SUN APPAREL CHARTS ‘INTELLIGENT’ GROWTH
Byline: Miles Socha
NEW YORK — Sun Apparel is gearing up for “intelligent” growth following a change in controlling ownership and an injection of venture capital.
Eric Rothfeld, Sun president, recently assumed majority ownership of the $400 million jeanswear firm, having bought out chairman and chief executive officer Miles Rubin.
The two had been partners since 1986, when Rothfeld, then a lawyer specializing in bankruptcy and reorganization, became a minority shareholder and executive at Sun.
Previously, Rubin owned two-thirds of the El Paso, Tex.-based company. Rothfeld declined to specify the size of his majority stake. He assumes the duties of chairman and ceo now that the Rubin family has no active role in the company.
Rothfeld’s new minority partner is Vestar Capital Partners, an investment firm here that invests primarily in middle-market companies with valuations in the $200 million-to-$800 million range. Vestar, which controls more than $1 billion in equity capital, will have representation on Sun’s board, but will otherwise leave Rothfeld and his management team to spearhead the company’s growth, according to Vestar managing director Sander Levy.
Vestar’s investments span industrial, consumer product and service industries, but it has no other apparel involvements at present. Last year, Vestar made an unsuccessful $230 million leveraged buyout offer of Bidermann Industries USA.
“They’re very strong on the financial side and an excellent sounding board for where we’re heading with the company,” said Rothfeld, who outlined Sun Apparel’s direction in an interview. “The intention is to grow and expand the company.”
Specifically, Rothfeld plans to:
Maximize Sun’s current licensed businesses, especially Polo Jeans Co. and Todd Oldham Jeans.
Take on new brands through licensing or joint-venture agreements, such as Triple X, which it is producing in a joint venture with Los Angeles-based Lucky Brand Dungarees.
Acquire other apparel companies and brands.
License its own brands, or new brands it develops, to retailers.
Responding to speculation in the market that Sun might soon go public, Rothfeld said: “Right now, our plans are focused on building our business.”
In recent years, Sun has transformed itself from a private label jeanswear powerhouse into a more broad-based maker of branded sportswear.
Having just completed one full year of shipping Polo Jeans Co., a license it acquired from Polo Ralph Lauren Corp. in 1995, Rothfeld said he sees “tremendous opportunities” to expand the brand in existing retail accounts and in new doors. According to market sources, Sun did close to $200 million with Polo Jeans in the last fiscal year and about $170 million with its other businesses. It has been widely reported that Polo is gunning for $350 million in the next three years.
“Our objective with Polo is to grow the business intelligently,” said Rothfeld, who sprinkles his conversation liberally with the I-word to express his studied business style. “I see a number of companies grow too rapidly. That’s one of the cardinal sins of the fashion industry.”
With Todd Oldham Jeans, Sun expects to do about $10 million in wholesale volume next year and grow to about $50 million in five years.
“In the specialty store world, they’re looking for important brand names that aren’t all over the department stores,” Rothfeld said. “We feel there’s a niche in the higher-priced designer jeans realm for a comparatively more moderate-priced designer jeans with a tremendous focus on fit and finish.”
Rothfeld also expressed big ambitions for the Triple X brand, projecting wholesale volume of $20 million in 1998 and $50 million in two to three years. Triple X is being positioned as a premium streetwear denim brand for young men and women. It will be backed by an extensive advertising program commencing next fall and be distributed internationally.
And, he said, Sun is definitely on the lookout for more brands.
“We will continue to look at intelligent licensing and joint venture arrangements,” he said. “We see opportunities in the moderate or middle market at retailers like Kohl’s, Sears and J.C. Penney beyond the private label segment.”
Rothfeld said Sun will also explore what he called “retail licensing,” an arrangement where it would license a brand it owns to a retailer and perhaps manufacture the jeanswear portions of the line. At present, Sun owns the X-Am and Weathered Cowboy brands, but it may acquire or create other brands for retail partners.
Until two or three years ago, private label manufacturing accounted for about 85 percent of Sun’s business, Rothfeld said. Now, with fast-growing brands like Polo and Todd Oldham, it’s about 50 percent.
“We haven’t slowed private label, nor do we intend to,” Rothfeld said. “Private label is a very important focus in our company and will continue to be.
“Our concept in private label is to offer full and complete service like a branded business.”
A flexible private label manufacturer, Sun produces jeanswear for a broad spectrum of retailers, ranging from Wal-Mart to Bloomingdale’s, and shipping sizes that spanthe range from infants’ and toddlers’ up to plus sizes.
Contrary to a widespread industry belief that owning manufacturing facilities makes a company inflexible, especially in a marketing-driven world, Rothfeld asserted that its plants in Texas and Mexico, where Sun makes approximately half its jeanswear, are elemental to its success.
“Not too many plants can move from 14-ounce five-pocket jeans to eight-ounce drawstring pants,” he said.
“Our manufacturing arm will always respond to our sales arm. We believe branded manufacturers should be leaders in new products and trends,” Rothfeld said.
As part of a management reorganization related to the growth plan, Mindy Grossman has been named executive vice president of Sun Apparel-corporate, a new position. Grossman continues to hold her posts as president and chief executive officer of the Polo Jeans Co. division.
In addition, Elaine Goldberg has been named to the post of president of Sun’s private label division and the Triple X business.