I.C. Isaacs Details Exec Pay
I.C. Isaacs & Co. Inc. last year revised the terms of its executive contracts, ending the practice of basing bonus payments on top-line results and instead linking them to bottom-line measures. As a result, only one top official — president Danny Gladstone, a five-year veteran of the firm who was grandfathered in — received any bonus money in 2003.
The New York-based firm has seen a number of changes at the top since an investment vehicle controlled by François Girbaud and Marithé Bachellerie acquired a 40.4 percent stake in Isaacs, their largest licensee, in 2002. The changes were detailed in a recent filing with the Securities and Exchange Commission.
The company said it had set the salary of chief executive officer Peter Rizzo, the former Bergdorf Goodman ceo hired by Isaacs in December, at $500,000 a year. Rizzo’s pay for the 23 days in 2003 he worked for the company came to $28,846.
Isaacs said Robert J. Conologue, who joined the firm in February 2003 as chief operating officer and chief financial officer, agreed to an initial salary of $315,000. His 2003 pay came to $273,828.
Sandra Finkelstein, senior vice president of merchandising, is being paid $310,000 this year. Finkelstein, who also joined the enterprise in February 2003, last year received $266,024 in salary.
Gladstone was paid a salary of $357,091 and $207,895 in bonus. However, the company said his contract has been revised to tie bonus payments to profitability.
Isaacs posted a net loss last year of $1.7 million, compared with a $5 million loss the year before. Sales were $66.2 million, up 0.6 percent.
The jeansmaker also said Gladstone had stepped down from its board. Seven people will stand for election as directors at the firm’s annual meeting in New York next month. They are chairman Staffan Ahrenberg; Olivier Bachellerie — Marithé’s son; Conologue; Rene Faltz, an adviser to François Girbaud; Neal J. Fox, a former retailer; Rizzo, and Robert Stephen Stec, a former VF Corp. executive. — Scott Malone
Bottom of the Pops
Typically, when a business tries to sell merchandise, it seeks to play up the desirability of the goods in question. But the folks at Diesel aren’t a group that takes the standard approach.
For the past few months, the Italian jeansmaker has been encouraging shoppers to drop off the worst record albums they own at its stores. The company has now collected about 3,000 of the least-desired LPs and is preparing to auction them on eBay.
The auction will take place from May 28 until June 28 and all proceeds from the sale will go to Sweet Relief Musicians Fund, an organization that provides financial assistance to all types of career musicians facing illness, disability or age-related problems.
The auction will include albums from such artists as Michael Jackson, Lionel Richie, Take That and Celine Dion, as well as Bald Bill Hagan and his Trocaderons’ “Music to Strip By” and 76’s “Sucking in the Seventies.”
Warnaco Posts a Profit
The Warnaco Group Inc. on Wednesday posted improved first-quarter earnings with net income coming in at $20.2 million, or 44 cents a diluted share, on revenues of $393.3 million.
In year-ago results, on an adjusted basis, during which the company was still mired in bankruptcy for a one-month period during the quarter, the loss was $40 million on revenues of $423.5 million.
For the period ended April 3, revenues in the sportswear group fell 24.5 percent in the three months to $96.8 million from $128.3 million. The intimate apparel group declined by 3.8 percent to $141.2 million from $146.8 million, hurt in part by continued weakness in the Warner and Olga lines. The good news was in swimwear, which gained 4.7 percent to $155.3 million from $148.4 million.
Joe Gromek, president and chief executive officer, said during a conference call to Wall Street that revenue shortfall in the Calvin Klein jeans business was primarily the result of the firm’s “planned year-over-year reduction in sales and excess inventory through the off-price channel and the shift in our membership club business to a more normalized basis.” He added that the company, nevertheless, achieved its goal of double-digit operating margins in the CK jeans business.
The company’s brand-building efforts for the CK jeans business include new product introductions and an increase in marketing activity. Gromek added that department store customers have responded favorably to the double-black denim portion of the CK jeans line.
The ceo noted that the performance of Chaps also had exceeded the company’s expectations, and that Chaps represents Warnaco’s largest revenue growth opportunity over the next three years. The Chaps denim collection will launch in fall 2004 in more than 900 doors.
— Vicki M. Young
Levi’s Tax Move
Levi Strauss & Co. has appointed Paul Smith as vice president of its global tax department, effective May 24. The move comes after a year in which the company faced lawsuits from former employees who claimed they had been fired after refusing to withhold records from tax authorities.
Smith, 36, joins Levi’s from Ernst & Young LLP’s Washington office, where he served as director of tax accrual services. At Levi’s, he will report to chief financial officer Jim Fogarty, an executive from the turnaround firm Alvarez & Marsal that Levi’s hired in December.
In April 2003, two former tax department employees sued Levi’s in California Superior Court in San Francisco claiming wrongful termination for allegedly refusing to hide documents they said showed Levi’s improperly recorded sales and tax information from its overseas operations. A month later, Levi’s countersued for charges including breach of contract. The legal battle between the parties is ongoing, and this year, a Levi’s bondholder sued the company and its top executives, charging violations of federal securities laws. That suit, brought in January, is seeking class-action status.
When Levi’s in March reported its financial results for its 2003 fiscal year, the company also restated results for 10 recent quarters, including all of fiscal 2001 and 2002, and the first two quarters of 2003.
At the time, Fogarty said the financial missteps that led to the restatement included “having taken a double deduction for losses related to plant closures.”
Levi’s lowered its income for 2001 to $93.7 million from $151 million. For 2002, income was lowered to $7.3 million from $25 million. For the first quarter of 2003, the company revised its net loss upward to $58 million from $24.5 million and for the second quarter, deepened the loss to $41.8 million from $13.4 million. — S.M.
— Julee Greenberg
VF Streamlines in Kids
While Greensboro, N.C.-based VF Corp. has attracted the industry’s attention with a major acquisition tear of late — and it’s already been named a potential buyer for Levi Strauss & Co.’s Dockers unit — this week it moved to streamline its presence in the children’s wear business.
The company said Monday it had sold the Healthtex brand to New York-based Lollytogs Ltd., which also produces the French Toast brand. The purchase price was not disclosed.
Lollytogs holds the license for boys’ tops bearing the Lee and Lee Pipes brands, both VF properties.
A spokeswoman for Lollytogs said the privately held company had sales “well in excess of $100 million.”
VF closed on a $600 million acquisition of Nautica Enterprises in August. Last month, it agreed to buy West Coast sneaker company Vans Inc. in a $396 million deal. After Levi’s on Tuesday revealed its plans to sell Dockers, a VF spokeswoman said the company has “an interest in strong brands” like Dockers, but also has “a very full plate right now.”