Rightguard
Member
- Joined
- Apr 22, 2006
- Messages
- 545
- Reaction score
- 0
Source: NYT
I wonder if they will show next season. I was anticipating the menswear, a little bit.
Owner of Bill Blass Faces Cash Shortage After Acquisition
By MICHAEL BARBARO
Published: May 20, 2008
The fast-growing buyout firm that owns the fashion house Bill Blass, the retailer Athlete’s Foot and the ice cream chain MaggieMoo’s appears to be on the verge of collapse.
The Bill Blass fall collection at Saks Fifth Avenue last month. The label is owned by NexCen Brands, which warned Monday that there is “substantial doubt” that it will remain in business.
NexCen Brands, a little known firm that owns many high-profile brands, said on Monday that it faced a severe cash squeeze and warned that there is “substantial doubt” that it will remain in business.
The company, which dismissed its chief financial officer two months ago, said that its 2007 financial statements could no longer be relied upon and that it was investigating its financial reporting practices.
NexCen, which earns revenue from 1,900 franchised stores, said it might try to sell off some, if not all, of its brands. That could put eight chains — including Marble Slab Creamery, Pretzel Time, Pretzelmaker, Great American Cookies, Shoebox New York and Waverly home furnishings — up for grabs. And it could put the future of Bill Blass, an influential clothing label sold at high-end stores like Saks Fifth Avenue, in doubt.
NexCen’s stock plunged 77 percent on Monday, to 58 cents a share, after its announcement.
NexCen appears to be the latest victim of a tight credit market and a slowdown in consumer spending, which have helped push nearly a dozen big chains — like Linens ’n Things and The Sharper Image — into bankruptcy over the last year.
NexCen said it must repay about $21 million it borrowed to finance the $93.7 million acquisition of Great American Cookies by October, leaving it with little cash to operate. The company had tried to refinance the debt but, with banks reluctant to lend, it failed to find a quick solution.
But the economy is not the company’s only problem. NexCen said it had previously failed to disclose the $21 million debt — and other financial information, which it did not specify — to investors in filings with the Securities and Exchange Commission. It dismissed its chief financial officer, David B. Meister, in mid-March. And the company said its audit committee had hired lawyers to carry out “an independent review” of its conduct.
NexCen was created in 2006 with an unusual business plan. Unlike most buyout firms, which hope to sell off acquisitions quickly for a profit, it intended to create a conglomerate whose disparate divisions in food, fashion, furniture and sports would play off one another.
The idea was for Bill Blass designers to make athletic clothing to be sold at The Athlete’s Foot, or for Athlete’s Foot store operators to branch out and open a MaggieMoo’s or a Pretzel Time.
Robert W. D’Loren, the chief executive of NexCen Brands, has called it a “think tank” approach to building brands that cuts across industries. No less a retail star than Marvin Traub, the former chief executive of Bloomingdale’s, gave his stamp of approval, joining NexCen’s board.
Mr. D’Loren has pioneered the business of buying and expanding consumer brands that did not own their manufacturing plants or stores, minimizing investors’ risk. He previously worked at or closely with companies like Iconix and UCC Capital, which are structured similarly to NexCen.
Most of NexCen’s revenue comes from royalties — from franchisees, in the case of The Athlete’s Foot, or licensees, in the case of Bill Blass. NexCen lost $4.6 million in 2007. But it had revenue of $34 million, up from nearly $2 million in 2006.
Analysts have become skeptical of the company’s strategy and leadership. “We believe management credibility has hit, incredibly, a new low,” Eric Beder, an analyst at Brean Murray, Carret & Company, said Monday in a note to investors. “Investors should avoid the stock until there is some semblance of normalcy and credibility at the company.”
Mr. D’Loren did not return phone messages Monday. The company held a conference call on Monday, during which Mr. D’Loren read a prepared statement, but did not take questions.
The troubles at NexCen have riveted New York’s fashion community, because of the uncertainty regarding Bill Blass. NexCen had promised to revive the clothing brand, which has struggled since Mr. Blass’s death in 2002.
Ronald L. Frasch, president of Saks Fifth Avenue, said that until now, there had been no outward signs of trouble at Bill Blass or NexCen. “From our side, it’s all been very positive,” he said. “This is a little bit of a surprise.”
But he said that “re-establishing a brand such as Bill Blass at that level takes deep pockets.”
“It’s a lot of expense going out before it comes back in,” he said.
Emanuel Weintraub, president and chief executive officer of Emanuel Weintraub Associates, a retail consulting firm, said NexCen “has a lot of brands that should be doing well.”
“If they are running out of money,” he said, “they are not running the company well.”
I wonder if they will show next season. I was anticipating the menswear, a little bit.
