Why Joseph Abboud Suits Might Not Be American Made for Much Longer
Will the final sale bell ever ring for JA Apparel Corp.? After all, we're coming up on five years since the owner of the Joseph Abboud and JOE brands put itself on the market. As potential buyers from China and India come courting, it'll be interesting to see if the company's steadfast dedication to its "made in the U.S.A." apparel will help or hurt its chances.
The India connection
S Kumars Nationwide Ltd. (SKNL) is reportedly singling out JA's tailored apparel business. It's no wonder considering how the economic slump coincided with a renewed interest in men's suits thanks to the sartorial spiffing required for interviews. Indeed, right after the Indian textile giant SKNL purchased the assets of U.S. men's tailoring company Hartmarx (now called HMX Group), its profit jumped 18 percent -- in the depths of 2009.
Purchasing HMX also brought such iconic American brands as Hickey Freeman, Hart Schaffner Marx, and Bobby Jones into the Indian company's fold. And HMX's chief creative officer just happens to be Joseph Abboud, the designer who lost the right to market under his name for several years after the trademarks were sold to JA Apparel.
If SKNL snapped up a piece of JA, Abboud and the brand he founded would be reunited. But the company may not be able to maintain its margins (holding around 19 percent in '09) if the goods continue to be manufactured in JA's New Bedford, Mass. facility.
Hong Kong's stealth shopper
Then there's Li & Fung, the Hong Kong-based multinational supplier to many of the retailers you know and love. The world's largest producer of consumer goods is kicking the tires of JA's licensing operation, no doubt to continue the aggressive expansion it initiated last year. In July, Li & Fung bought three health and beauty and fashion businesses for $140 million and entered four licensing deals that are expected to ring in $1 billion in revenue in the first year.
Licensing is a sweet spot for the 104-year old conglomerate. Key to its success is the company's network of 10,000 suppliers that can be deployed at the slightest whiff of a trend while Li & Fung keeps its balance sheets free of such pesky liabilities as factories and fabric mills.
So while JA's New Bedford facility wouldn't help negotiations, the Joseph Abboud and Joe licenses represent a strategic buy for Li & Fung. JA Apparel has deals in place to outfit NFL coaches (off the field, natch) as well as NBA players. A recent partnership between the Joseph Abboud brand and the N.Y. Giants gave the company an all-access pass to Giants players and the team's new $1.4 billion stadium for publicity. JA can also tap the Giants' database of 160,000 fans for direct marketing, and do apparel presentations to Giants rookies during minicamp. So what if they didn't make it past the playoffs.
No matter who eventually buys the company -- or parts of it -- one thing is sure, the rising cost of raw goods and labor will make those "made in the U.S.A." labels disappear.
Image via Joseph Abboud
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