NEW YORK — A pair of Asian apparel makers bought a majority stake in junior jeans powerhouse Mudd on Monday and, with the new backing, the company has set itself the ambitious goal of hitting the $1 billion revenue mark.
The new investors are Tack Fat Group International Ltd., a publicly traded apparel maker based in Hong Kong, and Windsor Garment, a Chinese apparel company.
Mudd founder Dick Gilbert and shareholder Conrad Lung — who represented the new investors in their approach to Mudd — disclosed the news in an exclusive interview Monday at the company’s Manhattan offices. They did not detail financial terms of the transaction.
Lung, who is also an owner of the New York importer Sunnex and of the Go Silk bridge line, said the investors first approached Mudd in August because they believed the company has “a lot of room to grow.”
“Globalization has now created very affluent consumer economies in Asia and there’s also room for growth in Europe,” Lung said. Mudd’s sales — including 16 categories of licensed products — last year came in at around $500 million, Gilbert said.
Gilbert, 61, said he will remain on board as chief executive officer and also retains an ownership stake in the firm, which he cofounded in late 1995. His former partners — Martin Weisfeld, Jo Ann Jacobsen and George Fontini — have sold their stakes and left the company, he added.
Pam Prahl, 37, who in February was named executive assistant to the president, takes on the new role of chief operating officer. Gilbert said Prahl was promoted because “I needed to bring some youth and energy into this company.”
Gilbert said he will focus on long-term growth and acquisition opportunities, while Prahl will oversee day-to-day operations. Lung will work on global marketing plans for the firm.
Tack Fat is a manufacturer of swimwear, jeans and tops that has more than 17,000 employees at its factories in China and Cambodia. As of Monday afternoon Eastern Daylight Time, it had a market capitalization of $126.4 million on the Hong Kong stock exchange. It also currently produces Mudd’s swimwear products.
Gilbert said the new backers will bring Mudd much-needed sourcing expertise.
“If we had a weakness in this company, it’s that nobody in the company was ever trained in production,” he said. “We were all sales guys who got together years ago.”
Gilbert said the risks inherent in that lack of knowledge became apparent to him last year when shipments started to come in late. His suppliers blamed hang-ups in Customs, which Gilbert said he was never able to understand.
“We didn’t even know,” he said. “That’s how stupid we were.”
Lung said sourcing expertise will become all the more important over the next year as the 147 nations of the World Trade Organization drop their quotas on textiles and apparel.
“The WTO change is looming, and that will affect all companies, not just Mudd,” he said. “You need to rethink your global sourcing and production strategies.”
He noted that Tack Fat also operates a chain of retail stores in China, which will aid in Mudd’s entry into that region.
“It’s notoriously tough to grow there, unless you have an on-the-ground partnership,” he said.
Gilbert has experience with the difficulty of expanding into Asia. In August 2002, Mudd signed a deal with a former supplier to help it expand into the Asian market, initially through South Korea. That company never produced the results Mudd expected, and the firm canceled the agreement last year, he said.
The company also is looking to update its brand image, to make it more global and more appealing to shoppers past their early teen years, Prahl said. Mudd jeans typically retail for $25 to $35 at department stores and national chains in the U.S. It also has some European distribution.
“We have the potential to grab an older teenage girl,” she said. “We’re not going from black to white. But we will update our image to speak to the 18- to 20-year-old customer….We believe the customer we have aspires to be like her sister or an older girl.”
Lung also noted the company will be seeking acquisition candidates. “That is very much the strategy of the whole company,” he said. “We’re going to be focusing on mergers and acquisitions and licensing.”
In addition to getting new owners, Mudd got a new home on Monday. The executives were interviewed at Gilbert’s still-bare-bones office in the firm’s new headquarters and showroom, a 8,500-square-foot 29th-floor space at 1407 Broadway in the Garment District. Pictures were propped against the wall, still waiting to be hung.
The deal does not include Paper Denim & Cloth, a high-end jeans line that Mudd launched in 2000. Gilbert said that line has passed to other private owners. He declined to provide further details.
Paper, Denim & Cloth’s former vice president, Scott Morrison, resigned his position in February and Gilbert named his son, Chris Gilbert, to succeed him, with the new title of chief operating officer. Morrison has since launched the Earnest Sewn jeans line.
Gilbert founded Mudd in 1995 after a previous business, Zena jeans — which also had been a moderate-priced junior line — hit the skids. Zena relaunched in 2002, still owned by Gilbert, but made under license by W.E. Stevens of Nashville.
During the hour-long interview, Gilbert recalled that on an early sales call, “somebody at one of the department stores said, ‘We’ll order it if you change the name. The Mudd name is stupid.’”
He plugged on anyway, and by 1998, the company hit the $100 million sales mark and signed its first licensing deal. Today the company has licensed out the rights to such categories of merchandise as hats, shoes, eyewear and outerwear.