the Bill Blass brand. Tending to make investments in distressed companies, past investments were in specialty retailer G&G, Esprit, Guilford Mills and Frederick's of Hollywood.

While Rafaella is now sold in almost every major department store in the U.S., one retailer in particular, The Bon-Ton Stores Inc., based in York, Pa., consistently has done well with the collection.

"What Rafaella achieves for The Bon-Ton is being an item-driven better sportswear resource that consistently delivers the trends," said Mary Kerr, corporate spokeswoman for The Bon-Ton. "In addition, there is a significant amount of value in their product for the price, and our customers recognize that."Kathy Bradley-Riley, senior vice president of merchandising for the Doneger Group, the large buying office here, agreed.

"Rafaella has always had a way of interpreting the trends of the season in a fashionable, but still missy-appropriate way," she said. "They have a good understanding of who the better target customer is, and they keep that customer in mind when designing the line. They are on top of the colors and key fabrics and never try to be cutting edge, just fashion right."

For Rafaella, business began 25 years ago with a simple pair of pants.

"We started with a great-fitting pant that the stores started ordering and reordering," Newman said. "Now, our pants are on a replenishment program, where stores can always reorder them. And the best thing about our pants is that the fit is consistent. It hasn't changed since we started making them. Customers can come into a store, pick up a pair and purchase them without trying them on if they already know their size."

But Rafaella has come a long way since it sold its first pair of pants. Today, the company sells a full array of sportswear and career separates ranging from knit and woven tops, blouses, jackets, loungewear and a brand new denim collection, launched at retail about six months ago. Newman said the line has been selling well, and it will be expanded to include more novelty jeans and jackets and also will be put into a replenishment program.

"More people are starting to get into that misses' denim business, but it's still a niche that needs to be filled," Newman said.

Newman said the secret to the company's success thus far has been its ability to keep prices down. Rafaella's retail prices range from $35 to about $80, which is quite low for the better sportswear department. It's because of this that Newman said he really hasn't felt the heat from the competition.

"All the other better lines on the floor have higher prices," he explained. "So when a customer comes into the store, she sees the value in Rafaella."

As a department store mainstay for the past quarter century, Rafaella has made it through some challenging times at retail. He said from a product standpoint, separates have become more important than ever."Coordinated separates are what it's all about. That's why we make each piece so it can stand alone or be sold next to another item in the collection," Newman said. "It used to be that stores wanted ensembles that were sold together. The separates business really is better now and it gives the customer more options."

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