Speedo Firm Dives Into World of Fashion : Apparel: Authentic Fitness purchases venerable swimsuit makers Catalina and Cole of California and plans to turn them around.
If anybody can exploit the old gold in Catalina and Cole of California, two well-known but lately mismanaged swimwear makers, it’s Linda Wachner, chief executive of Authentic Fitness Corp.
Last week, a U.S. Bankruptcy Court judge in Delaware approved Van Nuys-based Authentic Fitness’ $45.7-million purchase of Catalina and Cole’s parent, Taren Holdings Inc., a privately held Los Angeles company that filed for Chapter 11 protection from its creditors in August. Taren is controlled by two New York investor groups, Odyssey Apparel L.P. and Odyssey Partners L.P.
The acquisition, which also includes Taren’s Tennessee-based Colonial sportswear business, will almost double 3-year-old Authentic Fitness’ sales. Taren has about $200 million of annual revenue, with $120 million coming from Catalina and Cole.
Wachner was jubilant at turning back a last-minute, $35-million cash offer from much-larger rival V.F. Corp., an apparel company whose products include Lee and Wrangler jeans and Jantzen swimwear. V.F., which had revenues of $2 billion in the first half of 1993, is headquartered in Reading, Pa.
“We’re happy to be able to mine this old gold,” Wachner said of Catalina and Cole. The two companies helped launch “fashion” swimwear in the 1930s and establish Southern California as the nation’s center of swimwear design.
Catalina and Cole should fit well with Speedo, a swimsuit brand Authentic Fitness already owns. And Wachner, who is admired in the rag trade for her marketing savvy, has coaxed riches from old brands before.
But the deal carries risks for Wachner: Her famous Speedo swimsuits are no-nonsense suits favored by athletes. And although Authentic Fitness also markets swimwear and swim accessories under the designer Oscar de la Renta brand name, Catalina and Cole are an even bigger plunge into the fickle world of fashion swimwear.
Until recently, Catalina and Cole were by far the nation’s largest swimwear makers, with a combined 30% of the $800-million-a-year market. That share has slipped a bit in the past few years with stiff competition from a slew of smaller, more nimble competitors--many located outside the United States--with more hip designs aimed at younger women who buy more swimsuits.
Still, at Wachner’s other apparel firm, New York-based Warnaco Group, she’s successfully revamped lingerie makers Olga and Warner’s, for example, and menswear brands Hathaway and Chaps by Ralph Lauren.
Both her companies have done well for shareholders. Warnaco’s stock, which went public in October, 1991, at $20 a share, closed Monday at $31.25 a share.
Authentic Fitness turned a $9.8-million profit on revenue that increased 31% to $133 million for its fiscal year ended July 3. In fiscal 1992, it lost $4 million on $102 million of revenue. The company’s stock, which doubled earlier this year from its initial offering price of $14 a share in 1991, closed Monday at $26.25 a share.
Now, Wachner is building Authentic Fitness the same way she built Warnaco: By acquiring sleepy, flabby companies, paring debt, dumping unprofitable lines and giving the ones that still have “legs” a new shot.
“This is a typical Linda Wachner move,” said Lee Backus, a senior vice president at New York-based Buckingham Research, which evaluates companies for institutional investors. “She’s tough, she’s shrewd and she gets the job done. The proof is what she’s already accomplished at Warnaco and Authentic Fitness.”
Tough is a word often used to describe Wachner. Fortune magazine called her one of the seven toughest bosses in America and the “Queen of Impatience.”
Asked what her plans were for Catalina and Cole, Wachner said, “We plan to make money.” To do that Wachner intends to resume full-scale manufacturing at Catalina and Cole’s shared facilities in Commerce as soon as possible. She added that she met a couple of weeks ago with about 70 Taren employees still working there and told them if she succeeded in buying the company “not to worry about their jobs.”
Analysts say $46 million is a fair price for Taren. In its bankruptcy filing on Aug. 12, Taren listed assets of $91 million and liabilities of $81.3 million.
Cole grabbed attention last year with its Top Secret inflatable bikini featuring a small air pump inside the bra, but sales were disappointing. “I think they realized they needed to do something to get back some pizazz and went a little bit overboard,” one rival said. “It was on the gimmicky side for sure.”
Under the broad Catalina and Cole umbrella brands the companies also market swimsuits under nearly 20 more labels catering to different buyers. These other brands range from the Catalina 0,1,2,3 children’s collection to styles by Anne Cole, daughter of the company’s founder, Fred Cole, and Catalina Women, marketed in the larger plus sizes.
Another potential problem for Wachner could be rebuilding Catalina and Cole’s once-strong sales force.
When Taren filed bankruptcy, “a lot of people who had very long, very good relationships with retailers went off on their own and started repping other companies,” said Gary Abeyta, publisher of The Swim Wear Journal, a trade magazine based in Scottsdale, Ariz.
Under Chapter 11, a company keeps operating but is protected from creditors’ claims while it usually attempts to work out a reorganization plan to emerge from bankruptcy.
Taren filed Chapter 11, rather than Chapter 7, which is typically for liquidations, because the company wanted to sell its assets itself instead of having a U.S. trustee appointed by the bankruptcy judge do it.
