NEW YORK — With the mainstream tailored clothing business in trouble, Hartmarx has continued its rapid move into sportswear with its recent acquisition of Monarchy, a men’s premium denim brand.
The L.A.-based line, known for its glitzy runway shows, provocative print ads and raw-yet-refined sportswear, seems like a stretch for the old-school tailored clothing company, but that’s exactly what CEO Homi Patel likes about it.
“This is a new direction,” said Patel from his office last week. “It broadens our demographic and increases our holdings in the better market.”
The $20 million-a-year label, which retails jeans for $175 and graphic T-shirts for $70, is decidedly younger and more contemporary than Hartmarx’s other sportswear brands, which include Keithmoor, Sansabelt and Bobby Jones. The Chicago-based concern is best known for its heritage tailored clothing brands like Hart Schaffner Marx and Hickey Freeman, as well as its mid-tier licensing business, which makes tailored clothing for Claiborne, DKNY and Perry Ellis.
But increased margin pressure in the moderate-price channel has whacked the company’s core operations. As reported, earnings plunged 55 percent in 2006 from $51 million to $23 million. Since then the company has dropped its Kenneth Cole and Jhane Barnes licenses, both sold in that channel, and has padded its holdings with acquisitions in the better sportswear and women’s markets.
In the past two years the company has acquired women’s T-shirt company Zooey, Sweater.com and Simply Blue, a marketer of women’s denim brands that has doubled sales since 2005. Hartmarx’s women’s business now represents a quarter of its top line.
Patel views Monarchy, currently carried in 800 specialty stores as well as Nordstrom and Bloomingdale’s, as the male counterpart to Simply Blue and expects the brand to add between $25 million and $30 million to the company’s sales in the first year.
“We did a study of premium denim brands that were poised to grow,” Patel said. “We liked the people [at Monarchy] and the fact they’d tripled their business in a year.”
Hartmarx will help support the fast-growing brand, offering deeper pockets, an administrative and technological infrastructure, as well as long-standing relationships with retailers and suppliers. “With our new affiliation with Hartmarx, we envision additional opportunities for product line extension, new brand development, increased international distribution and licensing,” said Monarchy founder Eric Kim, who signed a contract to run the brand for the next seven years. However, Patel stressed that Monarchy will continue to operate as a separate unit. “They’ve clearly had success. We want them to continue to do that,” he said.
At the company’s shareholder meeting earlier this year, Patel said he’d like Hartmarx to generate half of its $600 million in sales from tailored clothing and half from non-tailored sources. “We’ll be close by the end of this year,” he said.
Under terms of the deal, Hartmarx paid $12 million in cash for Monarchy and will assume liabilities for the brand. Additional unspecified amounts are contingent upon future earnings.
Meanwhile, changes continue to occur in Hartmarx’s clothing division. Eric Jones, president of Hart Schaffner Marx, left the company last week. A onetime national sales manager for Purple Label, who had been with HSM for two years, is taking some time off but wants to continue working in tailored clothing. After tendering his resignation, Jones was asked to head the company’s marketing department, but he turned it down. “I’d like to pursue other opportunities,” he said.
Hartmarx has tapped Brett Schenck as Jones’ replacement. Schenck, who was running the company’s Burberry clothing business, is an industry vet whose resumé includes stints at Nordstrom and Ferragamo. “He has a lot of branding and retail experience,” said Paulette Garafalo, group president and Schenck’s direct boss. The new head of Hart Schaffner Marx will inherit the challenge of updating the venerable label and adding categories. “We want to take [the label] from a suit manufacturer to a global brand,” Garafalo added.