Suitmaker Hartmarx Looks to Two California Companies for Growth

Inside a red brick building in Santa Monica, Calif.’s high-tech corridor, two small apparel companies have shifted into high gear to create new lines for their new owner, Hartmarx Corp.

Sweater.com Inc., which operates a Web site and has a sweater label called One Girl Whohellip;, and Zooey, a high-end T-shirt company, have a mandate to help bolster Hartmarx’s profits as the Chicago company concentrates more on contemporary womenswear and less on menswear.

“We are moving at the rate of speed,” said Leslie Gifford, a principal of Sweater.com, which occupies the former offices of architect Frank Gehry, across the street from the flashy Yahoo Inc. offices.

Last August, Hartmarx acquired Sweater.com for $12.4 million. Immediately, the assignment for Bruce Gifford and Dan Jaffe, who founded One Girl Whohellip;in 2002, was to boost sales from the $15 million recorded in 2006 to $20 million in 2008.

Already Gifford and his team have launched a new, high-end cashmere sweater line that ships in July for the Fall 2007 season. Called B. Chyll (pronounced “be chill”), it will be in 300 stores soon, including Los Angeles boutiques Fred Segal Trend, Planet Blue and all four Madison stores. Jodi Johnson, the label’s new brand manager, debuted the line at the recent Designers and Agents show in downtown Los Angeles, getting good feedback.

Madison’s head buyer, Belen Hormaeche, said she likes the label because it is a clean, simple and easy line with reasonable price points. It wholesales from $85 for a V-neck sweater to $275 for a cable blanket. “The quality of cashmere is nice, and the body is very simple,” Hormaeche said. “We do well with cashmere. Instead of coats and jackets, people throw on a cardigan, which is easy to carry around.”

Not waiting for the dust to settle on B. Chyll, Gifford and his wife, Leslie, are furiously working on a third line. Taking advantage of the environmental, eco-friendly craze, they are developing an organic cotton line of T-shirts, sweatshirts, sweaters and activelifestyle products under a new label called The Pursuit of Harmony. It will be manufactured in China for the Spring 2008 season.

Saving the planet

Alice Heller has also stepped up her work tempo.

Three years ago, she founded Zooey, a luxury line of sophisticated men’s and women’s T-shirts made of a soft Supima cotton fabric she developed with Sharatex, a Los Angeles knit mill. The entire line is sewn by four or five contractors in Los Angeles.

Even though she didn’t have her company up for sale, Hartmarx approached Heller about buying the small apparel company with its $5 million in sales. In December, she sold Zooey for $3 million and signed a five-year contract to stay on.

“Hartmarx would like us to evolve into a $30 million to $50 million company over the next five years,” said Heller, the company’s president, who for years worked with Doug and Suzy Tompkins at Esprit Inc.

In only a few months, Heller and her crew have seen many changes. At the beginning of the year, they moved their corporate headquarters from downtown Los Angeles to the office space next to Sweater.com to share back-end office personnel.

Soon after the move, Heller and her staff launched a new organic cotton T-shirt collection whose theme is “A World of Cool.” The plain-silhouetted shirts have creative graphics and environmental sayings. They are made in Peru of Pima cotton.

The line has been snapped up by Nordstrom Inc., which plans to have the T-shirts in all its stores by the end of summer. It has also been purchased by several specialty stores. “I love the message, ’Save the planet,’” said Hormaeche of Madison, who bought the T-shirt for the small store chain that caters to upscale clients.

For Holiday, Zooey will be doing an exclusive environmentally friendly sweater line for Barneys New York’s Holiday catalog.

Moving beyond menswear

Homi Patel, chairman, chief executive and president of Hartmarx, said his company has been on the lookout for apparel companies that sell to better boutiques and department stores but have a diversified distribution pattern.

“We like upper-end and bridge-and-above companies that sell to the kind of retail stores we want to be in,” he said.

Last year, the 119-year-old company, which sells men’s suits under the Hart Schaffner Mark and Hickey-Freeman labels, was hit hard by the merger of Federated Department Stores Inc.—which has the Macy’s and Bloomingdale’s nameplates— with the May Department Stores Co., which operated several stores, including Robinsons-May and Meier & Frank. The merger resulted in scores of department stores being shuttered across the country.

Also, Hartmarx has seen men’s suit sales flatten as the work world becomes more casual. With that in mind, womenswear has been a growth vehicle.

Three years ago, only 8 percent of Hartmarx’s revenues came from womenswear, Patel said. That increased to 25 percent of its $600 million in revenue last year. In the next five years, the company expects that womenswear will make up about 30 percent to 40 percent of business.

“It is a pivotal part of their strategy,” said Gary Giblen, an analyst who covers the publicly traded Hartmarx for Goldsmith & Harris in New York. “They realized years ago that the men’s tailored business is pretty mature.”

With that in mind, Hartmarx is actively talking to a few California companies about being acquired. Patel said he wants creative owners who are willing to stay on to guide the venture to the next level. “We want to keep that entrepreneurial flavor, not homogenize or corporatize them,” he said, noting that most sellers are required to stay on under a five-year contract. Hartmarx likes to keep a hands-off policy.

Hartmarx already had a long history with Bruce Gifford and his family.

More than 25 years ago, Bruce’s father, Alfred Gifford, sold his New York–based Country Miss apparel business to Hartmarx for $12.5 million. Bruce stayed on to work for the company for a few years before leaving to eventually start the Los Angeles apparel company Molto Fino Inc., which closed in 2001.

Hartmarx discovered Zooey through “mutual acquaintances.” Hartmarx was acquiring a firm and heard about Heller’s chic and sophisticated T-shirt line that was selling to top-notch stores. “We heard they were doing cool things,” Patel said.