L.A. Swimsuit Industry Feels Economic Chill

Pink flamingos and gold bikinis light up the holiday display at Patricia Schaefer’s Atlanta-area swimwear shops. What’s missing are customers to purchase the skimpy swim togs for vacations in sunny Mexico, Hawaii or the Caribbean.

With snowbirds nesting closer to home this winter and the economy turned chilly, Schaefer, like many retailers nationwide, is cutting her bathing-suit orders. That’s sending a shiver through Southern California, one of the nation’s leading swimwear manufacturing centers, which is bracing for a stormy 2002.

Already captive of trends and temperatures, the Southland’s swimwear industry is getting snagged by a slowing economy and the Sept. 11 terrorist attacks. Retailers spooked by plunging consumer confidence and the steep decline in travel and tourism are postponing, reducing, even canceling some bathing-suit orders heading into the prime production season. Industry watchers predict that sales of swimwear and related apparel, which topped $2.9 billion for the 2001 season, will fall 3.4% next year.

“Swimwear is going to take it on the chin,” said Marshal Cohen, co-president of NPD Fashionworld, which tracks industry sales.

In response, some local manufacturers are trimming their inventories, shrinking their product offerings and rethinking some of their racier styles.

By the time U.S. warplanes began dropping bombs in Afghanistan, Orange County bikini manufacturer Susan Crank had pulled the plug on a daring Brazilian-style suit.

“Fewer thongs,” said Crank, president of Anaheim-based Lunada Bay Corp., summing up her product lineup for 2002. “Not many women look good in them anyway.... And all the comfort food we’ve been eating won’t help.”

This year was proving to be a tough one for the swimwear industry before the terrorist attacks. Cool spring and summer weather and the economic slowdown led to heavy discounting that crimped profit margins for specialty chains and department stores. Anaheim-based Pacific Sunwear of California Inc., a major swimwear retailer, posted net income of $13.4 million through the first nine months of the year--about half of what it earned during the same period a year ago.

The pain isn’t confined to retailers. New York-based Warnaco Group Inc., which manufactures Speedo, Catalina and Cole of California swimwear through its Authentic Fitness Corp. subsidiary in Commerce, filed for Chapter 11 bankruptcy protection in June. Surfwear maker Quiksilver Inc. of Huntington Beach recently announced it will miss analysts’ fourth-quarter earnings targets by a wide margin. VF Corp. of Greensboro, N.C., last month announced plans to exit the swimwear business and sell its Jantzen label, and Guilford Mills Inc, also of Greensboro, just closed a swimwear fabric plant.

“There is a lot of turmoil,” said Lynne Koplin, president of Gardena-based Apparel Ventures Inc., which makes the La Blanca label as well as Nautica, Ocean Pacific and Anne Klein licensed swimwear. “That kind of instability makes retailers more cautious.”

Looking into the new year, Koplin said early department store orders for Nautica and La Blanca swimwear, her company’s bestsellers, are off 15% compared with last year.

“Everyone is going to be more conservative,” said Koplin, whose company’s annual revenue is about $90 million.

“Conservative” isn’t the adjective typically associated with Southern California’s swimwear industry, which has helped spread the region’s fun-and-sun image to the world.

One of the first Los Angeles apparel labels to win national recognition was women’s swimwear maker Catalina, which was cranking out knitted bathing costumes as early as 1912, said California State University history professor Gloria Ricci Lothrop, who has written about the origins of the local industry.

Lothrop said the Southern California trade took off after World War II, fueled by post-war prosperity, better fabrics and the industry’s snug relationship with Hollywood. By the late 1940s, aqua-musical star Esther Williams was plugging swimwear by Cole of California, and ‘60s beach-blanket movies made California bikinis all the rage.

Today the Southland industry comprises more than 75 manufacturers, which account for about 40% to 50% of domestically produced women’s swimwear, as well as surfwear. Players include Apparel Ventures, Quiksilver and Lunada Bay, which makes Mossimo, bebe, GirlStar and Lucky Brand swimwear under license; Los Angeles-based Maxine Swim Group, which manufactures Liz Claiborne licensed swimwear as well as the Manhattan Beachwear, Hobie and Surfside labels; and Guess-brand licensee Raj Manufacturing of Tustin.

