Economic downturns can be particularly tough on young apparel companies that don’t have substantial cash reserves. I spoke with the owners of three brands to see how they are weathering the economic storm.
Atwater
Dean Bradley is the founder and owner of Costa Mesa-based Atwater Collection, an art-driven surf brand that is nominated in the “Breakthrough Brand of the Year” category for the upcoming Surf Industry Manufactur-ers Association Image Awards.
Bradley said Atwater, with less than $5 million in annual revenue, is “definitely” feeling the impact of the recession.
“We can’t ship (retail) accounts that are on credit hold, so we are having to balance our accounts that have fallen on hard times with opening new accounts,” he said. “It is survival mode out there right now. The bright side is we are a very small operation with very low overhead, so we are nimble and capable to adapt.”
The company has narrowed its collection to key strengths such as T-shirts, boardshorts, button-down shirts and denim. A plan to launch a line for young women has been delayed until the market improves.
Orders for the fall season are ahead of last year, so Atwater is “optimistic,” Bradley said.
“We are definitely still growing despite the economic climate,” he said.
The three-year-old brand’s best success has come with larger, independent surf shops, many with multiple locations, such as Huntington Beach-based Jack’s Surfboards, Surfside Sports in Costa Mesa, San Diego-based Sun Diego Boardshops, Spyder Surf in Hermosa Beach and Val Surf in San Fernando Valley.
Atwater also is landing in East Coast surf shops after hiring four new sales representatives for that region.
Bradley believes the company can use its momentum and a close hold on expenses to survive.
“We have high hopes,” he said. “Our sales are up and the recent nomination for SIMA’s Breakthrough Brand of the Year award really gave us and our retailers a boost of confidence. We have the resources to keep charging ahead with tight financial budgeting.”
O’Quinn Clothing
Dean Quinn, the founder and owner of O’Quinn Clothing, is working to quash rumors that the company is going out of
business.
Huntington Beach-based O’Quinn is a high-priced, fashion-oriented, surf-inspired line that found success in Bloomingdale’s and Fred Segal as well as some surf shops. It recently formed a partnership with a company, which Quinn declined to name, that owns T-shirt factories in Central America. He said the alliance would allow O’Quinn to make clothes more inexpensively and pass those savings on to retailers.
And, it will help O’Quinn offer fresh goods to retailers more frequently, Quinn said.
“(We can) give the retailer quick turn product,new T-shirts designs every 60 days delivered no longer then two weeks from taking the order,” Quinn said. “With retailers not knowing what’s going to happen 120 days or even 30 days from now, we can get them the product they need in a very short time.”
The new partnership also helps O’Quinn’s financial stability.
“Having a new partner that gives us credit stability is the key,” Quinn said. “When you’re a new, small company with very little assets, the factors and vendors only give you a small line of credit. If you want to take a big order and you’re only factored for a portion of it, it can hurt your cash flow.”
O’Quinn, which started two years ago, also cut its overhead by reducing its staff and moving to smaller headquarters.
“It was very hard to do, but it had to be done,” said Quinn, who declined to disclose annual revenue. “With our new partners and a reduced overhead, we became a much stronger company.”
Factor54
Factor54 partners Todd Miller and Ted Wueste, working from a small revenue base, had planned for explosive growth this year after raising money from investors to help finance the growth.
They have since moderated their forecasts because of the economy, though the company still is planning on 100% to 200% growth, Wueste said.
Factor54 is based in Costa Mesa and has just recently expanded from T-shirts, hats and boardshorts into denim and button-down shirts. It targets buyers attracted to the surf and skateboard style.
So far, Factor54 hasn’t had any retailers cancel orders, but storeowners are being cautious and are ordering more during the season rather booking orders ahead of time. Retailers are still paying, and the company only has one delinquent account out of about 150 customers, Wueste said.
Factor54 is encouraged by several new developments including hiring designer Rick Maderis, who is helping to define Factor54’s style. Previously, the clothes had more of a street feel that thrived in skate shops but didn’t do as well in some traditional surf shops, Wueste said.
Miller, a former professional surfer, and Wueste are glad they canceled plans to move to an office when the economy began to slow. They work out of the garage behind Miller’s house in Costa Mesa.
“We’re bursting at the seams, but we decided to get some offsite storage and add new shelves,” Wueste said. “We are operating very bare-bones. We are not going to blow the money we raised. We want to be here through this contraction at the retail and manufacturer level.”
Montgomery is the founder of Shop-eat-surf.com, a business news Web site for action sports executives.
