Buyer says four Crazy Shirts stores will remain closed
By Andrew Gomes
Advertiser Staff Writer
The buyer of Hawai'i apparel manufacturer and retailer Crazy Shirts said it will decide in two weeks the exact number of stores it will retain out of about 40 it is acquiring in a bankruptcy sale.
Only The Best Inc., an acquisition company affiliated with local retailer Waikiki Trader Corp., expects to complete its purchase Nov. 15 and confirmed that four stores closed by Crazy Shirts in the last few weeks will not be reopened.
Two of the four outlets were in Waikiki, at the Hyatt Regency Waikiki Resort & Spa and on Royal Hawaiian Avenue. One was in Hale'iwa, and one in Guam. Employees at all four stores were relocated to other stores.
The purchase, agreed to last week, also cleared a final hurdle at a hearing yesterday, as bankruptcy Judge Lloyd King ruled that Only The Best does not have to pay artist royalties on future sales of goods bearing Crazy Shirts designs.
The ruling upset about a dozen artists attending the hearing who had filed a motion opposing the sale, which excluded royalty payments provided for in their contracts.
"I felt it wasn't fair," said artist Desmond Dano, creator of the "Sharka" design, Crazy Shirts' No. 1 seller. "The design was making the company money and now the new company doesn't have to pay for it."
Dano, a single father of two who created Sharka in 1995, said he was earning about $160,000 in annual royalties on top of his salary of about $40,000.
Crazy Shirts has about 300 designs actively earning royalties for 40 or so in-house and free-lance artists. Last year, Crazy Shirts design royalties totaled $580,000, but have been as high as $1.5 million in some years.
Laura Shaw, one of four in-house artists for Crazy Shirts, said company founder and artist Rick Ralston believed in rewarding his artists, who receive between 1.25 percent and 2.5 percent of retail sales and twice that much wholesale.
"The royalties is the only reason I left the good job that I had to join Crazy Shirts eight years ago," she said.
Randy Yeager, Crazy Shirts president and chief executive officer, said selling the company free of any future royalty obligations was always part of the Chapter 11 sale proposal.
"Of course we would like to see the artists be fairly compensated, and we recognize the constraints a buyer has," he said. "We certainly hope that they do come back and offer a fair compensation package to the artists that takes into consideration the value to the company of the artwork that they created."
Only The Best has said it would like to retain as many of Crazy Shirts' roughly 500 employees as possible, and will operate Crazy Shirts as it is. Perhaps two or three stores will be closed by the new operator.
Waikiki Trader owns a variety of retail businesses, including a majority stake in Sgt. Leisure, a resort sportswear retailer that last year acquired exclusive apparel rights to the Kliban Cat image a former Crazy Shirts hallmark from the widow of the late cartoonist B. Kliban.
The company operates two B. Kliban stores in Waikiki that sell goods festooned with the cat likeness. Sgt. Leisure also sells Kliban Cat apparel at several resort stores in Hawai'i and on the Mainland as well as through DFS stores around the world.
Waikiki Trader, with estimated sales of $65 million last year, is buying nearly all of Crazy Shirts' assets for roughly $7 million to $10 million.
The deal includes $6.75 million in cash plus other considerations that could add as much as $3.5 million, depending on sales performance of stores and a real estate transaction.
Crazy Shirts, which ran into financial difficulties in the '90s and could not recover despite aggressive restructuring, had about $50 million in sales last year. The 40-year-old 'Aiea-based company has $8 million in assets and about $23 million in debts.