The closing of sports apparel company Apex One by parent
Converse is examined by Mark Maremont of BUSINESS WEEK. Converse
shut down Apex just 85 days after its purchase, "citing
unexpectedly slow orders and high costs. The fiasco has been
costly," as Converse took a $41.6M pre-tax loss on Apex --
"weakening its already shaky balance sheet." New York investment
firm Apollo Advisors, which controls 67% of Converse and was
involved with the Apex purchase, "got egg on its face, too."
Converse CEO Gib Ford said Apex sales were 50% below the
projections made by its managers, and "hinted at legal action."
Meanwhile, Apex COO David Koontz believes Converse "didn't
understand the Apex situation and tried the wrong fix" (BUSINESS
WEEK, 9/4).
APEX'S LEGACY: With their NFL sponsorship, Apex rode the
"boom in licensed sports clothing" with sales of $100M in '94,
but the company "was a lot better at marketing and designing than
it was at delivering goods." Apex was "undercapitalized and
constantly had to scramble for money to pay suppliers," and a '94
net loss of $48M "sealed Apex's fate." Converse saw Apex as a
"cheap way to jump into the apparel business and pick up valuable
sponsorships." Although Converse looked to introduce new
designs and logos by Thanksgiving, "the market was soft, and most
retailers no longer trusted Apex, even with Converse's backing."
Norm Charney, President of Athletic Supply in Dallas: "I didn't
want to put too many orders with Apex and Converse this year
until they got things sorted out." With a backlog piling up,
creditors upset, and the need to spend up to $25M to "keep Apex
afloat," Converse and Apollo shut it down. BUSINESS WEEK's
Maremont writes that Converse's own "troubles undoubtedly played
a part in the decision," as they had their own operating loss of
$8.4M in the second quarter. Ford: "We felt we had to take this
action to protect Converse." But the write-off leaves Converse
with a "scary 5-to-1 debt to equity ratio," and some analysts
"are whispering that Apollo may now try to sell the company"
(BUSINESS WEEK, 9/4 issue). In Baltimore, Vito Stellino writes
that Apex was the victim of "too many bad deals," such as paying
Patriots coach Bill Parcells $350,000 to wear their sideline
apparel (Baltimore SUN, 8/28).
