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Fashion retailer Nasty Gal will lay off 10% of its staff

February 4, 2016 04:17 PM
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(Bloomberg)—Nasty Gal, a fashion retailer known for its provocative styles, is slashing about 10 percent of its staff in what CEO Sheree Waterson describes as a "strategic restructuring," The layoffs affect 19 employees spread across various departments.

Founded in 2006 by Sophia Amoruso as an eBay store, Nasty Gal, No. 112 in the Internet Retailer 2015 Top 500 Guide, grew from a spot for Amoruso to flip vintage clothes to a $100 million empire of edgy fashion. In 2012, it began selling its own private-label clothes, including lots of lace, ultrashort rompers, and plenty of plunging necklines. In January, it collaborated with Courtney Love to create a collection inspired by the grunge musician's outfits.

The cuts come one year after the Los Angeles-based company raised a $16 million funding round from Index Ventures and former J.C. Penney (No. 37) and Apple (No. 2) executive Ron Johnson, which brought its total backing to $65 million. A previous effort to "strategically reorganize" the business in 2014 also resulted in cuts to 10% of staff. Nasty Gal had Internet Retailer-estimated 2014 web sales of $320 million.

The company is also battling four lawsuits by former workers who allege disability discrimination and the illegal firing of pregnant women. Nasty Gal has called the disputes "frivolous and without merit."

Waterson, a former Lululemon (No. 108) executive, took over for Amoruso in early 2015 because the founder wanted to take on a more creative role. "We have seen other tech and apparel brands make similar types of business decisions recently," Waterson wrote in the staff memo obtained by Bloomberg. "It is imperative for us to be nimble and think strategically about the future of our brand."

Nasty Gal and other e-commerce fashion sites are facing competition from mainstream fast-fashion giants such as H&M and Zara and niche upstarts like Dolls Kill and Ruche. E-commerce site ModCloth (No. 198), which has similar vintage resale origins as Nasty Gal, recently traded its founder CEO for a seasoned executive from Urban Outfitters (No. 49) after a rough 2014 riddled with layoffs. ModCloth is now pushing the expansion of physical stores while Nasty Gal is figuring out whether to expand from its two brick-and-mortar locations in Los Angeles and Santa Monica. 

"While this was a difficult decision to make, it is necessary and will allow us to continue to evolve as a company," wrote Waterson. "We will focus on strengthening our core business, improving operational efficiencies, and continuing to develop our iconic brand."

 

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