Blue Cult In Flux
Slow sales in the United States and stiff competition have Los Angeles–based denim maker Blue Cult Inc. streamlining its business and trimming the chaff.
“It’s been tough. We have a lot of competition and the market is tightening,” said Caroline Athias, Blue Cult’s design director and co-owner. “We decided to make the company more efficient—as efficient as possible.”
To do that, Athias said the company has been forced to lay off approximately 30 percent of its workforce, including some management. “When a company becomes too big, sometimes that happens. But we needed to do it to make sure we continue to be successful,” Athias said. Other reports put the number closer to 50 percent.
“We let go some sample makers, some of our dry-process personnel and a couple pattern makers,” Athias said.
The marketing department, which was created in 2003 when the company was pushing brand recognition, was dissolved after marketing director Tara Narayan left the company in January. Nicolas Peyrache, former head designer, has also parted ways with the company. Susan Woo, the designer of Blue Cult’s newest line, Blue Cult Elite, has taken over duties as the company’s head designer. Blue Cult has also parted ways with its public relations firm, Beverly Hills–based Dennery Marks Inc. Sources say the split was amicable.
“I’m back and working hard,” Athias said, noting that for about a year she and her husband, Chief Executive Officer David Mechaly, weren’t as involved with the company.
The reorganization also meant Blue Cult had to discontinue some concepts going forward. Blue 2, a contemporary denim line for young women, has been dropped. “It was mostly department store business, and they wanted a $70 price point,” Athias said. That, she said, wasn’t possible for the company, which makes its denim in Los Angeles and was wholesaleing the line for $98 to $100. Blue 2 is on hold until the company finds cost-efficient production offshore.
Blue Cult Knits, a division of men’s and women’s T-shirt lines designed to complement the brand’s denim, has also been discontinued.
“We’re not doing that at all now. We never had success with it,” Athias said.
Shipping problems have also reportedly plagued the company. Laura Sherman, former general manager at Frankie B., was hired as chief operating officer in late 2004 to work the kinks out of Blue Cult’s shipping process. The arrangement didn’t work out, and Sherman left the company after a few months.
Retailers reported that last year the company had problems with its production. “The [legs of the] jeans were shorter than expected,” said Thomas George, owner of Chicagobased denim emporium E Street Denim. In response to its production woes, Blue Cult decided to go back to basics with its design. The revamped line, which featured new denim and new construction designed by Woo, debuted at the Fashion Coterie show in New York earlier this year. “We had two weeks to do it right before Coterie,” Athias said, acknowledging that the circumstances and prep time were less than ideal. But, “there was no time to launch it the proper way,” she said.
Still, as their offerings and staff thin, Athias insists Blue Cult isn’t in financial trouble. She dismissed rumors that the company is looking for outside investors. Sales in Europe and Japan haven’t slowed, she said, and the Blue Cult Elite, Sacred and Sacred Blue lines are doing well.
Athias also dismissed rumors that Blue Cult’s warehouse is packed with languishing denim. “We do have a large amount of inventory because we’re revamping Blue Cult,” Athias said, noting that the company is in the process of selling off old styles because its new construction launches with a 4/30 delivery. But orders for the inventory, which she listed as slightly more than 17,000 pairs of jeans, come in daily from international distributors, she said. “We do have some closeouts—like everyone else,” she said.
The rumors about Blue Cult’s health have been swirling for some time. Athias said a woman approached her at a recent trade show and asked if the company was going under. “Would I be here if my company was in trouble?” Athias said she responded.
E Street’s George, who reported Blue Cult sales in his shop were constant but not great, said he’d been hearing rumblings about the company for several weeks. “I’m always a little skeptical when a company completely revamps its lines,” he said. The brand, he said, has been in slow decline for several years after its peak of popularity. “If I were a betting man, I’d say where there’s smoke, there’s fire.”
Still, many retailers had nothing but good things to say about the company and the brand. Gary Freedman, owner of the Dungarees denim shop in Studio City, Calif., said it was business as usual at Blue Cult as far as he’s concerned. Lisa Stern, owner of the Brentwood, Calif.–based Ma Jolie boutique and online store, said sales of Blue Cult denim are strong. “It’s a really strong line and my customers love it,” she said, noting the denim is a big hit at both her bricks-and-mortar and online shops.
Executives at Blue Cult are optimistic their efforts will pay off. “We’re not floating on clouds yet, but between slowed down and falling there is a big difference,” Athias said.
