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Richer Poorer Sets New Course After Turmoil

Apparel company Richer Poorer has a pair of matching goals—corporate stability and ambitious sales growth—after a roller-coaster ride over the past five years that included multiple company sales, a change in product focus, and a near brush with bankruptcy.

The San Juan Capistrano-based firm, which got its start in 2012 as a maker of socks but has since added boxer briefs, tees and other related “innerwear” products, is aiming for $10 million in sales this year.

It’s currently looking to raise about $2 million in funds, with a longer term goal to grow the business to $100 million.

A small part of that growth plan rests on a push into physical retail; it just opened a 300-square-foot shop-in-shop at contemporary sportswear boutique Univ in Encinitas ahead of a stand-alone store launch next holiday. The Univ shop is set to stay open through June of next year.

Money from the fund-raise will help the company build up its digital presence and business, in addition to funding the foray into brick-and-mortar, company officials said.

Fashionable Twists

Chief Executive and co-founder Iva Pawling along with co-founder and President Tim Morse don’t intend to stray from the Richer Poorer DNA to meet their longer term goals, looking to avoid artificially propping up their product lineup with a raft of new stock-keeping units to drive sales.

Instead, the two said they’ll buckle down on their focus on basics with some fashionable spins courtesy of design director Jenny Alaimo, who comes to the company from made-to-order fashion firm Frilly Inc.

The spring 2020 collection will reflect the first full breadth of Alaimo’s touch on the Richer Poorer design aesthetic, with a 200 stock-keeping-unit collection to be rolled out to retailers beginning in January.

Richer Poorer’s offerings, all priced under $100, are an edited mix of closet staples—think modal cotton bralettes, a simple midi dress, organic cotton pocket T-shirts, boxers and, of course, socks.

“We’re really focused on those items you love to wear at home but don’t necessarily wear on a day-to-day basis at work, and how do we make those fit better so that you feel comfortable wearing it with a skirt and heels or wearing your sweats with a blazer, because, from a macro trend, we’re all getting very uncomfortable with being uncomfortable,” Pawling said.

Shoes.com Swap

Pawling and Morse met in a Laguna Beach spin cycle class Morse was teaching. They funneled $15,000 in cash and maxed out a $30,000 credit card to start the business.

Pawling, whose sister Gorjana Reidel started her namesake Laguna Beach jewelry business with husband, Jason Reidel, cut her teeth in the startup world working at Gorjana. However, she was itching to break out and start something of her own.

Morse, who grew up in Laguna Beach surfing and skating, came with expertise in the action sports world. The two hit it off, bonding over their love of fitness.

Richer Poorer raised a small round of financing from investors in 2012; early investors included Patrick Carney, drummer for rock band The Black Keys.

Three years later, Canadian e-tailer Shoes.com paid $12 million to buy the growing business.

Pawling and Morse saw the deal as something that would give Richer Poorer a much stronger backbone in e-commerce from a company that had been able to scale other brands to hundreds of millions in digital sales. Operational problems at Shoes.com, however, soon led it toward bankruptcy, prompting Pawling and Morse to move quickly and strike a deal to buy back the company for a reported $8 million with the help of two Shoes.com board members in 2017.

That deal was completed weeks before its former parent turned to the courts to restructure. Last June, Pawley and Morse bought out the two board members.

Product Mix Switch

Richer Poorer had its own restructuring to figure out, in terms of product mix.

It has gone from an 80% sock business to about 70% apparel, and from 80% of its business geared toward men to now nearly 70% of its sales for women.

Beginning in 2015, “it was a really crazy almost four years,” Pawling said.

“The last six months things have really settled down for us because when we got the business back, we set ourselves on a new course and decided on what we want to do over the next five years. We built a new team to do that and have been consistently driving that single point of direction.

“But over that three-year stretch it was total chaos. Every six months something new, some sort of bomb was dropping in our laps.”

Now, “we’re pointed in a direction that I don’t feel like there’s going to be some crazy transition anytime soon,” Morse said.

Wholesale Focus

The company’s products are made in Peru, Bangladesh, Vietnam, Guatemala, and a small amount domestically.

Sales are still driven mostly by wholesale—with the line in anywhere from 400 to 500 stores depending on the season—and direct-to-consumer accounting for just under 40% this year.

That will likely even out to about a 50/50 split next year, according to Pawling.

While there was an attempt in the earlier years to expand distribution through surf and skate retailers, Richer Poorer has always lived comfortably in the contemporary fashion world signing deals from the start with retailers such as Nordstrom and directional boutiques like American Rag Cie.

That move would later allow it to ride out the action sports industry’s contraction.

“I worked at local surf shops. I love to surf. I love to skate. I love to do all those things, so it was near and dear to my heart,” Morse said. “I wanted to somehow build distribution in that [action sports] space.

“We saw that there were companies like [San Clemente-based sock maker] Stance and others out there that had raised a lot of money and we saw that there was an opportunity to maybe be a Pepsi to their Coke kind of thing. I thing if you look back, Iva comes from contemporary. I like fashion. We like that more elevated design point of view.

“We weren’t about smashing trends and licensing product and putting Star Wars on our socks. That’s never who we were, so it made sense for us to evolve more into an apparel company.”  

Next Moves

Moving forward, women’s will be Richer Poorer’s greatest opportunity for growth, given the sheer number of specialty retailers they have the opportunity to work with—there’s nearly 60,000 women’s shops domestically versus 11,000 for men’s.

Locking down that distribution will be a key focal point for the Richer Poorer team, which now counts 25 people at its headquarters and another eight in its San Marcos distribution center.

Where the two founders had initially been in every single meeting together, that’s no longer practical as the business grows and each of them balances the company with their own personal lives—each has two kids.

“It’s just the frenetic pace of life that we have to balance,” Morse said.

Still, some days come easier than other as Pawling shook her head, “yesterday almost killed me.”

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