La Jolla Group CEO on the Difficult Furlough Decision
The La Jolla Group, the licensee for O’Neill Clothing, joined a growing list of companies inside and outside our space that have temporarily furloughed employees due to the massive disruption caused by the coronavirus.
We asked La Jolla Group CEO Daniel Neukomm about the tough decision and what it means for the company and employees.
Why did you need to do this?
Daniel Neukomm: The La Jolla Group is family owned and not backstopped by large parent company or any outside investors like many in our space. Given the uncertainty around the duration of this pandemic we felt this was an obligation to everyone to ensure we have a company to come back to when dust settles.
These are unprecedented times, and retail is one of the worst hit sectors. With the combination of all non-essential retail being forced to close and the lack of clarity around when the government will support a return to economic and commercial normalcy, we needed to conserve cash so the business can weather the near term and have the assets and liquidity needed to rebound when the market resumes commercial activity.
While we believe macro conditions are short to medium term, the situation is still fluid and evolving.
What percentage of your staff is impacted?
Daniel Neukomm: The majority of our corporate staff were laid off or furloughed. All of our retail fleet is closed and all staff laid off or furloughed. All of the staff that remains is participating in a wage reduction.
The federal government is expected to pass a relief bill soon. Are you hopeful that can help?
Daniel Neukomm: I really hope this helps but as of now it’s difficult to assess how this may or may not impact our company. If and when it becomes clear how this will impact the La Jolla Group, we will certainly reassess. If we are able to bring people back online faster as a result of clarity on government assistance we will do so. I am not sure when this will benefit us given the scale of the situation and time required for the government to process the thousands or millions of applications for assistance that will be submitted through these programs.
Are the remaining staff impacted in any way – pay cuts, etc.? And are you still working on future seasons?
Daniel Neukomm: We still have quite a few team members maintaining business continuity and while some are doing less of one thing and more of another, we are still operational albeit remotely.
We are continuing to build future seasons but certainly taking into consideration the impact of the current climate and how that may influence what and how much product we bring to market.
All remaining staff took a substantial reduction in salary. We felt everybody needed to play a part in preserving the future of LJG so that we all have a company to come back to.
Can you describe in more detail just what the situation is like with order cancellations, extra inventory, accounts receivables, etc.?
Daniel Neukomm: Like everyone in our space we are seeing a significant slowdown and all of the impacts I would expect that to have. Some of our larger retail customers, while still open, are prioritizing their capacity to household items and not apparel, understandably so. However, we have had goods coming in from our suppliers, so our inventory position is building. We are analyzing our supply chain to manage that as well.
We are working through receivables on a case-by-case basis but generally we are seeing the flow of payments slow.
Do you have any words of encouragement for the core account base about the future? Any plans to help them?
Daniel Neukomm: We are working with accounts every day to help them navigate this unprecedented time. My expectation is that this will be relatively short term and when consumers are free to go back outside and be active, including getting into the water, we will see a significant bounce back. After being socially isolated, consumers are going to want to experience the opposite and I would imagine that local shops with a dedicated customer base will benefit from this.
Our product, sales, finance, operations and marketing teams are collectively putting their heads together to come up with concepts and programs designed to help our retail partners get back on their feet after this is over. We value their partnership and will do all we can so that collectively we can weather this storm.