L.A. T Sportswear, Inc. History

Company Perspectives:

L.A. T Sportswear, Inc. targets market and product niches where the major mills don't compete. The company's strategy aims to create a more complete line of new and innovative products, including the expansion of sales of private label products--a market too small for the major producers. The company is committed to carrying complete inventories in significant depth to minimize out-of-stock occurrences, and will concentrate on the addition of distribution locations to further expand one-day UPS delivery to 90 percent of the U.S. The company continues to focus on improving customer service and internal operations.

Company History:

L.A. T Sportswear, Inc. is a major manufacturer and distributor of imprintable and decorable knitted sportswear. The distribution arm of the business is one of the fastest-growing distributors in the industry. Its manufacturing division makes T-shirts, sweatshirts, one-piece rompers, dresses, and coordinating separates, offering both imprinted as well as blank sportswear, principally in the form of T-shirts and sweatshirts. The company distributes its own products under its Full Line Distributors division, which also distributes the products of 13 other garment and accessory manufacturers including Fruit of the Loom, Hanes, Russell, and Fieldcrest/Cannon. The company's primary customers include small independent imprinters, embroiderers, advertising specialty companies, and sporting goods stores.

L.A. T Sportswear was founded by Isador E. Mitzner in 1978, operating as a broker of overstocked and discontinued T-shirts and other screenprintable garments. The company was controlled in common by The Connection Group, Inc. and SPZ, Inc., both based in Georgia. L.A. T expanded into the distribution of baseball and golf caps, in addition to developing a business as an independent manufacturers' sales representative. In 1982, L.A. T contract-manufactured its first proprietary line of activewear for infants and toddlers, marketed under the Rabbit Skins label. Following the success of its Rabbit Skins products, the company purchased the cut and sew operations of its contract manufacturer and began manufacturing operations. Six years later, the company introduced a line of fashion-oriented imprintable sportswear for women, which expanded into a unisex product line offered under the L.A. T Sportswear label. The company began screenprinting its infant and toddler sportswear which was marketed to mass merchandisers, theme parks, resort specialty shops, and college book stores, among others.

In 1987 the company formed the Full Line division out of the merger of two small independent distribution locations in Texas and southern California. A relatively small line of imprintable golf shirts and sport shirts had been marketed by the independents prior to the merger. The Full Line division increased the product line to include T-shirts, sweatshirts, caps, jackets, bags and aprons, athletic jerseys, and shorts. Full Line added distribution centers in the Atlanta, Pittsburgh, and the San Francisco Bay metropolitan areas.

Expansion in the Early 1990s

By 1990, L.A. T's net sales had reached $34.4 million. In that year T-Shirt Brokerage Services, Inc., a cap and apparel broker, was spun off from the company, as was The Ball Ground Reps, Inc., a commission sales representative for various manufacturers. A new distribution center was opened in Chicago just as the company prepared for tight margins due to the major T-shirt mills' heavy inventories for 1994. The company offered a new product--an adult French Terry clothing line--and was encouraged by its successful performance. L.A. T sought market niches in an industry dominated by larger mills that produced enormous inventories of imprinted sportswear--where L.A. T's ability to produce on a shorter product run basis allowed for more innovative product design or fabric introductions, which differentiated the company from its competitors.

In January 1994, the company offered 1.2 million shares of common stock at $10 per share in its initial public offering. Following the IPO, The Connection Group, Inc. was merged into SPZ, Inc., at which time the companies reorganized from S Corporation status to C Corporation status.

By 1995 the Rabbit Skins label had become one of the leading producers in the infant/toddler market, accounting for half of the manufacturing division's sales. The Rabbit Skins line consisted of 36 styles and 724 individual items, manufactured using a variety of fabrics including 100 percent cotton and cotton/polyester blends. The company was committed to offering products of high quality fabrics and stylish designs. A screenprinted product program with Wal-Mart stores was a primary reason for increased sales in its manufactured sales sector. Michael's Stores was another major account which the company supplied with a new line of popular fleece products. Printed products included garments bearing the licensed names, logos, and mascots of major colleges and universities. Following the development of screenprinting capability which decorated the Rabbit Skins line, sales of the company's decorated products grew to 15 percent of the division's sales; blank Rabbit Skins products accounted for the remaining 85 percent of sales. The adult L.A. T Sportswear label accounted for about 20 percent of that division's sales, consisting of relatively upscale garments such as dresses, leggings, fashion T-shirts, pantsuits, and tops. L.A. T for Kids ages five to ten accounted for approximately 10 percent of that label's sales. L.A. T became one of the few manufacturers to supply specialty sportswear to all three age brackets. Almost one-third of the company's blank products were sold through its manufacturing division to screenprinters. Sales to distributors, including the company's own distribution division, craft stores, and mass merchants, made up the remaining outlet for blank products.

The Full Line distribution division grew in product line and in the number of manufacturers it represented, utilizing catalogue distribution (275,000 catalogues were sent in 1994) as a primary marketing device. The catalogues were made available at trade shows, supplemented by mailings to potential screenprint and other customers. Trends in activeware consumption were recognized in overall growth of 15 percent annually as consumers identified with various groups and events, and began dressing more casually. The company distributed products made from nationally recognized manufacturers such as Fruit of the Loom, Hanes, Russell, Jonathan Corey, Print-ons, Augusta Sportswear, Anvil, and Yupoong, as well as its own products. Geographically, the division grew from its original distribution centers in Anaheim, California, and Houston, to include centers in Pittsburgh, Atlanta, San Francisco, Chicago, Miami, and St. Louis.

