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Since selling a majority stake in the Marc Ecko brands to Iconix Brand Group last October after hitting a financial wall, Marc Ecko Enterprises has signed a raft of new licenses and refocused its businesses as it operates on a more secure foundation.
This story first appeared in the July 29, 2010 issue of WWD. Subscribe Today.
Since the Iconix deal, Ecko has inked 13 new licenses, bringing the total license count to 22, downsized its pricy corporate headquarters and licensed out the noncore Zoo York business. In addition, the company has ramped up retail operations as it works to navigate a difficult wholesale climate that has seen the closure of many independent specialty retailers in the streetwear zone.
“The deal with Iconix took a big burden off of some of our tactical financing issues,” said Marc Ecko, chief creative officer at the company that bears his name. “We have better governance and advisers and a fresh perspective and view.”
The deal brought a crucial infusion of capital to the company, which had previously been struggling to meet debt payments. Iconix paid $63.5 million for 51 percent of the Ecko brands, part of which was used to pay off loans owed to lender CIT. Iconix also helped refinance $90 million in receivables owed to Li & Fung, which is now being paid off over the next five years.
“We’ve been able to provide a stable capital structure to allow the company to build these great brands,” said Neil Cole, chairman and chief executive officer of Iconix. “Our goal has been to focus their resources on the key businesses and differentiate the various Ecko brands more clearly. So far, so good.”
Next spring, Ecko will debut at retail a Marc Ecko Cut & Sew suit collection from licensee Marcraft, as well as a home and bedding collection from CHF Industries. In addition, licensee Parlux Fragrances will introduce a follow-up to last year’s Ecko by Marc Ecko men’s fragrance with a sportier scent under the Ecko Unltd. name. (Ecko Unltd. is the company’s core sportswear line, and Marc Ecko Cut & Sew is a higher-end collection business.)
This holiday, an active brand called Ecko Function will launch in Foot Locker stores, including outerwear, knit tops, knit and woven bottoms, socks, footwear and other accessories, with retail prices ranging from $28 to $280. The apparel is licensed to Highlife Apparel, the outerwear to Studio Ray and footwear to Skechers.
Also this holiday the company will launch licensed product in Big & Tall and electronic accessories such as headsets and phone cases.
“[The years] 2010 and 2011 signify launches of categories that bring Marc Ecko brands into new spaces, different channels of distribution and to new consumers that extend beyond our sportswear apparel consumer,” said Seth Gerszberg, ceo of Marc Ecko. “Ecko Function brings our name to the active environment. The launch of headsets and phone cases brings Marc Ecko brand names into electronic stores. Marc Ecko home enters into a realm that can be made up of so much more than bedding — think of all the rooms and elements in each room that make up a home.”
Earlier this year, the company licensed the domestic Zoo York business, with apparel now handled by Wear Me Apparel, footwear by Skechers, watches by Geneva Watch Group, accessories by Concept One Accessories and action hard goods and protective gear by Division 6. Marc Ecko Enterprises continues to operate the Zoo York business internationally.
Both Cole and Ecko pointed to the juniors Ecko Red business, which is licensed to Icer Brands, as a key trouble spot for the company. “That business has turned out to be weaker than we hoped,” said Cole. He added the juniors collections need to be fine-tuned and the company’s overwhelming focus on men’s wear made juniors a particularly challenging business to develop.
To control costs, the company has reduced its footprint at the 23rd Street headquarters to about 50,000 square feet — just a fifth of the 250,000 square feet the trophy office space once occupied, including a half basketball court. Many employees were transferred to a New Jersey office. Gerszberg insists the company now has a cost structure in line with sales volume and below the industry standard.
In the wholesale arena, Macy’s and Dillard’s are the brand’s biggest accounts, but the company has been impacted by the decline in small specialty stores in the streetwear market. “A lot of mom-and-pop stores were not able to survive the economic climate,” said Gerszberg, which has led to a decline in the number of those accounts for the Ecko brands. “But we have been able to turn around a challenging wholesale business and create growth in our backlog for the fall 2010 and spring 2011 seasons.”
Ecko has been busy opening retail stores, as well. Currently, the company operates 93 stores in the U.S., including 64 Ecko Unltd. outlet stores, nine Ecko Unltd. full-price stores, eight Mark Ecko Cut & Sew full-price stores and seven Marc Ecko Cut & Sew outlet stores. Additionally, the company operates about 25 stores overseas and local partners operate another 50.
Another five Ecko Unltd. full-price stores are slated to open this year, and 25 full-price and outlet stores are planned for 2011.
According to Gerszberg, the company’s retail stores have posted 15 percent same-store sales increases for the year to date. Ecko retail stores account for 60 percent of total company sales with wholesale comprising 40 percent.
Ironically, it was that move into retail — including a much-ballyhooed plan to open a Times Square megaflagship that sat empty for three years — that caused much of Ecko’s financial troubles. “Reflecting on the stress on the company, much of that was because of our expansion in retail — capitalizing all those leases and fixtures,” said Ecko. “But it’s the best thing that ever happened. Despite the stress that it put on the company, it gave us the ability to control so much of our destiny and confidence in evolving the merchandise assortment. You have a footprint to test things in a more reactionary cycle than you do if you are purely wholesale.”