California Apparel News

When George Feldenkreis, a Cuban immigrant living in Miami, started out in the apparel industry, he was known as the “guayabera king,” the person who imported thousands of those boxy pleated shirts so popular with men in humid climes such as Latin America.

Today, Feldenkreis could be considered the “brand king,” after sweeping up scads of labels, including the one that became his company’s namesake, Perry Ellis International, where he is chairman and chief executive.

Brand building was a concept introduced to the company by Feldenkreis’ son, Oscar, more than 20 years ago, when Oscar was just a college-age kid. Now the younger Feldenkreis, president and chief operating officer of Perry Ellis in Miami, is working with his father to keep branding at the forefront of the $864 million company with a long but varied history.

As a novice entrepreneur in the 1980s, Oscar Feldenkreis started inventing his own brands, such as Feldini, Italianstyle men’s dress pants sold at department stores, and NaturalIssue , a label that started out as sand-washed silk shirts for men.

But it wasn’t until 1996 that the Feldenkreises, whose publicly traded company at the time was called Supreme International Corp., actually bought their first brand. It was Munsingwear and the Original Penguin by Munsingwear labels. Two years later, they swept up the Perry Ellis trademark for $77 million and changed their company’s name.

This year, their brand strategy has turned westward, veering away from their predominantly menswear offerings and embracing the women’s contemporary market, where retail sales have remained strong despite slowing retail sales. And contemporary is a category that has been fostered by L.A. designers who are always on the cuttingedge of lifestyle trends.

In February, Perry Ellis bought C&C California, best known for its buttery-soft T-shirts featured on Oprah Winfrey’s TV show shortly after the line launched in 2002, and Laundry by Shelli Segal, known for its sleek dresses, for $33.1 million, including $10 million in inventory, from Liz Claiborne Inc. Perry Ellis’ plan is to keep the two brands in Los Angeles and grow them in several ways that Liz Claiborne never did. C&C and Laundry now share offices and a warehouse in Commerce, Calif., the Southern California industrial city near downtown Los Angeles where many garment manufacturers are based.

Liz Claiborne changed the name of Laundry to Laundry by Design after founder Shelli Segal left the brand. But Perry Ellis opted to restore the Laundry by Shelli Segal name. Segal now works for a children’s label in Los Angeles.

“We felt that the people who knew the brand and the dress market are based predominantly out of Los Angeles,” Oscar Feldenkreis said. “We met with Shelli Segal over breakfast and the team that had been at the brand for five years.”

Sales for both brands should be rather even this year, Feldenkreis said, totaling between $50 million to $55 million, but then volume should grow by 10 percent to 15 percent a year with several ideas in the works.

“Our intention is to create a California lifestyle brand with C&C and develop men’s, kids’, ladies’ and girls’ products as well as loungewear [and] swimwear and possibly look for a licensee to develop canvas shoes,” Feldenkreis said. C&C swimwear could be on the market by November or December. Wovens and bottoms are another addition in the works.

C&C, whose T-shirts sell at specialty stores and upscale department stores for $40 to $58 and whose knit dresses go for $98 to $168, will continue to be manufactured in Los Angeles. “Quick turn has been one of the biggest successes of C&C,” Feldenkreis said.

Stephen Cox, who managed the C&C California brands under Liz Claiborne, has been retained as head of the C&C team.

Veronica Davis, who used to work for contemporary label A.B.S. by Allen Schwartz and mass merchandiser Kellwood, is taking the reins of Laundry, which had been operating out of offices in New York and California. The plan for Laundry, which now consists of social and day dresses that retail for $165 to $455 and are made mostly in Asia, is also to add licenses for jewelry, accessories and fragrances, as well as swimwear. Last year, Laundry’s revenues were $30 million for dresses sold in stores such as Bloomingdale’s, Nordstrom and Neiman Marcus.

Swimwear is a market that Perry Ellis knows well. The company produces swimsuits under such labels as Jantzen, JAG and Nike Swim. Swimwear, designed mostly at the company’s Culver City, Calif., office, accounted for 8 percent of net sales in fiscal 2007.

Perry Ellis is also deep into the surfwear scene, with an office in Orange County that manages the company’s Gotcha, Redsand and MCD labels. In total, Perry Ellis has about 165 people working in Southern California.

Broad brand

However, some are wondering if Perry Ellis isn’t spreading itself too thin, much like Liz Claiborne did during its brand-buying spree. The New York apparel giant acquired several labels, including Sigrid Olsen, Ellen Tracy, Dana Buchman, Prana and others, only to shed them in a fire sale that started last summer. The company kept several labels, including Lucky Brand Jeans, Juicy Couture, Kate Spade and Mexx.

Liz Claiborne owned C&C for no more than three years, with the original deal valued at $47 million, according to a press release at the time. Last year, C&C had annual revenues of about $23 million.

“Perry Ellis doesn’t just dabble in an area to add $75 million in sales. If they go into it, they want to go into it in a big way,” said Robin Murchison, an analyst in Nashville, Tenn., who covers Perry Ellis for SunTrust Robinson Humphrey. “It looks like this is their initial move into women’s [contemporary] and should help them see their margin structure at Perry expand.”

Murchison noted that womenswear normally has gross margins of 55 percent to 60 percent, much higher than menswear, which has gross margins that hover around the 33 percent to 35 percent mark.

Jeff Mintz, an analyst in Los Angeles who covers Perry Ellis for Wedbush Morgan Securities, said the purchase of these two California-centric brands is a good entry point for Perry Ellis into upscale womenswear. “I think it is an interesting purchase for them because they are pretty much a menswear company. They do women’s in swimwear and have a small women’s business in the Original Penguin and golf attire. But those are all small,” he said. “This is a good growth opportunity for them.”

It will be intriguing to see how these feminine labels blend in with Perry Ellis’ other brands, such as Cubavera, Savane, Farah, Manhattan, the Havanera Co. and Mondodi Marco.

One message board for Perry Ellis investors had this observation: “George and Oscar, two wild and crazy guys. Wild, still buying more business and piling on the debt, or crazy, buying this business as we are getting into a recession that could well be deeper and longer than anyone expects. Wild or crazy—you make the call.”