Byline: Thomas J. Ryan

NEW YORK — Aris Industries, the multibranded conglomerate being launched by Arnold Simon, widened its losses last year to $10.5 million from $3.7 million.
The loss stemmed from investments in infrastructure, start-up costs for new brands, severance for a former president and goodwill impairment, the company said in a statement.
Simon, chairman and chief executive officer, noted that since acquiring control of the firm in February 1999, Aris had been consolidating operations, launching new businesses and focusing on growth opportunities.
“With our stable of brands such as Fubu, Perry Ellis and XOXO, the addition of legendary names such as Brooks Bros. [golf] and Stetson casualwear, and niche opportunities such as Baby Phat and Cynthia Rowley, we are now poised for future growth,” Simon said.
As president and ceo of Designer Holdings, the maker of CK Calvin Klein Jeans, Simon is well known for revitalizing Klein’s jeanswear business and building its sales to $460 million from $140 million. Designer Holdings was sold to Warnaco in September 1997.
Aris’s net worth grew to $39.4 million at yearend versus $14.1 million at the end of 1998, largely due to Simon’s $20 million investment in the firm. Simon controls 44.7 million shares, or 56.3 percent, of Aris’s stock.
Sales last year jumped 37.3 percent to $175.4 million from $127.7 million, carried by a $22.7 million increase in Fubu boys’ sportswear, launched in 1998, and the addition of $42.9 million from the August acquisition of XOXO, according to Aris’s 10-K.
Partly offsetting these gains was a $10.9 million reduction in sales of the Members Only product line, a $1.5 million decline in its Perry Ellis lines and a $5.6 million loss from reduced private label sales and the phaseout of Jeffrey Banks. Aris’s jeanswear and sportswear license with Perry Ellis America was terminated this month.
Losses included charges of $2.4 million for severance for its former president, Charles Ramat; $3.7 million to write off goodwill; $2.6 million to consolidate facilities, and $2.2 million in start-up costs for new products to be launched in 2000 and 2001 and a new distribution facility.
Aris also said it provided markdown “accommodations” to customers “to help them alleviate the generally poor sales at the retail level.”
Gross margins improved to 28.8 percent of sales from 23.1 percent as gains in higher-margin lines, XOXO and Fubu offset depressed margins at Perry Ellis America attributable to weak consumer demand. Interest expense was cut to $4.2 million from $5.2 million as a result of the conversion of debt held by New York investment firm Apollo Advisors to equity and an overall reduction in borrowings.
The 10-K noted that as of Dec. 31, Aris was not in compliance with certain covenants under the credit agreement, but on April 11, its lenders waived compliance and agreed to amend the covenants for the current year in line with Aris’s business plan. In connection with the waiver and amendment, Simon personally guaranteed $3 million of outstanding debt through Oct. 31, 2000.
The 10-K noted that Aris paid $10 million and 6.5 million of its shares to acquire XOXO. Aris’s shares closed unchanged at 13/16 in over-the-counter trading Thursday.
Among its new licenses, Baby Phat women’s sportswear and Brooks Bros. golfwear will launch this year. Stetson sportswear and Cynthia Rowley sportswear will bow in 2001.
Contracts call for Aris to pay royalty rates of 8 percent under the Fubu license, 7 percent under Perry Ellis loungewear, 5 percent for Perry Ellis outerwear, 6 percent under Brooks Bros. and 4 percent under Stetson. The Baby Phat license calls for royalty payments of 8 percent on regular-price sales and 6 percent on items sold at discounts over 25 percent. The Cynthia Rowley license calls for royalties of 7 percent on regular-price merchandise and 3.5 percent for closeouts.