Others are Carson-based Beach Patrol Inc., which produces Daffy and Esprit licensed suits; Los Angeles-based Malibu Dream Girl; and Carol Wior Inc. of Bell Gardens, maker of the patented “slimsuit.”

Although the East Coast has some sizable manufacturers, industry veterans say Southern California’s potent mix of design talent, up-and-coming small companies, established players and beach culture has kept it an important center for the design and production of swimwear--one of last remaining U.S. apparel strongholds.

Part of the reason is the complexity of the manufacturing process. High-performance swimwear fabrics that hold their shape and resist chlorine can cost as much as $20 a yard.

“It takes a lot of technical know-how. Not everyone can do it,” said Daniel Kadisha, president of Long Beach-based Texollini Inc., which manufacturers fabric for the swimwear industry.

Constructing the garments is painstaking, which helps explain why a teeny weeny bikini can fetch $75 or more. Crank said that during the design process, each of Lunada Bay’s styles requires an average of 10 fittings on a live model to ensure a precise fit. Her company uses only local sewing contractors so she can keep a close eye on quality.

“This isn’t like making a blouse or a jacket,” said Crank, noting that the smallest imperfection can ruin the look and fit of a bikini. “If it’s off even 1/8 of an inch, you’re sunk.”

Crank knows a thing or two about buoyancy. A 23-year industry veteran, she expanded Lunada Bay into a company with more than $40 million in revenue on the strength of a swimwear licensing deal with Mossimo Inc.

But that gravy train was derailed when financially troubled Mossimo struck an exclusive arrangement with Target Corp. in 2000.

Lunada Bay worked out a deal to produce Mossimo-brand suits for the discount retailer. But almost overnight, Crank saw distribution of the label go from 2,500 better department stores and specialty retailers to fewer than 1,000 Target stores.

“It’s been tough,” she said.

Still, the company has persevered, coming out with its own Becca Swim and Rebecca V labels in an attempt to recoup some of the lost Mossimo business.

On a recent morning, Crank was scouring sales reports provided by retailers on how her suits are moving in the stores. Although winter sales aren’t that significant in terms of volume, the “cruise” season serves as a compass to help manufacturers such as Crank figure out which styles will be hot next summer.

Such feedback is critical, given the relatively long lead times needed to produce swimwear--eight to 12 weeks for knitting, printing, sewing and shipping.

The trick for swimwear manufacturers is figuring out which fabrics and styles to keep on hand without getting stuck with a lot of inventory, especially now that retailers are scaling back their initial purchases.

But that job got tougher this fall as the steep decline in travel and tourism threw the bellwether cruise season off course.

Another of Crank’s key forecasting tools is the Farmer’s Almanac. Swimwear sales are linked so closely to the weather that she has bookmarked meteorological sites on her computer.

“Willard Scott [television weather forecaster] is more important to me than Alan Greenspan,” Crank said.

In Tustin, the Bhathal family, owners of Raj Manufacturing, says 2002 could turn out to be a good year for them despite the cloudy industry forecast.

The 400-employee company manufactures all its swimwear in-house and has developed expertise in providing speedy reorders.

That could prove a decided advantage if the economy and weather cooperate and retailers that slashed their initial swimwear orders find themselves short of merchandise closer to the season, said Alexander Bhathal, executive vice president of planning.

The market is skewing “toward what we’re good at,” Bhathal said. The company manufacturers the Athena and rajman labels, in addition to Guess licensed swimwear. “We’re hoping to gain a little market share.”

Bhathal said Raj Manufacturing’s 34-year history is proving to be an asset as jittery retailers are shedding lines and sticking with manufacturers and labels they know will perform.

But Fernanda Gonzalez said she is undeterred. The founder of Los Angeles-based La Fer, a new swim line, said sheer chutzpah has gotten her in the door of several area boutiques, despite the general anxiety that has settled over the industry.

“People are scared, but they won’t be scared forever,” Gonzalez said. “ ... There is still going to be a beach and an ocean.”