Tom Kartsotis Builds on Bedrock

The founder of watch giant Fossil Inc. retired as chairman in 2010 and has since dedicated himself to building up his private equity and brand management firm.

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Nostalgically named for a World War II-era shoe polish, Shinola is the latest brand to capitalize on the burgeoning appeal of made in America fashion products. Launched this month via an e-commerce site, and with flagships set to open in New York and Detroit in June, Shinola is selling retro-inspired watches, bicycles, leather accessories and stationary goods all made and assembled in its own Detroit production center, or elsewhere in the U.S.

This story first appeared in the March 18, 2013 issue of WWD.  Subscribe Today.

While the name may be quaint, Shinola is a state-of-the-art operation, situated in a custom 30,000-square-foot facility within the historic Argonaut Building in Detroit that can now turn out 500,000 high-quality watches a year. The ambitious start-up is the latest venture from Tom Kartsotis, the founder of watch giant Fossil Inc., who retired as chairman of that company in 2010 and has since dedicated himself to building up his private equity and brand management firm, Bedrock Manufacturing Co., based in Plano, Texas.

In addition to launching Shinola, Kartsotis and Bedrock have since 2012 acquired the Seattle-based outdoor brand Filson, bought controlling stakes in the surf brands Original Jams and Mollusk Surf Shop and made minority investments in accessories maker Clare Vivier and designer label Marissa Webb. Earlier in 2011, Bedrock acquired a minority stake in retailer Steven Alan.

“Bedrock Manufacturing is predicated on the concept of manufacturing in America. Whether it’s bicycles and watches in Detroit, board shorts in Honolulu, outerwear and accessories in Seattle or animation in Dallas, it’s about imagination, creating jobs and making consumer products that we really love,” said Kartsotis, who also sits on the boards of Simon Equity Partners and Burton Snowboards. “It’s also about taking risks, calculated risks, that even in failure we will be able to look back and say, ‘OK, well that was fun. It didn’t work, but at least it was fun.'”

Heath Carr, chief executive officer of Bedrock, said the company takes an activist approach to its investments. “We are similar to a private equity firm except we don’t have any passive investments. We get deeply involved in helping to operate our brands and developing multiyear growth strategies and brand positionings,” he said.

That strategy is taking shape at Filson, acquired by Bedrock in June from private equity firm Brentwood Associates. The company has invested in a new 57,000-square-foot manufacturing facility in downtown Seattle that will open in May at 1741 First Avenue South, more than doubling its capacity to produce in the U.S., a key Filson brand attribute. The company will move production of its bags and accessories to the new facility while keeping apparel production in its current 36,000-square-foot headquarters and manufacturing facility at 1555 Fourth Avenue South, which it has occupied since 1998.

On Tuesday, Alan Kirk joined Filson as ceo, replacing former ceo Mark Korros, who exited the firm following Bedrock’s acquisition. Kirk was previously senior vice president of sourcing at Eddie Bauer.

“From a channel perspective, we see opportunities in growing our retail store footprint, expanding our wholesale presence, international growth and continued growth in our own direct-to-consumer business. From a product standpoint, we believe our brand has great opportunity across the entire assortment. We will continue to innovate while honoring our core product heritage,” said Kirk.

For the fall season, Filson has updated the fits on its apparel and revamped its bag line for improved functionality by incorporating padding and pockets designed to protect laptops and tablet computers.

“Fit has been an issue. We have retrofitted a significant part of the jackets to make them more modern,” said Maurizio Donadi, chief creative officer of Bedrock Creative Office, a partnership between Bedrock and Donadi, who was previously senior vice president at the premium Levi’s XX division. Donadi, with partner Marisa Ma, are working on many creative aspects of reimagining Filson and Original Jams.

Filson is working to incorporate lighter-weight, technically advanced fabrics into its assortments. “Right now our jackets are very heavy because they are designed for hunting and fishing and workwear. We want to have warm, lightweight jackets for an urban lifestyle, as well,” said Donadi.

