L.A. Gear to Lay Off Third of Work Force
L.A. Gear, whose athletic shoe and apparel business hit the skids about a year ago, said Friday that it expects to lay off 400 workers--nearly a third of its work force--in the next 12 months.
The once-high-flying casual wear and shoe company said the initial cuts--expected in a few months--will affect 250 employees. The company employs about 1,250, most in Southern California.
The initial layoffs will primarily hit workers in L.A. Gear’s apparel operations, a business the company said it intends to shut down. Instead of designing and distributing its own line of name-brand clothing, the company said it will merely license its name to other manufacturers for design and distribution.
It said it also intends to consolidate its remaining operations, now spread between plants in Marina del Rey and West Los Angeles, into a single facility still to be selected.
The layoffs and plant consolidation are the company’s latest efforts to revive its once-red-hot sales. Over the last 18 months, L.A. Gear has whittled down its work force from a high of 1,600. It has also tried to capture a greater share of the men’s performance athletic shoe market to stand its ground in the competitive athletic shoe industry. However, it has been consistently outshined by Nike and Reebok.
Earlier this year, the company turned for help to an outside investor, Trefoil Capital Investors, whose principals include Roy O. Disney. It also brought in a new No. 2 executive, Mark Goldston, to oversee day-to-day operations.
Although the latest reductions are expected to reduce annual expenses by $25 million, the company said they would result in a $22.5-million pretax charge against fourth-quarter operations.
It said it also expects to post additional writeoffs as a result of an ongoing review of its operations this quarter and noted that the adjustments “would likely have a further adverse effect” on the quarterly and full-year results. The company’s fiscal year ends Nov. 30.
In prepared statements, company executives said the cuts would improve future operations, which have sagged in the last year. In its most recent quarter, ended Aug. 30, sales were $183.8 million, down 39% from the $300 million recorded the year before. During the third quarter, the company lost $11.4 million, contrasted with a profit of $14.3 million in the prior-year period.
“The programs we are implementing are designed to strengthen L.A. Gear’s overall competitive position through both the reduction of costs and the focusing of resources on the most attractive segments of the company’s business,” said Robert Greenberg, L.A. Gear’s founder, chairman and chief executive.
Goldston said eliminating the distribution of L.A. Gear apparel will reduce cash requirements and expenses while still allowing the company to market its brand of casual clothing.
