Jimlar’s Next Jump

NEW YORK — Despite a floundering economy and dreary start to the new year, executives at Jimlar Corp. are convinced that there is an end in sight.

“We have some optimism for the second half of 2009, at the very latest,” said Larry Tarica, president and COO of the Great Neck, N.Y.-based footwear firm. “The fact that we are financially strong is a particularly helpful and competitive advantage, [and that] gives us some opportunities to really increase our market share.”

The company, which owns the Frye brand and licenses footwear for Coach and Calvin Klein, is hoping to build on a strong 2008 that brought double-digit increases.

This year, Tarica and the other three members of Jimlar’s top management team — CEO Jim Tarica, Group President Jimmy Gabriel and VP of private brands Tommy Tarica — are forging ahead with a number of new initiatives that could help the firm top $500 million in annual sales.

International expansion in Europe and Asia is a priority for Jimlar in 2009, following some significant overseas investments last year. The firm debuted a Florence, Italy, showroom and added a distribution center in Rotterdam, Netherlands.

Back at home, the company has been working to up its presence in the Big Apple. Last June, Jimlar debuted a 23,000-sq.-ft. Fifth Avenue showroom, and the firm is poised to open a Frye-branded retail store later this year.

Larry Tarica sat down with Footwear News to discuss keeping morale up when the economy is down, staying private and fostering the hot Frye brand.

FN: How would you compare this economic crisis to other industry downturns you’ve seen?

LT: I’m not sure we’ve ever seen an economic experience that mirrors this one. We’re very concerned and worried about the individual human hardship that will come out of this. Many people are losing their jobs, and people who are working are struggling. In a broader sense, we look at this as a large and deep correction rather than some cataclysmic crisis. We applaud most of the activities the governments globally are taking to systematically approach this problem, but we realize there will be some long-term pain that comes out of these solutions. With respect to our industry, our sense is the depth of this should not last long.

FN: What will be the short-term and long-term effects of this recession?

LT: [Right now], there is an imbalance between supply and demand, and that is having a deeply depressive effect on prices. The first short-term adjustment will be in inventory levels across the board through the supply chain. That will be depressive in terms of sales volumes, and essentially, it will create an environment where there will be a renewal of some stability in [prices]. There’s going to be some pressure on the supply chain in terms of factory closings, [and] there will be some pressure on the distribution system. The less capable wholesalers and retail distributors will struggle during this period, and some of them, unfortunately, will fail.

The longer-term issues are really structural from an economic perspective. It has been difficult for us during the last 10 to 20 years to move from a worker-driven and product-driven economy into one of consumerism. Anything that continues to contribute to that, such as larger government deficits and the enormous amount of public funding going into this situation, will obviously [force us to deal] with these debts on a longer-term basis.

FN: How have you positioned the company to weather the economic storm?

LT: We’ve invested deeply in our company, both in the growth of our capital base and in our human and other resources. [The] things we do are long-term investments. Organizations [with such plans] have a tendency to weather difficult times better and use those times — as we feel we will do in 2009 and 2010 — to grow our market share. We will continue to [grow], not shrink, our investment in our businesses. We will continue to grow our investments in design, product development and brand management. We’ve invested in factories around the world and will continue to do that in 2009. The [first] Frye store is [also] a hopeful opportunity, as well as the expansion of our international sales, which we expect to grow at even a higher rate than our sales here in the U.S., because, of course, our businesses here are more mature. We expect every one of our businesses to grow this year.

FN: How will the new presidential leadership impact the industry?

LT: [We hope President Obama] leads us to have confidence that the new group in Washington, D.C., will not only make good decisions for our country and economy but will communicate those decisions in ways that will [encourage] the public. We need confidence. We need consumers to believe that tomorrow is going to be better than today. That is what reduces fear and gives people the confidence to live their lives, spend money and cultivate activity in the economy.

FN: Frye is Jimlar’s hottest brand right now. How do you plan to sustain that excitement?

Frye has very enduring qualities, and that has to do with the approach we take to the style and the way we design the product. Frye has a core group of products that have been made by the company for decades and decades, and there is a long-term appetite for those products. But if we only presented Frye in those terms, we would be shortchanging the opportunities for Frye to express itself. We [have] expanded the product mix, are distributing Frye internationally and have plans to invest in brick-and-mortar retail.