A greater emphasis on international markets, footwear, warm-weather categories and women’s wear will play a key role in future growth, said Filson executives, as all those areas are currently underpenetrated.

A makeover of Original Jams is planned for January 2014. The business was purchased by Bedrock in September from Surf Line Hawaii Ltd., which is run by Pua Rochlen, son of the brand’s founder David Rochlen. Bedrock owns 80 percent of the company while Rochlen retains a 20 percent share.

“There is a small amount of product in the marketplace now and we will completely relaunch Original Jams next January — a surf brand that was wildly successful in the mid- to late-Eighties,” explained Carr.

In the same category, Bedrock acquired a majority interest in Mollusk Surf Shop in May from John McCambridge, who founded the brand in 2005 as a small store in San Francisco. The company now operates a second retail unit in Venice Beach, Calif.

“That [investment] we’re still figuring out. We want to further develop their existing wholesale line and are looking to expand their retail locations,” said Carr.

The Clare Vivier minority stake was taken in April and the Marissa Webb investment in January 2012. Steven Alan is a coinvestor in Mollusk Surf Shop, Clare Vivier and Marissa Webb, with Alan helping to broker Bedrock’s investments in those companies.

Alan said the Bedrock investment in his own company — which includes retail stores, a multibrand showroom and his own men’s and women’s wholesale sportswear collections — has been a boon. “What’s been really helpful from an operational standpoint is they’ve helped us refine our operating structure and they serve as a sounding board,” he noted.

Following Bedrock’s investment, Steven Alan hired its first president, Trish Donnelly, who was previously an executive vice president at the catalogue and e-commerce division of J. Crew. “That freed me up quite a bit to focus on the creative direction of the company and to work with the design team and my buying team a lot more,” explained Alan.

Steven Alan has ramped up the pace of its new store openings, opening six new stores since the Bedrock investment, including a new home store in Manhattan’s Tribeca neighborhood that opened Thursday. The company now operates a total of 18 stores.

Within the Bedrock stable, each brand largely operates independently but there are shared back-office functions such as human resources, information technology services and finance. Some of the businesses share Bedrock-owned real estate, such as Shinola and Steven Alan in a Tribeca building at 177 Franklin Street. Bedrock Creative Office shares space in Santa Monica, Calif., with Reel FX, a film and animation studio majority-owned by Bedrock.

Kartsotis is active on a daily basis in the management of Bedrock and its various brands, said Carr. While there are a handful of other principals at Bedrock, the primary capital for its investments and operations comes from Kartsotis.

At Shinola, the e-commerce site is currently selling its new bicycles for immediate delivery while the watches can be pre-ordered for July delivery and the leather accessories will go on sale in May.

The first watch style available is called the Runwell, which comes with a Horween leather band and in two sizes for $550. The watch is powered by Shinola’s Argonite 1069 movement, hand assembled in Detroit using Swiss-made components from Ronda AG, a partner in the venture. Later models include the chunkier Bixby, a lady’s “cushion” style and an expanded range of options in colors and bands across all models.

The bicycles, also assembled in Detroit, come in two city cruiser models: the three-speed Bixby for $1,950 and the 11-speed Runwell for $2,950.

Shinola accessories, made in Missouri, include a leather iPad case for $295, leather wallets from $80 to $225, a leather messenger bag for $250 and a leather and canvas backpack for $525. The designs feature classic silhouettes with clean, unadorned lines and touches of rustic influences. An outerwear range is planned for this fall, said Daniel Caudill, creative director of Shinola.

The full range of Shinola products will be available in the brand’s flagships slated to open this summer. The New York store will be located on the ground floor of the Bedrock-owned building at 177 Franklin Street and the Detroit store at 441 West Canfield Street.

Bedrock is further leveraging its Detroit watch-production facility and has created a new division called Bedrock Watch Co., which will develop and manufacture watches for its other owned brands, as well as for licensed third-party brands.

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