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Guess to Move Distribution Unit From L.A.


Los Angeles apparel manufacturer Guess Inc. said Thursday that it will pull its distribution operations out of downtown Los Angeles in favor of a new facility in Louisville, Ky.

The 300 people who work at the Guess operation at 15th and Alameda streets will have their choice of accepting a severance package or a relocation package that includes moving expenses, company executives said.

"It's an economic decision based on geography," said Guess Chief Financial Officer Brian Fleming. "This is not about L.A.; Guess is an L.A. company. This is a decision to locate our distribution center closer to our customer base, 70% of which is east of the Mississippi."

Louisville offered the apparel maker two important advantages: a 15-minute drive from United Parcel Service's national shipping hub and economic breaks from the state, including corporate income tax abatement for 10 years and other incentives based on the number of local hires. The facility will open next spring.

The bulk of the company's operations--including design, retail administration, advertising and finance--will remain in Los Angeles.

Guess, which helped create the designer jeans craze of the early 1980s, has since fallen on harder times.

Its contractors were cited for illegal home-sewing operations, and the National Labor Relations Board ordered the clothing giant to rehire employees it had fired for union activities. The company, meanwhile, shifted about a third of its manufacturing operations out of the country.

Since then, the company has tried to slowly claw its way back to the top ranks it had ceded to companies such as Tommy Hilfiger Inc.

Earnings in 1998 were down 33.1% to $25.1 million, with sales and royalties down 8.4% to $471.9 million. Fourth-quarter results, however, offered some promise, with net earnings of $4.1 million--up from a loss of $2.1 million in 1997--and revenue up 12% to $133 million.

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