No Day at the Beach

Swimwear maker Beach Patrol put into receivership

Swimwear maker Beach Patrol Inc., whose stable of junior and contemporary labels include Jag, Esprit Beach, Daffy and L.E.I., has been taken over by a court-appointed receiver at the request of the swimwear maker’s principal lender.

CIT Group/Commercial Services Inc., a Los Angeles factor that loans manufacturers money in return for their accounts receivables, went to Los Angeles Superior Court April 20 to recuperate $14.5 million it said it was owed by Beach Patrol. CIT filed a breach of contract complaint and requested recovery of personal property.

The court appointed Leon Owens as the receiver to take over Beach Patrol, located in the Los Angeles suburb of Carson, Calif.

The court action throws the company’s future into uncertainty. It can be reorganized, sold or dissolved.

“The receiver is in the process of taking existing inventory to fill existing orders,” said Tom Lallas, the attorney representing CIT. “I think the plan is to fill all the existing orders and then evaluate the business prospects to see what the future will be.”

Beach Patrol, whose annual revenues are about $50 million a year, has been struggling since late 2003 when water from a heavy Christmas Day rain storm collapsed part of the roof of its 110,000-square-foot warehouse and office complex. Three inches of water saturated most of the complex, damaging thousands of swimsuits that were waiting to be shipped to retailers around the country. Beach Patrol lost one-third of its third-quarter book order.

The takeover has hit company employees hard.

“It has been a very difficult two years,” said Beach Patrol’s President John Wickham, who came on board in 2000. “I felt we were coming out of it. This is unfortunate.”

Beach Patrol, owned by Western Glove Works, a Winnipeg, Canada, company that makes blue jeans under the Silver Jeans label, was established in 1987 and is one of Southern California’s principal swimwear makers.

The swimwear business has been tough in the last year due to several weather-related mishaps that put a damper on sales.

In August, Hurricane Katrina, one of the deadliest natural disasters in the United States, walloped New Orleans. Hundreds of thousands of residents still haven’t returned to the city and scores of retail stores remain shuttered.

In October, Hurricane Wilma devastated the southern third of Florida. Some swimwear and resort retailers in Ft. Lauderdale and Miami still haven’t reopened after the storm damaged shopping centers and commercial districts.

And Hawaii was inundated with rain that barely let up between mid-February and all of March, stifling the tourist season.

“Any kind of seasonal business is always difficult,” said Susan Crank, president of Lunada Bay swimwear in Anaheim, Calif. “There is a certain factor in the seasonal business you can’t control. That’s weather, and it’s a very fast-changing industry. It takes complete and total focus on a daily basis to stay ahead of the curve balls thrown at you.”