Tarrant Acquires Co-ownership of American Rag Apparel
Los Angeles-based Tarrant Apparel Group—a publicly held manufacturer of private-label woven and knit apparel for men, women and children—has acquired a licensing agreement with specialty retail operator American Rag CIE, which owns the rights to the American Rag trademark and retail operations.
Both companies declined to give financial details of the acquisition, but Tarrant’s chairman and chief executive officer, Gerard Guez, said the company will retain 50 percent of American Rag’s voting rights and slightly less of its equity. Guez said both parties have known each other for more than 25 years and feel it is a good time to form a partnership.
Terms of the licensing agreement call for Tarrant to have exclusive rights to design, manufacture and distribute apparel internationally under the American Rag label. The agreement also allows Tarrant to design, manufacture and distribute American Rag accessories in North America. Tarrant has the option to extend the term of its licensing agreement with American Rag for up to 30 years once the private-label manufacturer has completed the first 10 years of its agreement.
The deal was brokered by Private Brands Inc., an in-house licensing and acquisitions firm that Tarrant formed earlier this year. Part of the deal allows Private Brands to refuse any licensing of the trademark for use with products other than apparel and accessories.
The deal with American Rag marks Tarrant’s first venture into branded apparel.
“Our investment in American Rag marks the beginning of a new strategic direction for our company,” Guez said. “We see great opportunity to drive top-line growth by leveraging our apparel expertise and industry relationships to develop a portfolio of private brands for license and distribution to retailers around the world. We are excited to have American Rag as the first brand in our portfolio and are confident that its hip, vintage-inspired style will be an excellent fit for any retailer who wishes to bring a unique, fresh look to its younger customer.”
Currently, Tarrant produces private-label apparel for specialty retailers Lerner New York, The Limited, Abercrombie & Fitch, J.C. Penney, Kmart, Kohl’s, Mervyn’s, Sears and Wal-Mart.
Founded in 1984, American Rag is a specialty retailer that offers eclectic vintage and contemporary apparel, including Levi’s, Paper Denim & Cloth and Marc Jacobs. The company operates retail stores in San Francisco, Los Angeles and Japan. It also operates a specialty retail store called Maison Midi in West Los Angeles.
“The popularity of our business has grown much bigger than our business,” explained American Rag co-owner Mark Werts.
American Rag Collection will include a line of sportswear for juniors and young men.
Beginning in August, the American Rag Collection will be available in approximately 100 select Macy’s, Bon Marche, Burdines, Goldsmith’s and Lazarus stores.
Federated Merchandising Group President and Chief Operating Officer Leonard Marcus made an exclusive “multi-year” agreement this week with Private Brands Inc. to distribute the American Rag Collection to Federated stores throughout the United States.
Tarrant’s recent acquisition reflects some of the changes that are afoot for the company. Earlier this week, Guez announced plans to reassume the role of chief executive officer of Tarrant Apparel Group, effective immediately. The company has made Tarrant’s former chief executive officer, Eddy Tak Yu Yuen, president of Tarrant subsidiary Fashion Resource (TCL) Inc. in Hong Kong.
“We would like to thank Eddy for his outstanding work as CEO of our company and the integral role he played in successfully transitioning the company’s Mexico operations into a vertically integrated manufacturer,” said Guez. “We are very pleased his talents will remain with our company, and I look forward to working with him in his new role.”
Tarrant’s net sales increased 29.3 percent, from $71.6 million during the fourth quarter of 2001 to $92.6 million during the fourth quarter ending Dec. 31, 2002, after the incorporation of $38 million in sales from United Apparel Ventures LLC. The company had a $1.9 million net loss during the fourth quarter of 2002, compared with an $800,000 net loss during the same period of 2001. The company said this gross-profit decline was caused by a lower-than-anticipated capacity utilization in Mexico that resulted from a weak retail environment. —Claudia Figueroa