FN: Many brands have had to increase prices amid rising sourcing costs. What is your pricing strategy with Frye?

LT: When factory costs began increasing 18 months ago, our management group decided that we would work creatively with our supply chain and reduce our own margins to be able to hold our wholesale and retail pricing even as others were increasing their prices. Frye really has not changed its pricing paradigm during the roller-coaster ride of the past year, and we do not foresee any major changes in the year to come.

FN: Licenses have become a solid portion of Jimlar’s business. What are the benefits of such partnerships?

LT: If you have constructive, high-quality business partners in a license, not only can you have a great relationship with them but you can really help each other. We have gotten a tremendous amount out of those relationships. We feel, [for example], that our company is a part of Coach, and that Coach is a part of us.

FN: How closely do you work with the Coach and Calvin Klein designers?

LT: In the case of Coach, design is largely done, driven and handled by Coach with our input and, of course, our execution. In the case of Calvin Klein, the design is directed by Calvin, [but] done primarily by us with their approval. In both cases, we have very high-quality cooperation. Even though the model is different, we find we have talented partners on both sides.

FN: Coach was at the forefront of the accessible luxury craze. Has it been challenging to keep the brand hot?

We don’t think of Coach as having been hot; we think of Coach as being an enormously talented group of people who took the brand and figured out new, interesting and relevant ways to take it to consumers. There was competition to that model before, there’s competition now and there will be competition in the future.

FN: Has the international segment become more important to your business?

LT: Our attitude is that if you are going to get involved in something, try to make the investment up front to do it properly. And so, we opened three new facilities in Europe and added to our European team, virtually tripling [our staff there]. Our investments are not meant to grow the business overnight, but to give it purpose.

FN: How has your private-label business evolved?

LT: The service platform is still a thriving and growing part of our business. It’s the oldest business, and we designate and source for a broad range of other companies. They could be brand owners, retailers or catalog houses, and our goal is to try to work with their brands exactly as we would our own. It’s an area in which we have tried to be distinctive [by] bringing a brand management strategy and working with clients [beyond] just the financials.

FN: How much of the company’s business would you like to be international?

LT: There are successful companies in our industry that have international making up as little as 10 percent of their business, and some whose international business is as much as 50 percent. We would expect a successful model for us to be somewhere between those two goal posts. Our [initial] goal is to make sure we test enough products at retail and find out where we are having success and where we are missing the mark, so we know how to keep adjusting our design approach. While we think we could have almost explosive growth, considering some of the brands we have and the appetite [we have seen], we are very cautious when developing a new project.

FN: How will the Florence showroom and Rotterdam distribution center contribute to that goal?

LT: We were originally selling goods internationally from our warehouse in the U.S. and shipping directly from our sourcing countries. We found that was limiting the quality of service. So our investment in Rotterdam was to make ourselves more user-friendly and to service a platform we felt would be important on a long-term basis. The Florence showroom will be an important place for us to present the product, house a design studio and be able to receive press. We also have our own sales organizations throughout Europe, including in Milan.

FN: What is your trade show strategy?

LT: The evolving question for us is what divisions go where, when and under what circumstances. We’ve taken the position that, while we continue to show at WSA, we will debut our women’s fashion lines at the four major FFANY shows. At the same time, we show a number of our divisions at smaller accessories shows. Our strategy is not significantly different than it was in 2008, but we are always careful about the investments we make in trade shows.

FN: How has Jimlar changed over the years?

LT: Some of the fundamental cultural issues — respect for people; our commitment to trying to do the right thing for our consumer, clients and suppliers; making products the best quality we can make them; commitment to community service — these things are fundamental to us. We don’t believe that you have to change those things to run a successful organization. On the flip side, many people who have joined the company from other organizations have brought to us ideas and a renewed attitude about raising our standards. Sometimes those people have brought ideas to us [that were] calmly accepted. Other times people have had to yell and scream and jump up and down a little bit and say, ‘I’m frustrated because the company can do more and be better.’

FN: Looking to the future, would you ever consider an IPO?

LT: One of the important things that has helped us get where we are is doing things in a very long-term, invested way. We’re very fearful that if we were to become a public company, we would be forced to make operating decisions that are much more short-term in focus, such as worrying about quarterly and monthly results in a way we don’t have to do now. We have no plans in the near future for our company to go through a public offering.

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