Rock & Republic
Retools For Recession
And Life After

Launches Plain Wrap Line; Forecasts

10 Store Openings; Looks To Asia;

Nixes The Runway For Online Video

By Richard Collings

Published: August 24, 2009

   Even for companies as tough as their jeans, the Great Recession has tested many a denim brand’s durability, it could be said.

   “It was 2008, and I was 2000 and late,” Michael Ball, the CEO of premium denim brand Rock & Republic jested, referring to the lyrics from one of the music group Black Eyed Peas’ latest singles.

   He concedes that the last eight months have been the “most trying time” of his career in apparel and as head of Rock & Republic.

   Even though he took a hit with the drop in consumer spending, he said that there needed to be more of a balance, and in the long-run, the correction will ultimately benefit him, his company and the economy.

   While the company has been affected by the downturn, visit most leading retailers, and you will likely find that Rock & Republic remains one of the handful of brands to consistently appear on premium denim bars.

   Due to the challenges, Ball has pushed forward with a number of initiatives to ensure the private Culver City, California-based denim brand’s survival.

   The latest of those efforts is the launch of the company’s ‘Plain Wrap’ line, which owes its roots to the success of an experimental ‘Recession Collection’ Rock & Republic offered earlier this year in response to the lower demand for premium denim.

   Like the Recession Collection, the Plain Wrap line offers apparel for under $200 per item, Ball said, which is now the “sweet spot” for a company that typically sells jeans at about $300 a pair.

   Even more surprising is that the more affordable t-shirts, hoodies, jeans, sneakers, leggings, tank tops and wind breakers are not retailing at department stores such as JCPenney or Kohl’s, but are on the store shelves of high-end purveyors such as Saks, Nordstrom and Neiman Marcus.

   Ball described the product as “really clean,” which it has to be at that price point, and as his way of playing off of the generic private label brands offered by supermarkets.

   He said such an approach is necessary when so much clothing is being discounted and consumers are seeking value. Ball doesn’t think the lower-priced line will erode his premium denim business, but instead, will entice new customers.

   In addition to the more price-conscious clothing line, Rock & Republic, after having launched its first bricks-and-mortar retail store, plans to open another 10 or so over the next couple of years, Ball said.

   And instead of having a fashion show, the company has opted to begin launching dramatic video presentations on the internet, featuring its clothes, on a monthly basis in this increasingly digitalized age.

   Ball said he spends the same marketing dollars on producing such videos as he would on fashion shows, yet the videos have more potential in reaching consumers over a longer period of time, and are more visually exciting.

   Rock & Republic sees a number of opportunities to expand the brand in Asia in places such as Hong Kong, Singapore and Australia, where it is under-represented, now that it has established itself in the U.S. and Europe.

   It was previously reported that 45 percent of the company’s sales are generated internationally or overseas.

   Though the company is known for its denim, it also has cosmetics, footwear, accessories, eyewear, pet products, and other apparel items, all of which were developed in-house, Ball said.

   But now that Rock & Republic has put in all the hard work in developing the templates for those categories, having had complete control, it will seek to license them out going forward, Ball explained. At this point, all the potential licensees have to do is “grow it,” he added.

   Ball still owns 100 percent of the company, though he has thought about bringing on board private equity investors, but held off.
   He wonders out loud if he should have done so before the financial crisis when valuations were still high and credit flowed. But he then bats away the idea as the remnant of some distant era. He said he’s not planning to sell his company for now.
   It was previously thought the company might bring on board outside investment, such as from private equity firms, to open retail stores, or to take on some mezzanine debt financing.
   In the near-term, he’s focused on keeping his inventory tight by waiting for orders from retailers, before manufacturing more product, and keeping overhead in line with revenues.

   Rock & Republic continues to manufacture and apply the washes and finishes to its denim jeans in Los Angeles, and has a lead time of about eight weeks.

   For the last two fiscal quarters, Ball said the company has been profitable, and expects it to be profitable through the next two quarters. He attributes this to the fact the company reinvested so much into the business last year. He declined, however, to comment on the company’s revenues.

   Previous reports have put Rock & Republic’s revenues above $50 million, and perhaps as high as somewhere between $100 million to $200 million.
   In the end, Ball said he is confident that the company can emerge from the downturn with new customers and increased market share. As to his views on the economy and his company, he was much more bullish headed into 2008, but said, "everybody's guessing at this point."

   Give him wheel barrels full of cash, Ball said, and then he could project, but in the meantime, he's going to keep his "eye on the ball," of running his business.
 

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