J Fin Group believes in the little guy: smallish brands with solid designs and loyal followings that just need some help on the backend.
The Irvine-based apparel company formed about 1 ½ years ago when it made its first of two purchases of men’s lifestyle brands rooted in action sports: Split and Ambig.
It’s led by an apparel industry veteran and former executive at Manhattan-based streetwear brand Eckō and has hooked up with a Texas service provider that’s been in business for more than 40 years. And earlier this year it signed a licensing deal to produce apparel, along with consumer electronics gear and accessories for Carlsbad-based Spy Inc.
J Fin began 2014 with $20 million in annual sales and 15 workers at its 2,300-square-foot headquarters in the Irvine Spectrum.
Now Chief Executive Jock Thompson is out to clear a new path for the Split and Ambig labels, both formerly based in Santa Ana.
The idea is to refine both brands’ place in the market while smoothing out their operations—a specialty of Scope Imports Inc. The Houston-based company helps fill operational gaps for smaller brands that have the creative savvy to pull off good-looking lines but lack the business acumen needed to stay afloat over the long term.
Scope owns the Burnside and Subculture lifestyle brands, both of which do about $40 million in annual sales, according to Business Journal estimates. The company also hires itself out to provide IT, legal, accounting, financing and other back-end functions to Split, Ambig and other brands.
Thompson and some of Scope’s owners are part of the investment group that owns J Fin. He was sent to Orange County from New York to handle the Split takeover, which was followed by the purchase last January of Ambig, both from Santa Ana-based Life Distribution LLC.
Christie Vogt served as president of the brands and now handles Ambig sales.
Thompson declined to say how much the company paid for the brands, both of which have annual sales of less than $10 million.
“We’re in the apparel business—it’s what we do and what we know, and [Split] was a good opportunity,” Thompson said. “There was a lot happening in the midtier market in the JCPenneys and the specialty market, and [this] was an opportunity to try to find a brand that we could bring there.”
Split
Split relaunched last January, and there now are plans for the brand to return to the juniors segment, which it left in 2011. It hopes to have a soft-launch line ready for girls in time for the back-to-school season.
The original plan was to keep Split in the midtier segment of the retail market, but Thompson said the owners “fell in love with our purchase” and decided to take it to higher-end retailers right away, going into stores such as Zumiez and Active Ride Shop. The thinking was to get the brand in the sections of stores known in the trade as the collections area, which are generally a notch above shelves full of T-shirts and other basics.
Split and Ambig cover a range at retail. A long-sleeved shirt under the Split label, for example, sells for about $29. A similar Ambig shirt sells closer to $50.
J Fin’s most recent deal with Spy put the company into a new category altogether, what Thompson called a “fantastic opportunity” and one he hopes successfully propels the portfolio beyond apparel.
“Spy made sense [because] quite frankly, we had been looking to pivot off of apparel,” Thompson said. “Apparel is a little difficult. It’s challenging, and margins can be tough, and we wanted to diversify. Consumer electronics is firecracker-hot right now.”
It’s a $208 billion-a-year industry, according to the Consumer Electronics Association in Arlington, Va.
The trick for J Fin was to identify a brand with similar distribution channels that would allow it to easily get new products into stores for test runs in hopes of developing bigger accounts, such as Best Buy.
Thompson said more acquisitions could happen and that he’s always talking to prospective sellers. Additional licensing agreements aren’t in the cards, he said, adding that the Spy deal likely wouldn’t have happened if it hadn’t included the chance to expand into consumer electronics.
“It’s really more about owning the brands,” Thompson said. “It used to be that the apparel industry was a much easier business and the consumer had so much wind behind his sails, and there were so many retailers that you could just build [a brand] and they would come, and you could build these mega brands.”
J Fin’s owners see today’s opportunity in providing stability to smaller brands by offering them a stronger operating backbone.
Transition
The past year for Ambig and Split could best be described as a transition. Split was easy relative to the major changes that took place at Ambig, which had been marketing to younger skate kids. Research later showed Ambig’s typical customer is an older male in college or about to graduate. That finding required a new marketing playbook.
There was also operational retooling to create efficiencies.
Designers at both brands, for example, are now responsible for seeing their garments through the entire process, from design to development, which forces them to better understand the overall business.
“Since J Fin has acquired Ambig, my role has become more on the business side of apparel design,” said Ambig Design Director Amy Beams. “I have been to China twice in the last year and have been able to make decisions that make sense with J Fin’s business model. It’s been quite a learning experience, and I love it.”
The internal change didn’t come without struggles, including some employees parting ways with the company. The new mindset nevertheless has J Fin prepared for a paradigm shift taking place in the industry, according to Thompson.
“My partners and I, we always talk about how we’re bankers,” he said. “We’re not apparel guys anymore. We’re looking for a half a point there or a half a point here. You need to be efficient.”
Competition from companies at the top of the food chain has made it tough for startups to enter the market, and a lack of innovation from those at the top has created a somewhat stagnant environment.
“[Larger companies have] suffocated out all these little brands by taking up all that space, taking up all that air, (so) that none of these little brands have had a chance to exist,” he said. “You perceive the barriers to entry in this industry as very low, so any three kids with a passion can get into the industry, and they start creating newness. What I tell our guys all the time is that’s who you compete with.”
Instilling a sense of hunger in the office as though Ambig and Split—nearly 20 and 30 years old, respectively—were startups is what will give the brands longevity.
“We’re not spending like it’s going to break out,” Thompson said. “We’re spending like we’re going to support this and understand that the vision isn’t what it used to be, which is, ‘Hey, we’re going to be billionaires, and it’s going to be the greatest brand ever.’ And that goes back to your competition being those three kids that just graduated school that have no money but have all the passion in the world. It’s a shift in apparel.”
