Fortune Fashions Industries had to move all its manufacturing to Mexico a few years ago in order to survive. The Vernon company, like other apparel makers, has since been hit hard by the rising price of cotton and other raw materials. And through it all, the Targets and Wal-Marts of the world still demand low, low prices.
So it wasn’t seen as a surprise when Jerry Leigh of California, a Van Nuys apparel designer, manufacturer and brand management company, announced last week that it acquired the majority of the assets formerly owned by Fortune Fashions, which is now operating as a division of Jerry Leigh.
Family-owned Jerry Leigh purchased Fortune Fashions’ inventory, its printing plant in Ensenada, Mexico, and some of its intellectual property such as trademark rights, according to Mark Brutzkus, a Woodland Hills attorney representing Jerry Leigh. The Fortune Fashions division will continue to operate out of its 400,000-square-foot Vernon headquarters. Other terms of the deal weren’t disclosed.
Fortune Fashions, which employs more than 200, makes private-label, branded and licensed T-shirts for companies such as Dos Equis, Walt Disney Co. and Hasbro Inc. that are then distributed to major retailers such as Target, Wal-Mart and Kohl’s.
Sources familiar with the situation said Fortune Fashions sold its assets to Jerry Leigh because the company has been struggling financially.
Entrepreneur Fred Kayne, who founded Fortune Fashions in 1991, declined to comment on the deal. Bryan Fried, chief operating officer at Fortune Fashions, did not return calls seeking comment.
Andrew Leigh, chief executive at Jerry Leigh, said in a statement that the merger will allow Jerry Leigh to grow its business.
“This acquisition is a natural progression for Jerry Leigh,” he said. “Jerry Leigh and Fortune Fashions both serve in the licensing, sales, merchandising and design fields through complementary tiers of distribution.”
Jerry Leigh, founded in 1962, handles sales, merchandising and the design of licensed apparel for brands such as High School Musical, Abbey Dawn by rock star Avril Lavigne and Harajuku Lovers by pop star Gwen Stefani. The company, which employs more than 1,000, also makes a line of hooded sweatshirts, HB3, which have integrated headphones that are machine washable.
The purchase is seen as a natural fit by some analysts.
“They have similar channels of distribution and many of their categories overlap,” said Paul Zaffaroni, director at Newport Beach investment banking firm Roth Capital Partners LLC.
The business climate for companies such as Fortune Fashions has been difficult. Retailers have been pressuring apparel makers to cut prices as consumer demand for lower-priced clothes grows even amid soaring costs of raw materials.
“All manufacturers are being forced by the retailers to get cheaper, cut their price points and profit margins,” said Frances Harder, founder and president at downtown L.A. non-profit Fashion Business Inc. “Hopefully things will change and we will start to value more how much goes into making clothing.”