The business: Maker of custom T-shirts
Founded: September 1999
Closed: November 2000
Cause of death: Elusiveness of target customers
In 1997, when Fruit of the Loom shuttered its factory in Port Barre, La., McDonald's became the biggest employer in the one-stoplight town. But Kevin Stevenson had a vision for putting the bustle back into Port Barre (population, 3,500), located 50 miles west of Baton Rouge. In September 1999 he and two other veteran Fruit of the Loom executives reopened the factory, hired back some of the company's former work crew, and launched Port Barre Apparel.
But how could the start-up succeed where the huge textile manufacturer had failed? Conceding the cheap end of the market to overseas competitors, Stevenson's company set out to make custom T-shirts better and faster than the competition. Unfortunately, the plan didn't pan out. "We thought we were going to go in and get orders," says Stevenson, who was CEO and president of the now-defunct 100-employee company. "That was very nave."
Stevenson, 45, who had been an executive vice-president at Fruit of the Loom, had known from the start that he was bucking a trend.
Since 1994, the year the North American Free Trade Agreement (NAFTA) went into effect, the number of domestic apparel manufacturers had been shrinking. (The total today is less than 10,000, down from 25,000 in the early 1990s, according to the American Garment Council, based in Atlanta.) At the same time, the number of U.S. clothing makers setting up their own plants -- or contracting with local suppliers -- in Mexico, the Philippines, and other Third World countries had soared. "The bottom line is, it's cheaper to make it elsewhere," says the council's managing director, Mike Todaro.
Still, Stevenson and his partners were convinced that they had a critical edge since they could turn around orders in just 4 to 6 weeks, compared with the 12 weeks that the typical operation outside the United States required to make and ship goods and clear them through customs. The start-up would compete by jumping on consumers' buying trends and responding swiftly to retailers' needs. "It all goes back to what people want and when they want it," says Stevenson.
By August 1999, Stevenson and his partners had secured roughly $5 million in start-up funds, including a $975,000 bank loan that was federally guaranteed under a program designed to help communities that had been hurt by NAFTA. They also had a bargain lease -- a five-year, $2,500-a-month deal -- on the Fruit of the Loom factory space, plus trained workers who were grateful to have their jobs back and were raring to go.
But the company, which had planned to make private-label T-shirts for such retailers as Target and Kmart, didn't have any significant orders lined up in advance. "It was a catch-22," says Stevenson, who recalls that potential customers initially were reluctant to go with an unproven manufacturer. Then three ailing T-shirt makers began dumping their wares at fire-sale prices. During the next few months, Stevenson and his partners struggled to ride out the glut and find customers.
In late 1999 and early 2000 orders did come in from Wrangler and Tommy Hilfiger, but the company's slow start had severely tested its meager cash reserves. Last summer the problem grew even worse. Another customer, Ying Yang, a New York CityÂbased distributor, refused to pay for a $185,000 order of custom-designed men's and boys' shirts, contending that the necklines were imperfect. (Port Barre Apparel disputed the claim.) Then a shipment of fabric that the company needed to fill a large Tommy Hilfiger order turned out to be defective, according to Stevenson, and the bank refused to extend the company's credit line.
Stevenson notes that Port Barre Apparel was on track to finish 2000 with $5.5 million in sales. But because the company's credit was stretched to the limit and a $900,000 debt to creditors was mounting, he shut down production in November. "If you're low on capital like we were," says Stevenson, who's selling off the company's remaining assets, "you can't make many mistakes."
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