Jordache Enterprises, Inc. History

Company History:

Jordache Enterprises, Inc. manufactures apparel, or contracts for the manufacture of apparel, including jeans, shirts, and outerwear, for men, women, and children. In the late 1990s, it also had purchased a chain of retail stores to market its products and was licensing the Jordache name for items such as eyewear, luggage, bedding, footwear, cosmetics and perfume, intimate apparel, and even diapers. The company was in the forefront of the designer jeans craze that began in the late 1970s. And though the Jordache brand name flourished in this field for a decade, it lost significant market share in the late 1980s; company management hoped to initiate a comeback for Jordache in the late 1990s.

"Overnight" 1979 Success--After 17 Years

Josef (Joe) Nakash was an Israeli who came to New York City in 1962 at the age of 21 with $25 in his pocket, determined to escape a poverty-stricken childhood and youth. He slept on park benches and in subway stations until he found a $40-a-week job wheeling racks of merchandise for a discount store. Nakash saved his money and in 1966, when he was making $110 a week, brought over his brothers Raphael (Ralph) and Abraham (Avi). The three saved $150 a week from their earnings and opened a discount store by 1969, selling brand-name jeans at cut-rate prices. Within a few years they had expanded this enterprise into a four store chain in Brooklyn and Queens.

The Nakashes' largest store was torched and looted during a city-wide nighttime power failure in 1977. This proved a bonanza, for the brothers collected $120,000 on their insurance policy, enabling them to enter the business of manufacturing jeans. The Nakash brothers had long been casting their eyes on the European jeans market, where denim products were tighter, sexier, and more fashion-conscious than in the United States. The Nakashes "Jordache" jeans--a loose acronym of their first names plus a French-inspired ending (pronounced "ash") taken from the end of their last name--was fashioned from a $4 swatch of Japanese fabric and had triple stitching for strength, reinforced buttons, and a double elastic waistband hugging the small of the back.

The moment could not have been more propitious, for consumers were turning their attention from standard brands like Levi's to designer jeans put out under labels such as Gloria Vanderbilt, Calvin Klein, Sergio Valente, and Sasson. Even so, there was nothing major to distinguish the brothers' Hong Kong-made samples from those from any other contender or pretender until they launched an aggressive television and print advertising campaign in January 1979 with $300,000 of their own money and a $250,000 loan from an Israeli bank. This leap into the unknown represented about one-fourth of their annual sales volume.

The Nakashes made a TV commercial featuring an apparently topless blonde wearing skin-tight Jordache jeans and riding a horse galloping through the surf. Suddenly a bare-chested young man, also in jeans, appeared and vaulted onto the horse, which carried the two into the sunset. Set to a rock beat, the music on the sound track swelled to the words, "You got the look I want to know better." All three networks rejected the spot as lewd, but the independent New York stations carried it, and within weeks Jordache was a hit among teenage girls.

The Nakashes immediately followed up with at least $1 million more in advertising, including not only more TV spots in the New York area but also full-color ads in such major magazines as Playboy, Vogue, and Harper's Bazaar. The New York Times refused to print an ad showing a female clad only in Jordache jeans piggyback on a hunky Jordache-clad topless male because the girl was grinning, so the company reshot it without the smirk, prompting the office quip, "The Times thinks it's okay to do it--you just can't enjoy it."

Triumphs and Tribulations of the 1980s

Incredibly, start-up Jordache had sales of $72 million in 1979 by selling more than three million pairs of its sole product--jeans selling at retail for between $29 and $34. The Nakash brothers became the second-largest shareholders in one of the fastest-growing banks in Israel. They began establishing Jordache International retail outlets throughout Asia and negotiated licensing deals for the Jordache name for products ranging from sunglasses to women's sportswear. In 1980 Jordache signed a licensing deal with Burlington for home furnishings, including domestic items for bed and bath and a full assortment of kitchen textiles and table linens.

By the fall of 1981 Jordache was producing 1.2 million pairs of jeans a month and selling them in 25 countries. The company had added a medium-priced line of jeans under the Alessio label. There were other divisions for children's clothing, menswear, handbags, activewear (including sneakers, running suits, and other athletic apparel), and junior-related separates. New manufacturing facilities had been purchased in Louisiana, and the company was adding to its warehousing space as fast as it could find space to buy.

