In the latest sign that Southern California is a leader in the trendy teen apparel market, Jones Apparel Group Inc. said Wednesday that it would pay $310 million for Los Angeles-based RSV Sport Inc., parent of the popular l.e.i. brand.
RSV has made strong gains in the bulging juniors market with its jeans for girls and young women. A recent survey of 2,000 teens nationwide showed that more girls ages 12 to 19 bought l.e.i. jeans in the last year than any other brand, according to Teenage Research Unlimited, a market research firm in Northbrook, Ill.
RSV, which launched in 1989 to make riding jeans for equestrians, had sales of $248 million in 2001 and expects revenue to surpass $300 million this year.
The manufacturer gained an edge competing with much larger companies, including Gap Inc., Tommy Hilfiger Corp. and Levi Strauss & Co., partly because it reacts nimbly to fashion shifts, said Michael Wood, vice president of Teenage Research.
It also heaped up revenue by selling both in teen specialty stores, such as Wet Seal and Gadzooks, and in department stores, where teens' parents often shop, he said.
"It doesn't matter if JCPenney or Kohl's is not the coolest store, as long as they're carrying the brand kids want," he said.
But whereas l.e.i was the "absolute leader" in the jeans market a year ago, many companies are nipping at its heels, and the denim market is saturated, said Marshal Cohen, co-president of NPD Fashion World, a unit of NPD Group, a market information company in Port Washington, N.Y.
New York-based Jones Apparel, which designs and markets a wide range of brands, including Jones New York, Lauren by Ralph Lauren and Nine West, said the purchase would allow it to diversify its products for juniors, the fastest-growing consumer demographic.
It also will expand Jones sales in the moderate-price channel.
The bulk of RSV's business is girls' pants, mostly denim. The company also licenses the l.e.i. name to companies that make other products, including shoes, accessories and children's clothing.
No layoffs are expected at RSV, which has 2,600 employees combined at its downtown Los Angeles headquarters, a sales office in New York and manufacturing plants in Mexico and Asia.
RSV Chief Executive Mel Geliebter said the company's operations would not change. Geliebter, who co-founded the company with his wife, Susan, said joining Jones would give l.e.i an enormous opportunity for growth.
At Jones Apparel, which is known more for women's career apparel, the juniors business accounts for only 5% of overall sales, said Anita Britt, the company's executive vice president of finance. The acquisition of RSV would boost that to 11%.
"Obviously, it's a wide-open market for us because we don't have much presence in it right now," she said."
Adding l.e.i. to its stable also gives Jones Apparel a carrot to wave at department stores, which have been trying to recapture teen business lost to specialty stores in recent years, Cohen said. Most of l.e.i. sales are in department stores.
"This gives Jones a brand to say, 'We're in the forefront now of that market,' " Cohen said.
Retailers are zeroing in on a "new jean generation," he said. Baby boomers have long dominated the denim market, but shoppers ages 17 to 24 bought most of the jeans sold last year, he said.
To acquire RSV, Jones would pay $272.5 million in cash, issue about 1 million shares of common stock valued at $37.5 million and assume about $75 million in debt.
Furthermore, selling shareholders and some employees of RSV would be entitled to future payment of up to $70 million in cash or stock if certain earnings targets are achieved over a three-year period, Jones said.
Jones Apparel's stock closed at $34.75, down $1.10, on the New York Stock Exchange.
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A survey found that 43% of girls ages 12 to 19 bought l.e.i. jeans in the last year.
Brand and the percentage of girls who said they bought the brand:
* l.e.i.: 43%
* Mudd: 41%
* Old Navy: 39%
* Gap: 32%
* Tommy Hilfiger: 24%
* Levi: 23%
* Paris Blues: 22%
* Express: 20%