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Industry Insight

MOSS ADAMS CAPITAL: Apparel and foowear market monitor highlights notable deals, stock prices and results.

Details on Industry Insight.

Tiffany Montgomery
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One Distribution on KR3W and the future

By Tiffany Montgomery
July 02, 2008 6:19 AM

Yesterday, I wrote about how One Distribution appears to have another hit on its hands with its footwear brand Supra.

Today, I'll focus on what's new with KR3W, the company's blockbuster apparel line that changed the skate denim market a few years ago. Also, Scott Bailey and Scott Vanderripe, who handle operations and production, respectively, and previously were part of the team that founded Split, tell me how their past experience prepared them for the new venture and what the One Distribution plans to focus on next.

Third partner Angel Cabada, the creative visionary behind the products, was a former partner in skate apparel company TSA.

KR3W: The apparel brand is on track to grow 15 to 20 percent this year. KR3W is best known for its denim, and its skinny style of denim changed the skate market several years ago at time when baggy, urban styles were the rage.

The slim style was so influential, and such a radical shift, I've had some skate shoe brands tell me it hurt their business badly. Those brands were making big, puffy shoes to match the oversized pants styles of the time. But those shoes didn't look so good with skinny denim, while slimmer, vulcanized shoes did.

KR3W launched in Spring 2003 because the partners saw a void in the skate apparel market. Angel believes that kids are smarter than most companies think, and they move faster, Scott B. said.

"Angel never tries to dumb down the product," he said. "We lead with the edgier kids not the masses."

Retailers were initially cautious with KR3W because the brand and the company were untested. Once the company shipped on time and the styles sold in stores, retailers became believers and KR3W did double the numbers the team had planned.

Because the three partners had industry experience, factory support and great contacts, they were able to handle the rush of orders that flooded in.

"Making 100,000 units of jeans was not a big issue," Scott V. said.

Competitors at the time didn't move very quickly when it came to following hot trends, Scott B. said. So KR3W had the skinny denim market to itself for a year or so, which gave the new brand a good foundation.

"Nowadays, everybody's quicker," he said.

The brand is not sold in department stores, and the main national action sports account it sells is Zumiez. On the fashion side, Urban Outfitters is the main national account.

Otherwise, KR3W's distribution is in skateboard and fashion accounts.

The company doesn't plan to open up distribution to drive more growth, even with the slow economy.

"Our philosophy is limited distribution is the right place to be," Scott B. said. "We have so much growth with Supra, we're not pushing it with KR3W."

KR3W warehouseKR3W's denim dominance is apparent walking around the company's warehouse, left, as it prepared to ship back to school.

The place was teeming with jeans - and the company had not received most of its fall merchandise yet.

"We sell A LOT of denim," Scott V. said.





Experience matters: The previous experience with other companies helps One Distribution in many ways.

"You've already learned what not to do, which cuts half of your problems," Scott V. said.

"When you've started a business in your garage and struggled for 10 years and watched other brands be successful, when we started again we had a roadmap of where we wanted to be," Scott B. said.

They also knew they wanted more solid financing instead of patching together money from themselves, friends and family. This time around they had the track record and contacts to line up investors from the get go.

Their experience also helps when hiring employees - currently the company has 30 people on staff. They have an eye for finding good people, Scott B. said. That's one reason why the launch of Supra has gone pretty smoothly though the partners had no footwear experience - they hired the right people to help, Scott B. said.

The future: The three partners named their company One Distribution because they didn't want to be locked into one brand. They envision the company having a suite of brands under one umbrella.

That led me to ask if they will start any new brands soon.

There are no immediate plans, the partners said, as they focus on several other projects. Two years ago they bought back the company's European distribution and now have their own office in France that handles business in 24 countries. They believe European sales could eventually surpass sales in the U.S.

"Europe is a big part of the equation right now," Scott V. said.

They are selling direct in Canada, and are working closely on the runaway growth of Supra.

"We have our hands full," Scott B. said.



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