Growing older hasn’t been easy for Santa Ana-based Cachcach, a maker of upscale baby and kids clothes.
The 23-year-old company continues to tweak production to counter rising costs, including from the usual litany: medical insurance, minimum wage and rent.
“I’m in a position at this point where it’s imperative I cut my labor costs or we’ll start losing money every year,” Chief Executive Paul Kohne said. “I’m right on the cusp where profitability can easily turn to losses.”
The battle isn’t new for Cachcach, one of the few companies that still sews and makes its clothes in Orange County.
In the past few years, the company has scaled back operations and gradually moved some production overseas to keep profits and counter higher costs.
Cachcach now has about 50 workers, roughly half of what it counted in its 1990s heyday, and down from 60 in 2004. Sales have been flat the past few years at about $5 million, Kohne said.
The company already has shifted about 25% of production to China. Kohne laments his costs still are way too high.
He’s now scouting around in Mexico to open his own border factory in Tecate, where he said he plans to shift about 55% more of production by the end of 2008, mainly sewing and assembly.
“It has to be hand done,” he said. “You can’t have a robot doing it.”
Clothes still will be cut, embroidered and shipped from here, Kohne said.
Some of Cachcach’s supervisors may shift to the Mexico plant, he said. The company expects to keep about 35 to 40 workers in OC, mostly for the office and warehouse and for cutting and embroidering.
The move is expected to cut Cachcach’s labor costs by about 50%, Kohne said. He said he’s not sure yet whether he’ll keep his 25,000-square-foot warehouse in Santa Ana or downsize.
One thing is certain: the days of cutting, sewing and shipping clothes in one place are over, Kohne said.
“That business model can’t work in California anymore,” he said.
By lowering costs, the company may look to cut its prices in a bid to appeal to department stores, he said. Sales to department stores fell further after Cachcach started raising prices in 2005 to “reflect the increases in costs,” Kohne said.
The company’s themed baby blankets, clothes and hats sell for $30 to $100.
Cachcach now sells to about 600 to 700 stores, mainly kids boutiques, such as Petit Bonhomme in San Clemente, The Red Balloon in Newport Beach and Bassinets & Blueberries in Costa Mesa. It also sells to some department stores, such as Neiman Marcus.
That’s down from about 1,800 in 1996. Moves by big retailers into children’s fashion,all carrying an array of lower-priced clothes with a similar fashion spin,have pinched smaller boutiques.
The company also is trying out a line of clothes aimed at “tween” girls ages 7 to 12. The line, A La Cart, just started shipping to stores.
It includes pants, tops, skirts and more,ranging from $20 to $80,that buyers can mix and match, Kohne said.
The company knows designs must be hip and hit a chord with shoppers. Tween girls are fickle. Most likely haven’t heard of A La Cart, Kohne said.