Additionally, the company was licensing its name and horse's head logo for 36 products, including brassieres, pantyhose, diaper covers, and children's dolls. Joe Nakash said the licensees were taking in more than $100 million annually. Jordache was earning $200 million a year in wholesale revenue for its jeans. It was spending about $16 million a year on advertising, which Nakash said he believed in "like a military strategy. You invade." The company also, by early 1983, had founded Yama Maritime Inc., an affiliate in which it had invested $40 million for eight cargo ships sporting the familiar horse's head. By this time Jordache's sales volume was $400 million annually, and it had 45 domestic and 33 international licensees.

The Nakashes hang-loose style made a mockery of corporate organizational charts. The brothers did most of their planning while commuting to Manhattan from their Queens residential neighborhood. They divided their duties on the basis of what they enjoyed doing the most and switched funds from division to division on a basis of daily need. They promoted young, inexperienced people from within or hired retailing, rather than garment-industry, executives, in the hope that they would contribute a feeling for the customer's needs.

Jordache stuck a thumb in the eye of rival Sasson Industries when it purchased the Maurice Sasson brand name from a defunct company in 1983 and appointed Maurice Sasson president and chief designer of a newly formed subsidiary, Bronco Ltd. Maurice Sasson had founded the Sasson jeans line but had split with the Sasson firm in 1979 after a lawsuit over the use of the Sasson name. Bronco began manufacturing and marketing a line of young-men's contemporary fashions and a high-fashion junior line under the Maurice Sasson name.

Also in 1983, Jordache paid $4.7 million for a half-share in a hot new $6 million a year Beverly Hills jeans manufacturer, Guess Inc. What seemed to be a highly astute investment turned into a seven-year-long horror story. Soon after Guess sales exploded, the Nakashes began to suspect that its founders, the Marciano brothers, were skimming profits off the top. The Marcianos were just as unhappy over the prospect of having to share their suddenly lucrative take with the Nakashes. They filed suit in federal court in 1984, charging Jordache with fraud and breach of contract and alleging that the Nakashes were racketeers.

In January 1986 federal customs and tax agents raided Jordache's offices, confiscating 450 crates of documents. A few days later, Hong Kong police raided Jordache International's offices there. But federal prosecutors in New York, headed by Rudolph Giuliani, were preoccupied with insider-trading cases and never followed up by seeking indictments. In 1989 a congressional panel heard testimony charging that the Internal Revenue Service had in effect been used as a pawn by the Marcianos in their war against the Nakashes.

A California jury found for Guess in its suit against Jordache in 1989. In May 1990, while jury members were deliberating on damages, the Nakashes agreed to settle this suit and 12 pending ones by giving back their Guess stock. In return the Marcianos agreed to let them have nearly two-thirds of the company dividends being held in escrow--roughly $66 million of a total of $106 million. Jordache won full ownership of a jointly owned subsidiary, Gasoline. The legal fees involved in this epic battle totaled at least $80 million.

Jordache was still flourishing in 1986, when it was the largest privately owned U.S. jeansmaker, with annual sales estimated at more than $600 million. A television campaign, seemingly based on Calvin Klein's, featured teenagers who, instead of modeling Jordache jeans, talked about adolescent concerns such as their appearance and search for romance. One commercial, which included a participant asking, "Have you ever seen your parents naked?" drew criticism from parents' and women's groups and was rejected by all three networks. Jordache's "forum" continued with topics such as parental breakups and teenagers running away from home but eventually turned to the safer subject of world hunger.

Meanwhile, Jordache's list of company licensees reached 100, generating $300 million in wholesale volume. In 1989 the list of products included children's socks, playwear, and sleepwear; women's rainwear, outerwear, large-size sportswear, and jewelry; misses' activewear, lingerie, and sleepwear; junior and misses' dresses and related separates; men's and women's hosiery; luggage and other leather goods; and umbrellas and gift accessories. An important attraction for prospective licensees was Jordache's heavy commitment to advertising. The company also was providing support to licensees in the form of legal services and merchandising and marketing staffs.

Sliding Downmarket in the 1990s

Jordache developed a chain of retail outlets for its products by acquiring 55 discount stores in six states from Heck's Inc. in 1990. Jordache paid only $1 but assumed $22 million in mortgage obligations in taking over the struggling Appalachian-area chain. Avi Nakash, Jordache's president, said the stores would sell Jordache, Calvin Klein, and other branded apparel at a 30 to 40 percent discount. However, a retail consultant suggested the company would use Heck's as "a dumping ground for Jordache's mistakes--its overcuts, returned items, and unwanted job lots."

Another retail consultant said many clothing manufacturers were developing retailing arms in order to survive in a field dominated by mass marketers and financially unstable department store chains. Jordache had announced in 1989 that it would open 30 to 50 "Jordache Outlet" discount shoe stores with Shoe-Town Inc.

