Some Southland apparel stocks post strong showings while others stumble in market.

Some Southland apparel stocks post strong showings while others stumble in market

In recent months, some Los Angeles County-based apparel companies, including L.A. Gear, have been hitting hard times on Wall Street, while others, such as Frederick's of Hollywood, Inc. have been thriving.

The performance of Los Angeles-area company stocks reflect a nationwide trend of apparel stocks running either hot or cold, apparel analysts say.

Notably, L.A. Gear, Inc., the Los Angeles-based footwear company which saw its stock soar to $50 a share last year, was trading at $12,50 a share in mid March. The company, for the first time, projected losses at $7.1 million for the fourth quarter of 1990.

Los Angeles-based Yes Clothing also had troubles on Wall Street, as its stock plunged to $2 a share in late November 1990, after the company enjoyed a 52-week high of $13.25 a share. Yes Clothing, which went public in November 1989, had projected a loss of $300,000 in the third quarter of 1990.

In October last year, an attempt by the Sunland-based apparel manufacturer Cherokee Group to issue $48 million worth of nearly voteless stock was rebuffed by Wall Street.

However, things aren't all bad for Los Angeles area apparel companies. Frederick's of Hollywood, Inc., announced in January that the company has met the preliminary elibility requirements to trade on the New York Stock Exchange. In March 1991 Fredericks was trading at $17 a share on the New York Stock Exchange.

"The company and its shockholders should benefit for a larger market of the company's shares, greater visibility withing the investment community and increased coverage in daily stock tables," said George Townson, Frederick's chairman, president and chief executive officer.

Frederick's of Hollywood has been enjoying respect from Wall Street and the business press. The 45-year-old intimate apparel company was trading near its 52-week high of $18 in late March and was recently named one of the top 200 best small companies in America by Forbes magazine.

David Liebowitz, an analyst at American Securities in New York said that there has been "a very clear delineation between the haves and the have nots" in the apparel industry in the stock market in recent months.

"What we have seen in the stock market is a very good reflection of the underlying company strength and weakness," Liebowitz said. Apparel stocks with a lot of debt or low sales "have been slammed pretty hard by the financial community," he said.

Liebowitz noted that Frederick's and a few other apparel stocks were trading "at or near their all time highs."

But Wall Street is playing it safe, favoring companies without debt and with a loyal clientele, he said. "The key thing to bear in mind is that the recession we are currently in has hit the retail industry very, very, hard," Liebowitz said.

And if the recession were not bad enough, the Persian Gulf War has compounded retailer's woes, said Howard Ruben, West Coast editor of the Daily News Record, the men's fashion magazine of Fairchild Publications Inc., which also owns Women's Wear Daily, After the U.S. began bombing Iraq, the country's shopping malls have been ghost towns, Ruben said.

"Business from Jan. 16 until now has been non-existent," Ruben said in an interview last month. "Everyone's watching their television set."

In some cases the war has provided a physical barrier to shopping, Ruben noted. On Jan. 15, would-be shoppers in San Francisco could not enter the city, because anti-war demonstrators effectively blocked the Golden Gate Bridge.

Alice Ruth, an apparel analyst with Montgomery Securities in San Francisco said, however that she expects consumer spending to be slow, until the end of the second quarter of 1991. Ruth is "positive" about a number of apparel stocks, including Liz Claiborne Inc., NIKE Inc., Merry Go Round Enterprises Inc., and The Limited Inc.

Tom Tashjian, a senior consumer analyst at Seidler Amdec in Los Angeles disagrees with Ruth, saying he expects spending to remain sluggish until the fourth quarter of 1991.

"We believe this recession is going to last longer than a consumer upswing on the Fourth of July," Tashjian said. "People who expect an earlier upswing will be disappointed," he added.

Historically, during a recession there is a pent up demand and once consumer spending begins, it can pull the country out of a recession, Tashjian said. "Investors are already beginning to look beyond the recession and the Gulf War," he added.

George W. Randall, chairman of Yes Clothing, said that the future of his and other California-based apparel companies is bright, as California is becoming a more important force in the fashion industry.

"I believe that New York became too smug and couture oriented and really forgot about the masses," Randall said." California is much more fashion forward," he said.

Randall said that he expects Yes Clothing stock, which was trading at about $4.50 a share in mid March, to continue to rise in 1991. Third quarter losses last year were due in part to the fact that the company has had additional expenses starting up three new lines of clothes.

Randall said that investors began looking askance at the apparel industry about the time that Robert Campeau bought the Federated Department Stores and threw them into bankruptcy shortly thereafter.

"I say the apparel industry got hurt about the time of the Campeau takeover," Randall said.

Frederick's of Hollywood has enjoyed steadily escalating profits for the last five years, going from a net loss of $518,000 in 1986 to a net income gain of more than $3 million in 1989.

"We're not doing as well as we were prior to the economic shift," Townson said.

Liebowitz said that there are still some good apparel stocks out there for investors, but analysts are eyeing investment opportunities cautiously. These days, Liebowitz said, "We feel it is much safer to be wearing both a belt and suspenders than just an elastic waistband."