Cheil Industries to cut fashion operations

By Kim Yoo-chul

Cheil Industries, an affiliate of the Samsung Group, plans to drop one of its casual apparel brands as part of efforts to restructure its fashion business and increase management efficiency under the company’s new CEO.

Cheil officials said the Samsung affiliate is in the process of realigning its business portfolio. They said the firm is considering restructuring some of its casual apparel brands, such as FUBU.

“Our top management has yet to have any final decisions but announcements will be coming soon,” a company representative said.

Sources in the local fashion industry expect Cheil Industries will drop FUBU, one of its menswear businesses, after 14 years.

Cheil Industries started selling the brand in 1999. A total of 48 local authorized sellers in Korea including 34 leading department stores currently sell the label.

FUBU isn’t the only label expected to disappear from the market.

Top management is also considering closing some women’s clothing brands. Production of other clothing brands managed by the firm’s subsidiary in China will also come to a halt, said officials and sources.

``But no massive layoff is expected as the company will transfer the affected employees to other business divisions,” said another Cheil official, asking not to be identified.

The business realignment comes after Yoon Ju-hwa, a former chief financial officer at Samsung Electronics, was transferred to become president of Cheil Industries during last year’s management reshuffle of Samsung’s top brass.

“Under the new CEO, its chemicals and electronic materials divisions are receiving more attention,” said the official, adding Cheil Industries will streamline its fashion business.

Cheil recently started producing key materials for use in OLED displays in line with huge sales of Samsung Electronics’ OLED-embedded Galaxy line of devices.

“Cheil is being aggressive in expanding its product portfolio. It is going to increase the output of materials for OLED displays from the second quarter of this year. Business diversification is yielding visible profits. It’s no surprise to see Cheil will cut its reliance on the fashion business,” said Woori Investment in a note to clients.

The company’s electronic materials division accounted for 26.1 percent of its total revenue last year, while the portion from its chemicals division was 44.4 percent, said the company.

Cheil Industries expanded its business areas into fashion by launching its first menswear range in 1989.

Since then, it has diversified its business portfolio into casual wear, women’s wear and sportswear. Bean Pole, Galaxy and Rogatis are the firm’s representative clothing brands.