With the end of the designer jeans craze, Jordache's annual sales fell to an estimated $400 million-plus at the end of the 1980s. According to a Los Angeles Times story, the company's jeans had lost their cachet, appealing mainly to inner-city youths and blue-collar workers and typically selling at discount stores. Junior wear was accounting for 52 percent of the company's business; misses for 18 or 19 percent; young men's apparel for about 16 percent; and children's wear for about 10 percent. In 1991 the company launched Looks, a fragrance for 14-to-25-year-old females.

When Jordache Baby's disposable diapers was released by a licensee in 1994, it was apparently the first designer diaper. The product, 40 percent cheaper than Pampers or Huggies and said by one dissatisfied customer to leak, seemed to symbolize Jordache's descent in the marketplace to mass-merchandise stores and discount outlets. The company spent less than $1 million for advertising during 1996.

The following year, however, Jordache launched a new $5 million television and print campaign with a rescored version of its original "You Got the Look" theme. The print ads featured pouty young women in high-tech rooms that evoked a discotheque setting, designed to play on the popularity of 1970s fashion nostalgia and thereby attract a younger customer base. The ad director for this campaign was Ralph Nakash's son, 20 year old Shaul Nakash, who was an MBA student at the time.

Jordache's holdings in the 1990s included Ditto Apparel, Inc., a manufacturing arm located in Colfax, Louisiana, and Retail Acquisitions Inc., which ran the apparel stores and was also a finance holding company. Jordache also had suppliers abroad, including JRA Philippines, which was making jeans for sale in U.S. department stores. Ralph Nakash was chairman of the board of the parent company. Elliot M. Lavigne was named chief executive officer in 1997. Headquarters remained in New York City, in Manhattan's garment district.

Further Reading:

• Behar, Richard, "Does Guess Have a Friend in the IRS?" Forbes, November 16, 1987, pp. 147-49.
• Belkin, Lisa, "When the Honeymoon Ended," New York Times, May 1, 1986, pp. D1, D5.
• "A 'Blood War' in the Jeans Trade," Business Week, November 13, 1989, pp. 74-75, 78-79, 81.
• Bloomfield, Judy, "Labels Stretching Out Via Licensing," Women's Wear Daily, July 7, 1989, p. 20.
• Byron, Christopher, Skin Tight, New York: Simon & Schuster, 1992.
• Conant, Jenny, and Jessica Kreimerman, "Selling Jeans by Ignoring Them," Newsweek, September 15, 1986, p. 64.
• Cuff, Daniel F., "Jordache Leader Hopes Shipping Will Recover," New York Times, February 1, 1983, p. D2.
• Ettorre, Barbara, "The Status-Reapers," July 1, 1979, New York Times, Sec. 3, p. 7.
• Gordon, Maryellen, "Taking Jordache to New Heights," Women's Wear Daily, February 7, 1990, p. S10.
• "Jordache Purchases Sasson Brand Name," Women's Wear Daily, October 12, 1983, p. 12.
• "Jordache's New Executive Look," Business Week, November 2, 1981, pp. 121, 123.
• Krol, Carol, "Jordache Resurrects 'You Got the Look' Ads," Advertising Age, July 21, 1997, p. 3.
• Ono, Yumiko, "To Complete This Jordache Look, Just Add a Bib and Teething Ring," Wall Street Journal, August 9, 1994, p. B1.
• Pechter, Kerry, "Jordache's Purchase of Heck's Puzzles Many in Retail Field," Wall Street Journal, January 4, 1990, p. B5.
• Reynes, Roberta, "The New Entrepreneurs," Marketing Communications, April 1980, pp. 28-29, 79.
• Salmans, Sandra, "Shoot-Out on Seventh Avenue," New York Times, September 20, 1981, Sec. 3, pp. 1, 24.
• Silverstein, Stuart, "Guess and Jordache Jeans Settle War Over Ownership," Los Angeles Times, May 31, 1990, pp. A1, A30.
• Slutsker, Gary, "The Smoking Bun," Forbes, March 25, 1985, pp. 210-12.
• Stewart, Anne, "Topless Ads Mean Bottomless Riches for the Three Israeli Brothers Behind Jordache Jeans," People, December 3, 1979, pp. 135-36, 138, 140.
• "Topless Jeans Make the Scene," Time, September 10, 1979, p. 74.

Source: International Directory of Company Histories, Vol. 23. St. James Press, 1998.

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