Just as Falmer Jeans began to register improved margins and market share following efforts by chief executive Chris Howell to turn around the flagging brand, time ran out and the company went into administration (MW October 15).
Like Yardley, which went into receivership a month ago, Falmer was a huge brand in the Seventies – bigger in the UK than Levi’s, the company claims. But, again like Yardley, the cost of attempts to revive the brand in the Nineties has led to unmanageable debts.
Falmer’s directors called in the administrators after creditors, who are owed about 5m, applied pressure. The company is looking for an investor to buy time to further the revival of the brand and throw a lifeline to Falmer’s principal investor, 3i, which has a 45 per cent stake reportedly worth 1m.
The company is not looking for a buyer. The administrators claim to have rejected three rival takeover offers, as well as a rescue proposal from Joe Bloggs investor Shami Ahmed.
Colin Wiseman of Moore Stephens Booth White, which is handling the administration, explains Falmer’s recent demise: “It had no reserves to weather the downturn in the market.”
Unit sales of jeans have fallen by about 15 per cent in the past year, and the market has polarised between cheaper own-label jeans and upmarket designer lines. Mid-market players, including Falmer, Lee and Levi’s are squeezed in the middle.
Howell was hired in 1996 from rival jeans maker Lee Cooper, where he was managing director. He bought a 20 per cent share of Falmer and has been working to turn around the business ever since.
According to Falmer marketing controller Liz Lawley, the company was losing money when he was taken on. “He came in and relaunched the brand. The ranges were trying to be everything to everyone and the distribution was poor.
“Howell has refocused the brand and targeted it at the youth end of the market,” she says.
Despite last Tuesday’s events, he has had some success. The company’s figures for 1997 show a profit of 72,000 on sales of 22.6m, compared with a loss of 346,000 on sales of 23.7m in 1996. AC Nielsen figures for the year ending May 1998 showed that the company’s sales to men rose by 15.5 per cent and sales to women rose by 3.7 per cent. It was one of the only labels which saw sales rise in the period.
The company has recently started to manufacture own-label jeans from its factory in Scotland. One of its main customers is thought to be Arcadia, parent of Top Shop and Dorothy Perkins. The administrators intend to enlarge Falmer’s own-label manufacturing base.
Howell’s turnaround programme has included developing the brand’s overseas sales. The company opened its first store in Seoul a year ago. Howell appointed Tim Ormiston, who brought fashion label Liz Claiborne to the UK, as international brand director to manage the expansion (MW January 22), but Ormiston left the company during the summer.
Howell also oversaw the purchase of trendy streetwear label Dosse at the beginning of this year. The intention was to win a share of the market that Falmer and the other jeans makers had lost to the streetwear market.
But one of the greatest trials facing Falmer has been its battle to build sales of men’s jeans. Most recently, Falmer has been negotiating a deal to distribute Hardcore jeans – a menswear brand – in the UK and across Europe (MW October 8).
It is understood a deal was close to being signed with Hardcore owner Dutyapply when Falmer went into administration. It may still go through. As Wiseman says: “Business is continuing to trade exactly as before.”
No doubt the cost of implementing some of these rescue schemes now accounts for a significant slice of the 5m Falmer owes, but if UK jeans sales had not collapsed when they did, perhaps the debts could have been met.
Falmer is not the only jeans label busy behind the scenes. VF Corporation has merged the management, including its sales and marketing teams, for all its jeans brands including Wrangler and Lee and budget lines Maverick and Old Axe. It also pulled its advertising account out of Grey and moved it to Fallon McElligott in April (MW April 16).
Levi-Strauss is merging the sales and marketing operations for its Dockers and Levi’s brands (MW September 10) and is creating two brand categories: youth and young adult. It is part of a global rethink after damage to the bottom line forced the company to close four European factories and two in the US with expected job losses of about 2,500.
Consumers are aware that Levi- Strauss is changing. The company dropped its 501 ad campaign, which had been running for 13 years, in the summer (MW August 6), and replaced it with a branding campaign.
It was a significant move. The depressed UK denim market was looking to Levi’s, the market leader, to create a rise in demand for jeans across the board.
One jeans industry expert criticises the new branding campaign, created by Bartle Bogle Hegarty. He says: “The ads are too obscure for most people. It’s a mainstream brand but the ads make it a niche player.” A spokeswoman for Levi’s denies this, saying the ads have a broad appeal and have got people talking about the brand.
Styles such as combat and sports trousers have shifted the focus away from jeans. Denim companies are making all three. As Kelvin Vidler, managing director of Lee Cooper, says: “The market is probably worth the same as it was, if you include combat and carpenter trousers.”
However, Tamsin Lay, account director of FashionTrak at Taylor Nelson Sofres, says: “The same thing happened in the Eighties with leggings and shell suits stealing share. Jeans will come back. They can’t carry on declining.”
Her opinion is in keeping with that of Falmer’s Lawley, who has worked at the company for 15 years: “The jeans market has always been cyclical, but this is the worst downturn we have had.”
As the decline in branded jeans continues, Falmer will be forced further into lower-margin own-label production unless someone stumps up the funds to revive the brand. The administrators must effect a restructure and put the creditors at ease, or change their stance and seek a buyer.
Either way, there will be more bad news for jeans manufacturers over the coming months.