Retail Weakness Results in Layoffs at Major Los Angeles Contemporary Brands

Manufacturing

As of Thursday, September 15, 2016

High-end Los Angeles labels that have strong brand recognition are going through troubled times.

Two months after Delta Galil acquired 7 For All Mankind, Ella Moss and Splendid, the Israeli company is laying off 65 people at the companies it acquired. This is after 73 people were laid off in February at 7 For All Mankind by its former owner, VF Corp.

In addition, J Brand, the premium-denim line founded in 2004 by Jeff Rudes, notified the state Employment Development Department in August that 27 people would be losing their jobs in mid-November. J Brand was sold to Fast Retailing Co., the Japanese parent company of Uniqlo, at the end of 2012. For fiscal 2011, J Brand had $124 million in net sales, the last year annual sales were made public.

Neither Delta Galil nor J Brand responded to requests for comment by press time.

Employees at 7 For All Mankind, Ella Moss and Splendid were notified on Sept. 7 and Sept. 8 that there would be cuts across all departments, inside sources said.

In addition, 7 For All Mankind’s offices, located in a luxurious, chandelier-laden converted warehouse in Vernon, Calif., will eventually be merged with the offices of Ella Moss and Splendid, which moved three years ago to Alameda Square, near downtown Los Angeles.

The cuts at the three contemporary labels owned by Delta Galil went across several departments, including marketing, merchandising, retail, design and operations, sources said.

Among those who lost their jobs was the vice president of marketing as well as the director of men’s merchandising, the director of retail, the men’s senior buyer, the junior buyer for outlets and the president’s executive assistant, a former employee said.

Those losing their jobs were told that the firings were due to restructuring under the new owner.

Last June, Delta Galil announced it was buying the three high-end labels from VF Corp. for $120 million. The deal, which was finalized on Aug. 28, was considered a bargain.

VF Corp., based in Greensboro, N.C., bought 7 For All Mankind nine years ago for $775 million. VF already owned a one-third stake in Mo Industries, the parent company of Splendid and Ella Moss, in 2009, when the company acquired the other two-thirds for $161 million plus $47 million in debt.

Prior to selling the three contemporary brands, VF Corp. saw its annual revenues for the labels slip three years in a row from $415.1 million in 2013 to $344.1 million in 2015.

The acquisition of the three brands was expected to add $300 million to Delta Galil’s annual sales in 2017.

Delta Galil is a more than 40-year-old manufacturer of apparel, intimates and activewear based in Tel Aviv. It owns several lingerie brands as well as P.J. Salvage, a sleepwear and loungewear brand in Irvine, Calif., acquired last year.

The Israeli company, which is traded on the Tel Aviv Stock Exchange, has been feeling some financial headwinds lately. In recently released financial statements, the clothing company said that its sales for the first six months of the year were $506.2 million, down from $508.3 million the previous year. Sales for the second quarter ending June 30 were off 2 percent to $249.5 million compared to $255.5 million last year.

Delta Galil Chief Executive Isaac Dabah said the company experienced a “challenging U.S. retail environment” during the second quarter of this year. The Israeli clothing company expects continued softness in the U.S. retail market for the rest of the year.