By  on October 13, 2009

The company named Heath Golden its new president and chief executive officer in August, following a turbulent period that saw a failed merger bid in April with NAF Holdings II LLC, an investment vehicle controlled by Efrem Gerszberg, brother of Ecko Unlimited co-founder Seth Gerszberg. Golden — an attorney by training, who was elevated from the chief operating officer position — has reorganized management and is overseeing the final stages of a restructuring plan, which began in 2008. The plan has reduced head count at the New York-based company by 50 percent and is on course to save Hampshire $12.4 million in annual selling, general and administrative costs. The cuts included customer service personnel in the company’s South Carolina office and accounting staff, but about 60 percent came from the China sourcing operation, where 130 employees were cut to 26. Rather than using a centralized sourcing platform, the company’s different divisions now source independently, using more agents. The move has saved money while improving flexibility, according to Golden. “We’ve adjusted our infrastructure costs and positioned ourselves to be profitable in what the world is today,” he noted. “We took a hard look at how we operated and how we could be more efficient and do more with less.” Hampshire, whose business is comprised of 60 percent sweaters and 40 percent sportswear, has seen top-line sales decline 25 percent since 2005, from $322.4 million to $240.9 million in 2008. Along with Golden’s appointment to the top job, in August the company hired Howard Zwilling as president of the women’s division. Zwilling was previously group ceo of Jones Apparel Group’s moderate sportswear division and is a 30-year veteran of the industry. Women’s comprises about 60 percent of Hampshire sales, while men’s is 40 percent. The men’s division is led by president Mark Lepine, who joined in 2007, prior to which he was president of Liz Claiborne’s men’s special markets division. Along with declining sales, Golden, Zwilling and Lepine are battling losses. In the first half of the year, the company posted a net loss of $16.2 million, compared with a loss of $8.8 million in the year-ago period. Sales decreased 31.1 percent in the half to $50 million, from $72.7 million a year ago. Golden declined to provide forward earnings guidance, noting it was the policy of the publicly traded company not to forecast financial results. “It comes down to product and being able to deliver a superior product,” offered Zwilling of Hampshire’s turnaround efforts. “We want to be the best value — not the lowest price.” Hampshire specializes in midmarket sweaters and knits, which offer fashion product at sharp prices. Most of its product goes out the door from $19.99 to $39.99. The company markets women’s sweaters and knits under the Designers Originals (distribution includes J.C. Penney, Belk, Bon-Ton, Bealls and Peebles), Hampshire Studio (Dillard’s), Mercer Street Studio (Macy’s) and Spring+Mercer (a contemporary line at Bloomingdale’s and Dillard’s) labels. Women’s casual and career separates are marketed under the Requirements (Kohl’s), RQT (J.C. Penney, Stage Stores, Peebles, Boscov’s and Bealls) and R.E.Q. (Sears) labels. For men, the company markets sweaters under the licensed Geoffrey Beene (Macy’s, Belk, Bon-Ton and Boscov’s) and Dockers (J.C. Penney, Kohl’s, Sears, Stage Stores and Peebles) labels, in addition to its own Spring+Mercer brand (Macy’s). The company believes Dockers maintains more than 50 percent market share in the men’s sweater business in the midtier channel. In addition, the company in August launched two licensed men’s brands, which are exclusive to J.C. Penney. The Joe Joseph Abboud sportswear collection consists of woven and knit tops, sweaters and bottoms, while the Alexander Julian Colours line includes wovens and sweaters with knitwear to come in the spring. Steve Lawrence, executive vice president of men’s apparel at J.C. Penney, said, “We are very excited about the launches of Joe Joseph Abboud and Alexander Julian Colours, as both new brands help provide exceptional designer style and quality at affordable prices. While it’s still early, customers have been very pleased with the launch of these new brands.” To further boost sales, Golden plans to delve into international markets and shop-at-home sales channels. Currently, 99 percent of the company’s sales are in the U.S., with 1 percent in an off-price account in Canada. “That’s an obvious miss for us,” noted Golden. In a vital financial move, in August the company successfully amended its credit facility with HSBC, J.P. Morgan Chase and Wachovia, reducing its size from $125 million to $48 million and moving its expiration date from 2013 to 2010. The new facility adjusts covenants to give the company greater flexibility with borrowings, while increasing fees and interest rates. Prior to the amendment, the company had been in violation of a covenant of its former facility, eliminating its ability to borrow or issue letters of credit, threatening Hampshire’s viability. “The previous facility was far too big,” said Golden, noting the former agreement was negotiated at a time when money was easy and inexpensive to borrow. He added the company has been able to migrate its vendors to open term agreements, decreasing the need to borrow and issue letters of credit. As of June, the company had $13.5 million in letters of credit outstanding, compared with $49.5 million in June 2008. To close the book on the unsuccessful merger with NAF Holdings II LLC earlier this year, Hampshire agreed on Sept. 28 to reimburse the takeover firm $833,000 in costs, which settles and discharges all claims related to the failed $30.4 million deal. NAF had previously claimed Hampshire failed to meet certain requirements of the agreement while Hampshire suggested NAF did not have sufficient financing to complete the merger.

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