Byline: Eric Wilson

NEW YORK — The relationship between designer Daryl Kerrigan and Pegasus Apparel Group reached a crisis point last week, and will, at the least, result in the cancellation of the designer’s fall collection.
Sources close to the designer said late Friday she had notified several members of her staff they would be laid off within six months as a result of the parent company’s decision not to produce her fall Daryl K collection.
Executives at Pegasus, which acquired Daryl K less than a year ago, said the division was “downsized” by about eight design and production positions, but insiders at the company said the situation was actually much worse, with major issues brewing between Kerrigan and Pegasus, and also affected staffers at the designer’s retail operations.
Kerrigan, reached at home, would not discuss the nature of what had happened, saying, “It’s a very confusing situation and I don’t really want to say anything yet. I need to talk to some people first.”
The development comes just a month after eveningwear designer Pamela Dennis, another of Pegasus’s acquisitions, struck a deal with her backers to restructure her collection — on her own, while Kay Unger will produce a bridge line for Pegasus under Dennis’s label.
Jason Weisenfeld, executive vice president of public relations, advertising and marketing for Pegasus, said that the company had “reached a decision not to produce the fall 2001 collection and focus that time to find the right partner for a production and distribution agreement.”
He said eight positions were eliminated relating to the production of the collection and that, in another development, Pegasus would close Kerrigan’s Los Angeles store, the newest and poorest performing of her three stores. This fall, Kerrigan’s Daryl K store at 21 Bond Street and K-189 store at 208 East Sixth Street will carry basics from the K-189 collection, he said.
Kerrigan’s maintenance of her own production has always been a priority for the designer in terms of quality control. The decision to outsource production is said to be a particularly contentious issue between the two parties, but Kerrigan was reportedly shocked by the decision to eliminate much of her staff, to which she is famously close.
Weisenfeld denied that the development implies further problems in the relationship with Kerrigan.
While the exact nature of the decision to skip production of the fall collection was not divulged by the company, sources at retail said they had curtailed their fall orders, citing two reasons — the season was not her best and also nagging questions about the financial shape of Pegasus. Others cited some questionable references in the collection — for example, the FBI sketch of the Unabomber on the backs of blouses and whether that was a lightly veiled reference to Kerrigan’s feelings toward Pegasus’s focus on infrastructure and technology in each of its investments.
Still, Kerrigan and her husband and partner, Paul Leonard, had considered taking a sabbatical from the business two years ago when discussions with several backers failed to produce a viable deal for the designer. Once her company was acquired by Pegasus, she said in a profile last year, “At Pegasus they have a great respect for designers, which is really uplifting.”
But she also found the reality of the deal, in which she sold a majority stake of her company to Pegasus, to be more frustrating. In the same interview, she said she hadn’t seen a dime of real cash — “I always thought when you sold part of your business, you would get some money for it. But you don’t. You get money into your business. You get the chance to go on.”
Kerrigan had plans for retail expansion, developing a long-awaited men’s collection called Daryl K Fir and an accessories line. Those plans all appear to be on hold while Kerrigan and Pegasus work out their corporate plans for the company and how to proceed with the core collection.