AFTER A TRAUMATIC ’95, CAROLE LITTLE WRESTLES WITH A TRYING MARKET
Byline: Kristi Ellis
LOS ANGELES — It’s been more than six months since the apparent end of a series of criminal violence and murders against the executive ranks of California Fashion Industries, maker of the Carole Little lines, and co-chairman Leonard Rabinowitz has been trying hard to put the trauma behind him.
At the same time, however, he’s been faced with continuing upheaval in the retail business and the shock waves hitting its apparel suppliers.
During two interviews last week, one from the stark white caverns of the firm’s new, highly secured facility and the other from his office at the building the company will soon vacate, Rabinowitz put into perspective the company’s financial struggles and touched on the bizarre series of murders that have impacted the company (see related story, this page).
Apparel makers across the country have struggled with retail consolidation, lower volumes and tighter margins and the Carole Little brand is no exception.
Faced with a 20 percent drop in volume from $375 million in 1994 to $300 million in 1995 and an ailing careerwear business, the women’s better maker has laid off 200 employees over the past three months and has begun to refocus its business, Rabinowitz related.
The layoffs, which reduced the Carole Little work force from 1,000 to 800, came during an especially turbulent time, marked by the continuing investigation into the murders of two company executives and an outside sewing contractor.
Moreover, the company is in the process of completing its move to a 500,000-square-foot building on Grand Avenue in downtown Los Angeles from the 160,000-square-foot facility it has occupied on Martin Luther King Jr. Boulevard. Carole Little purchased the old May Co. distribution center two years ago and has invested $25 million in renovations, according to Rabinowitz. To date, three floors are finished and the company has set up partial operations there. The fourth and final floor, which will house offices for Rabinowitz and co-chairman and designer Carole Little, as well as a new showroom, should be finished by February.
Rabinowitz stressed that the drop in volume is due to retail consolidation and an unexpected shift in his core businesses that has come with the growing trend to casual dressing.
“Our career business has been cannibalized by the casual component of the business,” he said, and since casual pieces sell at lower prices, the shift has led to an erosion of dollar volume.
Additionally, there has been the impact of the concentration of management in the department store business and the trend by consumers to expect more of their apparel purchases to be off-price.
“Not that long ago we had one buyer at Bullock’s that bought nothing but Carole Little and concentrated on our business for the 18 or 20 stores at the time,” Rabinowitz said. “I now have a buyer at Macy’s West that buys for more stores and also buys from five other resources. They are doing a good job, but everybody is settling for 10 points less in margin than they did 10 years ago.”
Reflecting this consolidation of retail power, Carole Little will close its California Mart showroom here by the end of March. Rabinowitz said that he doesn’t need the showroom space because his retail base has dwindled over the last decade from 200 accounts to what is essentially four corporate department store conglomerates and he can service them in New York or on the road.
“We do teleconferencing with buyers in-between seasons, have our aircraft to see their stores and we see them in New York. If you really looked at our L.A. showroom, we were using it as an office. We were not seeing customers there, and that was a lot of rent to be paying for office space,” he said.
In addition, Rabinowitz is setting up a Web site on the Internet. The company already has a three-camera professional studio, from which Carole Little herself has done live broadcasts for the past year to stores and other centers around the world.
Rabinowitz doesn’t look for the Internet to be a big contributor to business in the short term, but it could have potential for the future in reaching consumers.
Carole Little’s volume in fiscal 1995, according to Rabinowitz, was divided as follows: 25.6 percent, career; 16.1 percent, women’s (large sizes); 18.1 percent, sport/casual; 14.1 percent, petite; 19.3 percent, dresses; 3 percent, street wear, and 3 percent, knits. The slight remainder was done in various ventures, such as a direct marketing program.
To compensate for the faltering career business and the consolidation at retail, Rabinowitz said Carole Little will focus on its fastest-growing core businesses — sport/casual and large size — and look into alternative distribution, which could mean creating a lower-price division under a different label and marketing to discounters.
At the same time, Rabinowitz indicated he is considering developing an expanded range of Carole Little label products such as pantyhose or cosmetics.
He noted such products might well be manufactured in-house. He said he isn’t ready to license anything yet.
“It would be nice if we could expand into a broader base,” said Rabinowitz, “but you only get the volume if you own it.” He noted that Liz Claiborne has been an example of this, by taking most of its products in-house.
There aren’t any plans to open retail stores, though the company currently operates 32 factory outlet stores.
“[Designers and manufacturers who have retail stores] are looking at them as pride of ownership or advertising but most aren’t making money with their flagship stores,” he declared. Rabinowitz also said he finds it hard to believe that manufacturers who open a store in a mall next to department stores carrying their products actually do more business.
Despite the volume drop and downsizing, Rabinowitz remains optimistic. He predicts that 1996 will be flat but believes that sales will start to grow again in 1997.
“We have a strong label with strong customer identification, good retailing selling space and good relationships with department stores,” he said. “They will always need to have some nationally branded merchandise, so there is a niche for us.”