Nearly half of the workforce is to be laid off at Eider, the French ski and outdoor company taken over last month by the Lafuma group. As part of drastic cost-cutting measures, Eider’s new owner has planned to eliminate 47 of the company’s 102 jobs. Nearly all of the employees involved work at the company’s secondary plant in Eloise, which will be gradually closed down.

As already published in our sister publication, SGI Europe, the Lafuma group made it clear last month that Eider was nearly sunk by its heavy cost structure. It posted an operating loss of €2.5 million in 2007 on sales of €21.3 million, which were more or less stagnant for several years. Philippe Joffard, Lafuma’s chief executive, described Eider as a French brand that had over-reached its limits by making investments worthy of a company with much more international weight.

Lafuma paid only €1 for Eider, sold by Argos Soditic, a French investment fund, but it took over debt amounting to €12.5 million. A first chunk of debt consisted of a mezzanine debt of €5 million contracted by Edelweiss, a holding company above Eider. This was paid by Lafuma at a level of €1.5 million through 43,000 new Lafuma shares, issued at a price of €34.85 per share. Paris Orleans, the financier involved in the deal, pledged to hold on to these Lafuma shares until the end of 2010. Secondly, Lafuma came to an agreement with bankers with regard to another chunk of debt worth €4.25 million. The buyer is still negotiating with suppliers and the government regarding the remaining €3.3 million of debt.

Among the activities to be closed down at the plant in Eloise, Eider’s warehouse for raw materials will be transferred to the Lafuma warehouse in Anneyron. The logistics will be taken over by Sherpa, Lafuma’s partner for all of its brands. The Eloise plant handled about 40 percent of Eider’s cutting operations, which will be moved to Lafuma’s own cutting units in Tunisia and Hungary. The extra work will be handled either by Lafuma’s own factories in these countries, or by subcontractors in Romania and the Ukraine.

Other units of Eloise, such as a division making samples, will be transferred to Eider’s primary location in Annecy. The Lafuma group is hoping to obtain legal clearance for the cuts by the end of July, so that the Eloise plant could be closed down early next year. The staff reductions should generate annual savings of about €1 million and Lafuma estimated that the takeover could yield savings of another €0.5 million through joint purchasing.

Due to French legal restrictions, Lafuma declined to say whether the layoffs included Jean-Michel Herrault, Eider’s chief executive. However, this appears likely since Eider’s management is to be fully integrated with that of Millet, the mountaineering brand in the Lafuma group. Millet’s general manager is Frédéric Ducruet, who knows Eider well since he is a member of its founding family and headed the company for a decade until 1995. He then switched to The North Face and joined Millet in 2001.

Among the other cuts envisaged by Lafuma is the end of Eider’s license agreement with Killy, which started in January 2007 and generated annualized sales of only about €3 million. Furthermore, the new management is expected to ditch Eider’s footwear range, which proved costly but never took off. More positive measures to boost distribution and sales will be taken starting at the beginning of November.

When unveiling the deal last month, Lafuma’s management took pains to stress the complementary aspects of Eider and its other brands. With Eider, the group now fully covers all categories, from country with Le Chameau to the great outdoors with Lafuma, snow with Eider, mountaineering with Millet and surfing with Oxbow, which it acquired in 2005. Only about 20 percent of the activities of these brands overlap.

Lafuma will lean on its own international network to boost sales of Eider outside France. They currently make up about 45 percent of Eider’s sales, chiefly in the U.K., Switzerland, Belgium, the USA and Italy. Eider has strong retail relationships in the countries where it is sold, for example with Snow & Rock and Ellis Brigham in the U.K., Stöckli Sports in Switzerland and AS Adventure in Belgium. Furthermore, Eider has two strategic licenses in Taiwan and Korea, which generate sales of about $8.5 million. Lafuma’s subsidiaries in nine foreign countries will help Eider to enlarge the distribution to other clients.

Another part of the plan is to slightly adjust the positioning of Eider, by concentrating on snow sports and the upper end of the outdoor business. The brand’s summer sales, which make up only 20 percent of its turnover, should be expanded through new ranges, along the lines of brands like Peak Performance. Furthermore, Lafuma wants to make more of Eider’s accessories, which represent less than 3 percent of Eider’s sales, chiefly with headwear.