OP Buys Jimmy’Z in a Bid to Regain Its Leadership
Striving to regain its status as a surfwear trend setter, Tustin-based Ocean Pacific confirmed Tuesday that it has completed the purchase of Jimmy’Z, a popular clothing maker that has found it difficult to satisfy growing demand for its products.
Officials of the companies declined to discuss the acquisition price. Industry sources estimate that Jimmy’Z, a 3-year-old company that expects sales of $35 million in 1988, is worth about $14 million.
Larry Ornitz, OP’s chief executive officer, said Jimmy’Z will maintain its staff and headquarters in Vernon.
Steve Bowman, former president of the OP Knits division, was named president of Jimmy’Z. Jimmy Ganzer and Sepp Donahower, founders of Jimmy’Z, will stay on board as chief designers and marketers, Ornitz said. Ganzer and Donahower declined to discuss the sale.
Distribution Problems
Ornitz said that OP hopes to expand the market for Jimmy’Z surfwear, but first it must concentrate on solving the company’s distribution problems.
The company’s youth-oriented merchandise has been a big seller at surf shops and other retailers. But Ornitz acknowledged that the distribution channels are clogged, and the company has been able to fill only about 40% of its orders. OP’s size and distribution strength will help solve the problems, Ornitz said.
While OP is still the industry leader in surfwear sales, with expected 1987 revenues of $300 million, industry sources said it has lost much of its trend-setting reputation in recent years.
The problem of maintaining an innovative style is not uncommon among entrepreneurial businesses that grow rapidly into mass merchandisers, according to industry authorities. OP, which started as a small surf shop supplier in 1972, is now more than four times as large as its closest competitor.
Ornitz said OP’s women’s and children’s domestic market is growing, and sales are increasing in Europe and Asia. But sales to the U.S. young male market are expected to be flat next year.
“OP started as a hard-core, grass-roots company for surfers,” said Tom Tashjian, a retail analyst at Seidler Amdec Securities in Los Angeles. “But when everybody in the Midwest is wearing OP shorts as summertime wear, that can turn off the surfer, who might not be the largest part of business, but he’s setting the style.”
Tashjian said that the recent addition of new merchandise lines has helped OP gain back some of its lost surfer market, and the purchase of Jimmy’Z should strengthen the company’s marketing image among young surfwear buyers. Ornitz said OP also plans to enter the shoe market next year, with casual designs for men and women.
To help stay in touch with its core market, OP continues to sponsor an annual surfing contest in Huntington Beach, featuring cash prizes that attract some of the biggest names in surfing and thousands of spectators.
Joel Cooper, chief executive at Costa Mesa-based Gotcha, one of the more successful surfwear makers, said that both the OP and Jimmy’Z names will be strengthened by the merger, and he welcomes the change.
“I don’t like the idea of companies in this business not doing well, because consumers might lose some of their interest,” Cooper said.
The $1 billion annual surfwear market is experiencing significant changes. After several years of phenomenal growth, some Southern California surf wear makers are facing severe financial difficulties.
One Orange County surfwear company, Daystar, has filed for protection from creditors under Chapter 11 of the federal bankruptcy code.
Paul Holme, editor of Surfer magazine in San Juan Capistrano, said: “The changes aren’t surprising. The industry has gone through enormous growth, and it was quite clear that at some point there would be some changes.”
Holme said consumer demand for surfwear is continuing to grow. But, he said, raising capital and maintaining cash flow has been difficult for some surfwear marketers who are relatively inexperienced at business management.
In 1984, a proposed sale of Ocean Pacific to clothing giant Munsingwear was abruptly called off just days before the deal was scheduled to close. The planned transaction was believed to be valued at $50 million, but it collapsed when company officials were unable to reach a definitive agreement.
