Is Hilo Hattie history?


POSTED: Saturday, May 30, 2009

Following a Hilo Hattie tradition, every customer is still greeted with a shell lei at the entrance of its main Nimitz Highway store, although these days, there are plenty of leis to go around.

Only a small trickle of customers were shopping at the store on a recent afternoon, while only one checkout register was open—and there was no line.




In debt


        Hilo Hattie's pre-petition debt amounts:

» $1.25 million: Maui Divers Jewelry


» $205,878.46: This Week Publications


» $229,871.67: Island Import Co. Inc.


» $798,434.52: Royal Hawaiian Creations


» $4,000: Kona Mountain Coffee


» $254,719.29: Trade West dba Nani Makana


» $212,000: Brett Hill Construction


» Unknown: Travel partner commissions


Source: U.S. Bankruptcy Court filings


The fate of the 46-year-old Hilo Hattie, which filed for bankruptcy seven months ago and is still falling deeper into debt, will be determined June 22 by Judge Robert J. Faris.

Last week, longtime retailer Maui Divers Jewelry offered $1 million for Hilo Hattie and its seven retail leases. The sale must be approved by U.S. Bankruptcy Court.

Other buyers potentially could come forward by the June date, when Faris also will decide whether to appoint a trustee for the company or move it into liquidation.

No crowds are flocking to Hilo Hattie despite a 30 to 70 percent discount on apparel and gift items throughout the store. Even the dashboard hula dolls are on special, at two for $10.

Will Hilo Hattie, “;the store of Hawaii,”; become history like Aloha Airlines, or will it manage to emerge from bankruptcy amid one of the retail industry's most difficult recessions?

Outside observers say the sale to Maui Divers is viable.

“;They've been successful,”; said retail analyst Marty Plotnick. “;They know the market, and they have a long history of experience. My hope is that a marriage of Hilo Hattie and Maui Divers in Bankruptcy Court can be fruitful.”;

But Plotnick also says that the market for aloha apparel has changed, with competition now coming from big-box stores like Target, Costco and Wal-Mart. Today's shoppers do not covet an aloha shirt as a collectible the way they did in the 1960s.

“;The problem is, we stopped giving aloha wear its due,”; he said. “;You've got to bring back the concept of aloha wear as having a tremendous cachet and badge of having visited Hawaii.”;

Hilo Hattie, once voted by Star-Bulletin readers as the best store to buy aloha wear, carries its own brand, in addition to Quiksilver, Tori Richard, Kahala and Duke Kahanamoku labels in menswear, and Iolani in women's apparel, plus gift items from Island Heritage and others.

Island Soap & Candle Works and Maui Divers operate concessions within the Nimitz flagship.

Despite being owed more than $200,000, a Hilo Hattie ad still appears in This Week Publications' Oahu magazine.

About 200 employees remain with the company.

Free shuttle buses continue to pick up customers at various stops in Waikiki every half-hour, but only a few get off or on.

Hilo Hattie does have a loyal set of customers, like Richard and Elizabeth Welch, who were visiting this week from Virginia and caught the shuttle from Waikiki.

The couple shops at Hilo Hattie every time they visit, said Elizabeth Welch, who picked up some aloha shirts, macadamia nuts and papaya seed dressing.

Still, monthly sales at Hilo Hattie have been down 37 to 46 percent compared with a year ago since the company filed for bankruptcy, according to court documents.

Only seven of its retail stores remain in Hawaii—two on Maui, two on the Big Island, one on Kauai, and one at Ala Moana Center, in addition to Nimitz headquarters on Oahu. Its four mainland outlets have closed down. Hilo Hattie also closed its Sand Island warehouse.

Since filing for bankruptcy in October, Hilo Hattie has recorded $5.4 million in losses. For the monthlong period ended May 2, the company lost $317,206.

Plans to open a 30,000-square-foot flagship store at Royal Hawaiian Center were scrapped when the company failed to come up with enough capital—at least $6 million—to move forward.

Still, it owes Brett Hill Construction $212,000 for escalator work at the center, which Brett Hill is now seeking from Kamehameha Schools.

To get back on its feet again, Hilo Hattie says it plans to open stores in more heavily traveled areas, including Ala Moana Center's mall level, Aloha Tower Marketplace, Starwood's Waikiki hotels, Queen's Market Place in Kona and Kapaa Center on Kauai.

But as of this week, no letters of intent had been signed.

Besides Maui Divers Jewelry, which itself is owed $1.25 million, no other companies have come forward to express an interest in buying Hilo Hattie.

Kona Mountain Coffee, which has supplied Hilo Hattie for 18 years, walked away from making an offer when it could not get adequate information about post-petition debts. Castle & Cooke did some due diligence but is not interested in acquiring the business, said spokesman Carleton Ching.

Honolulu attorney Paul Alston, who requested information on behalf of a potential buyer, told the Star-Bulletin that the party was no longer interested as of last week.

The Hilo Hattie branding—taken from the stage name of 1950s entertainer Clarissa Haili—still holds much value, even if the retail stores are not competitive, said retail analyst Stephany Sofos.

“;It represents a true Hawaiian icon,”; said Sofos. “;To buy the branding of Hilo Hattie is a very valuable commodity.”;

The question now is whether Hilo Hattie's next chapter will continue to be written or if it, too, will become history along with Aloha Airlines.





A long history

        Hilo Hattie's history in Hawaii:

» 1963: Kaluna Hawaii Sportswear opens on Kauai.


» 1965: First manufacturing center opens at Ward Warehouse.


» 1967: Jim Romig incorporates Pomare Ltd.


» 1970: Sales reach $1 million, and Romig buys rights to Hilo Hattie name.


» 1982: Hilo Hattie's headquarters (80,000-square-foot showroom), manufacturing center and warehouse opens at 700 N. Nimitz Highway.


» Dec. 23, 2005: Hilo Hattie signs lease at Royal Hawaiian Center (to be terminated in 2009).


» Nov. 15, 2007: Paul deVille leaves post as president and CEO.


» July 2008: Hilo Hattie acquired by TOC Inc.; Ted Nelson becomes CEO; John Scott becomes president.


» Oct. 2: Hilo Hattie files for Chapter 11 bankruptcy.


» December: Hilo Hattie lays off 34 employees, cuts compensation for two senior managers.


» May 20, 2009: Maui Divers Jewelry offers $1 million to buy Hilo Hattie.


» June 22: U.S. Bankruptcy Judge Robert Faris to decide on Hilo Hattie's sale, appointment of trustee and liquidation.


Source: hilohattie.com and federal Bankruptcy Court documents