Ibex Outdoor Clothing to Liquidate, Will Fill Orders Into February

Valley News Staff Writer
Friday, December 01, 2017

White River Junction— Ibex Outdoor Clothing, struggling in a rapidly changing retail environment, said it is shutting down, liquidating and seeking a buyer for its remaining assets.

“Ibex will fully wind down its current operations sometime in February of 2018,” the company said in a news release on Friday.

The move comes after the White River Junction maker of outdoor apparel laid off 12 employees in November amid a shift in business strategy to stop distributing to retail outlets and instead to sell its clothes only online and through its three company-owned stores. But at the time, Ibex signaled that the moves might not be enough to turn the company around and anticipated changes in both its “business model and the ownership structure.”

Once a symbol of a bootstrap entrepreneurial company that embodied Vermont’s environmentally conscious spirit and laid-back workplace — as many as 13 dogs could be found roaming the office on a given day — Ibex in recent years found it increasingly difficult to compete in a marketplace roiled by sweeping changes in retailing in addition to facing a warmer climate affecting cold-weather apparel sales.

In an interview, Ibex Chief Executive Ted Manning said the company’s situation grew tenuous in late October, when it became evident that “we had no ability to bring our supply partners with us into 2018 and they were not able to commit in supporting us next year.”

Manning said the approximately 20 remaining core employees at Ibex’s White River Junction headquarters will continue to process sales online and to retail stores into the new year, although he expected some employees to leave sooner as they seek new opportunities. Ibex’s three company-owned stores in Boston, Denver and Seattle, which together employ another 20 to 30 workers, will be open through the holidays but all company operations will cease by February, he said.

Like many apparel manufacturers, Ibex has been upended by seismic shifts in the retailing industry, where cheaper-made products from overseas suppliers and technology has made it tougher for U.S. manufacturers to make a profit, especially if they are saddled with debt. Online shopping also has clobbered brick-and-mortar stores, once a major retail outlet for Ibex clothing.

Many of these changes have made it an inhospitable environment for niche apparel companies, such as Ibex, which despite a reputation for quality workmanship and die-hard customers nonetheless cannot achieve the economies of scale necessary to be profitable. Apparel manufacturing incurs heavy upfront costs to pay supply chain partners. Those costs typically are financed through bor rowing that is repaid after the selling season, a delicate balancing act made tougher as traditional retail stores falter.

“Retail bankruptcies, the shift to ASAP shipping as opposed to pre-sales ordering by stores, Amazon, warmer winters, have all challenged our liquidity and broke our ability to create new product,” Manning said.

Even global warming has played a role, according to Carolyn Kimbell, owner of Elevation Clothing in Woodstock, a longtime seller of Ibex apparel.

“The outdoor industry has been going through a massive consolidation as buying habits are more diverse and the climate and weather is more unpredictable,” Kimbell said in an email. “As a retailer you can plan and try to predict sales ... but a warm December or January can be debilitating — people are not going to purchase (cold) weather clothing. No amount of planning can account for that.”

Manning said the decision for the voluntary liquidation was made at a Nov. 13 board meeting in order to “convert inventory to resolve the debt.” He declined to say how much debt Ibex is carrying.

A voluntary liquidation allows a company to have more control over the process — as opposed to a Chapter 7 bankruptcy, where the creditors force a company into liquidation — in addition to saving costs, Manning explained.

“This allows us to wind down with integrity,” he said. “We decided to drive this ourselves.”

Despite the decision to cease operations, Manning said that revenues at Ibex — at around $20 million annually — actually have been ticking up (although they would be less as a result of ceasing sales to independent retail stores).

But he sidestepped a question about whether Ibex is profitable or not.

Manning said there is a “process in place” to sell Ibex’s assets, which after liquidation essentially would be the company’s intellectual property such as its clothing designs, logo and customer database. He said interest has been expressed by potential buyers “locally, nationally, globally,” although he declined to identify them.

Founded in 1998 by John Fernsell and Peter Helmetag, a Pawlet, Vt., farmer, Ibex began operating out of Fernsell’s commodity trading office above the Woodstock Pharmacy on Central Street in Woodstock, with outdoor apparel made from New Zealand Merino wool and designed by Fernsell’s wife, Jinesse Reynolds.

Initially utilizing manufacturing plants in St. Johnsbury, Vt., Ibex for awhile operated out of offices in the building where Worthy Kitchen now is located on Route 4 outside of Woodstock before moving to White River Junction.

Later, Ibex shifted manufacturing to the West Coast, near San Francisco, to be closer to apparel makers who manufacture for The North Face and other outdoor activity companies. In 2010, North Castle Partners, a Greenwich, Conn., private equity firm, acquired a controlling stake in the company and three years later, Fernsell left the company over what he called “irreconcilable differences” with the new owners.

“It changed a lot in culture and strategy,” said Fernsell, who now with his wife operates Twizel Goods, a San Francisco-based online sustainable apparel company.

Ted Manning, a veteran executive with Eastern Mountain Sports, was recruited to succeed Fernsell.

Ibex no longer makes its clothing in the U.S. but now contracts with overseas manufacturers.

Over the years, Ibex has turned to a variety of different investors and lenders for capital, including, in 2016, a $350,000 working capital investment from the Vermont Economic Development Authority to better coordinate its manufacturing and supply chain with seasonal production cycles.

The buyout by a private equity firm led some to complain that Ibex had sold out to the demands of a Wall Street mindset that was antithetical to the ethos of the company. But Manning said on Friday that he “couldn’t disagree more. The quality of support we had from private equity was superb.”

Yet the retail environment has changed so much that it makes it difficult for a small, stand-alone entity in Vermont to continue on its own and simply recapitalizing Ibex would not change that, according to company executives.

“This has not been a question of capital,” said DJ Jenson, operating executive at North Castle Partners and chairman of Ibex. “Over the last seven years we’ve made huge strides across all areas of our business, from supply chain to manufacturing to distribution. We’ve done just about everything a financial sponsor can do to make this business succeed.”

Rather, Jenson said, “we find ourselves in a position where it’s not about dumping more money into the business. ... We’re at an inflection point where it needs to get bigger real soon, either with a partner who has the infrastructure, resources and muscle to push this thing forward. Ibex has grown dramatically over the last five years but the next phase of this growth is strategic.”

Jenson said a potential buyer for Ibex’s assets likely would optimally be another outdoor apparel company that has an “existing product line and existing distribution system into which the Ibex plan can be readily plugged.”

Kimbell, the owner of Elevation Clothing, said the news of Ibex closing was “not unexpected, but still quite a blow.” In fact, she said that her store has actually increased its inventory of Ibex clothing recently “to make sure that our customers can still get the clothing that they know and love.”

Her store is replenishing Ibex apparel “on a daily and weekly basis and will do so until their inventory runs out. Ibex continues to be a great partner for us, even as they wind down their business,” she said.

John Lippman can be reached at jlippman@vnews.com.