No Fear is creating financial concerns for mall owners
It’s name is No Fear, but it’s getting another reputation in local malls: No Rent.
The casual clothing company from Carlsbad has been sued by several Southern California shopping malls for falling months — and tens of thousands of dollars — behind in rent for its retail outlets.
An attorney for No Fear Retail Stores Inc. blamed the late payments on the sour economy and said the company was working with shopping centers to renegotiate leases that were signed when the future looked brighter.
“Like nearly all U.S. specialty apparel retailers, No Fear has been hammered by the economic downturn. In response, we have worked hard to reduce operating costs, including leasing costs,” said Scott Benjamin, No Fear’s general counsel.
Among the malls that have taken No Fear to court are the Irvine Spectrum and Block at Orange, both of which filed lawsuits in Orange County Superior Court; and shopping centers in Arcadia, West Covina and Valencia, which filed suits in Los Angeles County Superior Court.
Irvine Co., which owns the Spectrum, obtained a judgment against No Fear in October after the retailer failed to defend a lawsuit that said it was $49,000 behind in rent. The judgment opened the door for an eviction, but an Irvine Co. spokeswoman said the No Fear store at the Spectrum is still open. The clothing company settled each of the Los Angeles County lawsuits out of court.
No Fear exploded in popularity in the 1990s with T-shirts bearing slogans such as “Drive it like you stole it” and “Life’s not too short, it’s just that you’re dead for so long.”
But the privately held company has had difficulty sustaining its growth because of the recession and intense competition in the active-sportswear industry, said analyst Mitchell Kummetz of Robert W. Baird & Co.
“You look at the landscape of action sports brands, you do have a few that stand out for having maintained an authenticity and growing their business nicely: Quiksilver, Billabong and O’Neil,” he said. “And there are some brands that were once very strong and now are not. No Fear would be one of those brands.”
Last year amid the economic downturn, No Fear agreed to acquire Canadian eyewear and apparel company Gatorz Inc. and emerge as a publicly traded company in Canada. The deal still needs regulatory approval in Canada.
No Fear targets youths and young adults with action sports and casual apparel, including T-shirts, jackets, sweatshirts, jeans and shorts. The company originally was a wholesaler but started opening retail stores in the late 1990s. It opened seven stores in a terrible economic climate — late 2008 and early 2009 — giving it 53 retail stores in seven states, most of them in California. The stores carry No Fear brand clothing and products from other companies, such as eyewear from Spy Optic Inc.
The retail expansion does not appear to have served the company well, Kummetz said.
“They opened up a lot of stores and based the structure of the leases on the trends taking place at the time,” he said. “Obviously those trends have deteriorated … which is why they’re working with landlords to restructure deals. They’re not the only ones. A lot of people who opened stores in ‘06, ‘07, ‘08, are probably in leases that don’t make sense, given where the environment is today.”
Last year, No Fear executive vice president Michael Pratt told action sports retailing website Shop-Eat-Surf.com that sales at stores open at least a year, an important measure of performance, “have not been pretty” and that the company had reduced employee hours in an attempt to avoid layoffs.
“The environment is not for the faint of heart, but you have to have confidence in your products, your brand and your business model,” Pratt was quoted as saying by the website.