Targeting the 1996 U.S. Summer Olympic Games

L.A. T signed a letter of intent with the Hanes division of Sara Lee Corporation to use trademarks, licensed to Sara Lee by the U.S. Olympic Committee and the Atlanta Committee for the Olympic Games, in connection with the 1996 Summer Olympic Games. The company used the Hanes label and trademarks for the promotion of its fashion knitware for youth and adults with the intention of distributing the products through its mass-market accounts and mid-tier retailers. The company was optimistic that other licensee agreements for special events would be generated from the Olympic venue exposure.

The company began experiencing major setbacks in 1995 due to several factors, including disappointing revenues related to the Olympics products. That market became saturated when the number of sub-licensees grew, and the company had overestimated the amount of inventory required to fill that market niche. In addition, stiff competition caused prices to fall--and adding to the losses an offshore manufacturing program failed when problems relating to the quality of their manufactured products affected sales and production, and delivery cycles were delayed. The program was discontinued by late 1995 during a period when the U.S. market was hit by increased import competition and a soft market. Further complicating matters, the company struggled with the implementation of a new computer system which supported catalogue sales and distribution. The conversion took much longer than expected to install, resulting in system failures, disputes with customers, the loss of critical data, and impaired collection efforts. Losses reached approximately $3.6 million in 1995, compared with net income of $2.9 million reported in the previous year. Operating expenses extended to $21 million. L.A. T fell out of compliance with its bank agreement, which was financed with Bank South. The company had been allowed a $30 million credit line, and once that limit had been reached they began renegotiating with Bank South while also seeking out the possibility of replacement financing through other lenders. The company eventually established a three-year, $35 million credit line with Mellon Bank, secured by "virtually all the assets of the company," according to David Shelton, chief financial officer for L.A. T.

In an effort to restructure operations, L.A. T realigned its management team and discontinued certain product lines. Vice-president and board director Jeffrey S. Lebedin resigned and Robert C. Aldworth became executive vice-president and COO. Operations were closed at the San Francisco; Byffe, Alabama; and Chicago distribution facilities and it was decided that the printing facility should discontinue operations by the summer of 1996. Profits continued to decline in 1996, when sales dropped 20.3 percent, as the company struggled to regain ground lost during the restructuring period.

1997: Returning to Profitability

By the third quarter of 1997 L.A. T was reporting a net profit of $184,000. Addressing the company's rebound, CEO and Chairman Isador Mitzner told the Daily News Record that "Although the industry remains sluggish and we continue to face stiff price competition, we are encouraged by a second straight profitable quarter compared to prior-year losses."

In response to the intense competition in the screenprint garment distribution business, L.A. T reaffirmed the need to provide good quality, competitive pricing, prompt delivery, a wide selection of products, and a high level of customer support. Internal operations were streamlined through improved flexibility in inventories which negated the prior tendency to maximize quantities of goods in order to best serve customers. New methods of tracking allowed the cutting and sewing departments to produce at levels more consistent with demand, reducing inventories in many cases. As of December 1997, L.A. T was positioned to fill a backlog of orders valued at approximately $1.9 million. Reflecting the diversity of its sales base, the company reported that in 1997 its largest customer accounted for less than two percent of sales, and the company's ten largest customers accounted for less than eight percent of sales. L.A. T's active customer list had grown to over 26,000 customers.

Nationally, the company's primary competitors in the screenprint garment distribution business included Broder Brothers, Staton Wholesale, California Shirt Sales, and South Carolina Tees. Regionally, distributors such as San Mar, Alpha Shirts, and Stardust competed for the company's business. L.A. T recognized that in order to compete with these companies and others it needed to focus on product design, quality, pricing, and responsiveness to customer service demands. Chairman and CEO Isador Mitzner stated in company reports that "through better inventory control, we have added 125 new styles for 1998, without significantly increasing our overall inventory investment. This merchandising strategy is appealing to our customer base. With our day to day operations significantly improved, the Company will focus on a sales strategy, beginning in the second quarter of 1998, in an effort to improve our revenues. The success of this mission should create the opportunity to return the Company to profitability in 1998."

Principal Divisions: Full Line Distributors.

Further Reading:

• Combining Manufacturing with Distribution of Specialty Activewear, Atlanta: L.A. T Sportswear, Inc., 1995.
• "L.A. T Posts $426K Loss in First Quarter," WWD, May 20, 1996, p. 13.
  L.A. T Sportswear, A Corporate Profile, Atlanta: L.A. T Sportswear, Inc., 1995.
• "L.A. T Sportswear Earnings Dip," Daily News Record, August 22, 1996, p. 10.
• "L.A. T Sportswear, Inc. Back in Black," Daily News Record, November 10, 1997, p. 17.
• "L.A. T Sportswear, Inc. Signs Letter with Sara Lee on Olympic Apparel," Daily News Record, July 1, 1994, p. 8.
• "Noncompliance--L.A. T Sportswear, Inc. Did Not Respect Its Bank Credit Line Agreement Due to Loss in FY 1995," WWD, April 3, 1996, p. 14.

Source: International Directory of Company Histories, Vol. 26. St. James Press, 1999.