California Apparel News

In May, when RVCA accepted the Surf Industry Manufacturers Association’s Buzz Brand of the Year award for the second consecutive time, the company’s acceptance speech was typical for an emerging business trying to find its footing. Facing an audience filled with manufacturers and retailers, one representative exclaimed: “We ship really late, and you take our stuff. We wouldn’t be here without you guys.”

Spectators laughed, and RVCA employees belted shots of tequila at the podium.

“We’re trying to get really organized at RVCA,” the employee finished.

The popular lifestyle apparel label, which straddles the fence between boutiques and action-sports specialty shops, is working on structuring a factoring facility with Wells Fargo Century. With a factor, RVCA will ship, for the very first time, Holiday products to retailers before Thanksgiving, said Pat Tenore, who founded RVCA in 2001 with Conan Hayes and who heads design at the Costa Mesa, Calif.–based company. RVCA also will finally have cash flow, which previously was tied up for as long as five months, Tenore said. “My partner and I don’t have deep pockets or assets,” he noted.

RVCA is taking a big step to manage its growth as rumors swirl that it was considering taking an investor to inject much-needed cash into the company. Working with a factor also would help RVCA end the pattern of shipping late or incomplete orders.

“Right now, I receive less than half of what I ordered for Spring and Summer,” said Hayes Overton, the men’s buyer at ZJ Boarding House in Santa Monica, Calif., which started carrying RVCA three years ago. What does come in arrives “very late,” he said. “It’ll still go, but it definitely has a negative affect [on business],” he said.

RVCA’s problems illustrate the challenges a young company faces when it vies to grow but does not want to sell out. The entrepreneurs have more ideas than business savvy and cash.

Frank Kaufman, business assurance partner at RVCA’s accounting firm, Moss Adams LLP in Irvine, Calif., admitted that RVCA is experiencing growing pains. “Since day one, they have been behind in delivering,” he said. “The demand outstrips the supply.”

Kaufman said RVCA is adding to its infrastructure. It recently hired Eric Thomas, who previously worked for Adriano Goldschmied and G-Star, as its national sales manager.

Wells Fargo Century is waiting for additional financial information from RVCA, said Kevin Sullivan, who is executive vice president and Western regional manager in Wells Fargo & Co.’s factoring division in Los Angeles and Irvine. “We believe that, if RVCA were utilizing the services of a company such as Wells Fargo Century, it would go a long way to helping them better manage customer relationships since they would essentially let us handle credit collection for them,” he said.

Being a lifestyle apparel brand also brings an added dimension. The lifestyle tag can mean the best of two worlds. Not only can a company sell to the core surf and skate shops, but it also can find a home in boutiques. At the same time, it can trip up in the intricacies of calculating margins.

“A lot of the lifestyle brands get in trouble because they are balancing [on] the fence,” said Robert Keirstead, who co-owns a contemporary boutique called Indigo, which also is based in Santa Monica and carries RVCA. He said many skate shops have lower prices than boutiques.

At Indigo, RVCA’s menswear hangs next to items from Robert Graham and Ted Baker London. But RVCA is a bargain in comparison. RVCA’s jacket featuring an Indian head appliqueacute; and its cotton tees sell for $70 and $26, respectively, while the Robert Graham field jacket retails for $324 and the Ted Baker cotton sweater goes for $148.

Keirstead said the lifestyle brands must ask: “Where is the markup? Do you lose out selling to the skate and surf people?”

In addition to ZJ Boarding House, another core shop that stocks RVCA is Laguna Surf & Sport. Eric John, the owner of Laguna Surf & Sport, said RVCA sells out despite the late deliveries.

RVCA’s trend-setting designs reflect the eclectic interests of its founders. Hayes dug into the savings he amassed during his professional surfing career to front the money for the venture. He now oversees production. Tenore, who has a black belt in jujitsu as well as some design and retail experience, provides the vision for the men’s and women’s collections, which include long-sleeved woven shirts dotted with skull appliqueacute;s and incredibly soft T-shirts screen-printed with artists’ drawings.

In an interview earlier this year, Thomas said the company’s wholesale volume reached $6.5 million in 2004 and is projected to increase more than 50 percent to $10 million in 2005.

Tenore acknowledged that RVCA has a core group of loyal retailers. In spite of the late or incomplete deliveries, its customers want it to succeed. “We love the design,” ZJ Boarding House’s Overton said. “They’re pretty much on the track that they could be the next big brand in our industry if they can pull it off.”