Blue Cult Shakeup Continues
Sources close to embattled denim maker Blue Cult are reporting yet another changing of the guard.
After only a few months at the helm, Michael Mechaly, the nephew of founder David Mechaly, is reportedly out as the company president. Sources say Michael was forced to resign when David Mechaly brought in his formerly estranged son and founder of 575 Denim, Frank Mechaly, as a partner.
Earlier this year Michael Mechaly spearheaded a plan to revive the foundering denim company. Key to the plan was a sales partnership with Mikey Koffman, owner of The Gallery showroom in the Cooper Design Space in Los Angeles. Koffman, who also managed sales for Michael Mechaly’s own denim brand, Coil, trained sales reps on both coasts for Blue Cult and managed the brand’s sales since March, which clocked in at approximately $50,000 each month. Now, Koffman has terminated her relationship with Blue Cult, saying David Mechaly has refused to honor the Blue Cult sales orders written by The Gallery and has refused to pay commissions to her showroom and the sales reps hired for the brand. The bilked sales reps are exploring legal options for recuperating monies and commissions owed to them by Blue Cult, Koffman said.
Frank Mechaly, who left Blue Cult in 2004 after a fallout with his father, confirmed the partnership between 575 and Blue Cult and added that Michael Mechaly quit the company in June. “Both companies—575 and Blue Cult—remain totally separate. I will be temporarily managing Blue Cult’s production and sales,” Frank Mechaly said.As part of the deal, he will be hiring and training corporate sales reps. “My main concern is to make sure Blue Cult’s jeans fit like the original Blue Cult and have the original washes and sewing techniques. I want to go back to what made Blue Cult successful in the first place,” Frank Mechaly said. Coil, which launched in 2006 and began shipping in 2007, is part of the partnership.
There isn’t any word yet on the exact terms of the partnership or how long it will last. In the meantime, Blue Cult may move out of its Vernon, Calif., headquarters and into 575’s offices in Los Angeles. Blue Cult executives could not be reached for comment because the company’s phone numbers had been disconnected.
Blue Cult’s jeans are still available from online retailers, including Bluefly.com, Zappos.com and Revolveclothing.com at discounted prices, but many bricks-andmortar retailers, including Saks Fifth Avenue and E Street Denim, have dropped the line. 575 Denim, which launched in 2005, retails for upwards of $200 at specialty stores, including Metropark, H. Lorenzo, Lisa Kline, The Closet and Villains.
Blue Cult, which makes premium jeans under the Blue Cult label and licenses its Blue 2 juniors brand to Nzania in Irvine, Calif., has been struggling for several years.In 2006, there were reports of mass layoffs, languishing inventory, production woes and persistent rumors that the company was on the chopping block. The following year saw more layoffs, the demise of several Blue Cult labels (including its much-ballyhooed Blue Cult Elite brand, Sacred Blue, Sacred and Blue Cult Knits) and rumors that the company was on the hunt for investors.On January 30, Cathay Bank filed a promissory note and collections suit against Blue Cop, Blue Cult’s manufacturing arm, in Los Angeles Superior Court. According to court documents, as of Jan. 24, Blue Cop owed Cathay Bank more than $2 million, and the bank has taken possession of all of Blue Cop’s present and future assets, from inventory and equipment to accounts receivable and software—all of which will be sold to cover Blue Cop’s debt. In March, co-founder and key executive Caroline Athias stepped aside to make room for Michael Mechaly.
Frank Mechaly, for his part, has had legal troubles of his own. In the last year, Frank Mechaly and his companies, Jeanius Corp. and 575 Denim, have been defendants in five lawsuits filed in Los Angeles Superior Court alone. All but one case have been settled out of court.—Erin Barajas
