Being the proverbial fish out of water is an uncomfortable situation for most people, but it seems to suit George Feldenkreis just fine. Four decades ago Feldenkreis was a near-penniless Cuban immigrant in Florida, scraping together an income from various importing activities. Fast forward to July of this year, when Feldenkreis, now the chief executive officer of Perry Ellis International, found himself in Barcelona, once again a foreigner seeking a foothold in a new, opportunity-rich market. He was in Spain to oversee the sales of his company’s Original Penguin apparel line to European retailers attending the Bread & Butter trade show. “We’re making great strides with the brand in Europe,” he reports, clearly proud of the success. “It’s positioned very highly, and sells at stores like Selfridges and Harrods.”
To Feldenkreis, talk of luxury retailers in Europe comes just as easily as stories of his early exploits selling screws and other hardware. Both point to his mastery of entrepreneurship and demonstrate that his forte is strategic planning and recognizing opportunity—one develops the impression that he could sell just about anything with some measure of success. It is this wily business sense that has led Feldenkreis to where he is today—celebrating 40 years of the Miami-based company he started from almost nothing. Perry Ellis International has undergone almost as many changes as the fashion industry itself, yet the constant factor has been the leadership provided by George Feldenkreis, and, beginning in the early 1980s, that of his son Oscar, who is now PEI’s president and chief operating officer. Together, the Feldenkreises have built a highly diversified, publicly traded apparel giant that has the rare distinction of being focused almost exclusively on men’s wear. The company recently racked up annual revenues of more than $800 million (see “PEI At-a-Glance” sidebar), and the Feldenkreises have earned the respect of the industry at large.
WALL STREET WAKES UP
Though PEI went public in 1993 (when it was known as Supreme International), it has only recently attracted significant attention from the investment community. At the time of the initial flotation, PEI possessed few brands of national significance, and the Feldenkreis family has always controlled a significant portion of the stock. Since then, though, the company has grown its brand portfolio significantly (see “Label Maker” sidebar). With the acquisition of the intellectual property of the Perry Ellis brand in 1999, Supreme (which promptly changed its name to that of its latest purchase) entered the top tier of apparel producers. Since then the Feldenkreises have worked to persuade Wall Street that their shares are a worthwhile investment, and in the past year the stock has been bid up to unprecedented levels. “The market had gotten overly negative on the Perry Ellis story,” says Jeff Mintz, vice-president of research for Wedbush Morgan Securities. “Clearly PEI had issues with consolidation in the department stores. That hurt the company, but then the market realized that that was not going to kill Perry Ellis.”
Indeed, it is the Federated-May merger that the Feldenkreises most often reference as the cause of any recent troubles, but they are quick to emphasize that the company has left those stormy seas behind. “We felt that the last year was a year of consolidation, and almost all apparel companies lost volume because of all the May Co. stores closing,” says George Feldenkreis. “We also exited a lot of private label business with Sears, and because of it we experienced a downturn. Having said that, we experienced record profits because we improved some of our processes. And this year, for the first half, we’re seeing substantial increases in revenues and profits.” The company is predicting top-line growth of 8 to 10 percent for fiscal 2008.
Retailers support Feldenkreis’s recently happier story. Terry Lundgren, chairman, president, and CEO of Macy’s Inc. (formerly known as Federated Department Stores), says the Perry Ellis brand is a key component of Macy’s offerings. “It’s classic with a twist, yet it’s got some modern sensitivities and is widely understood by a broad base,” he says of the brand. “It’s not so contemporary as to be limiting, and not so traditional so as to compete with brands that we already have on the floor. For that reason, I think that there is significant growth potential for Perry Ellis at Macy’s.”
Though PEI is certainly still sticking with the department stores—they account for about a quarter of current sales through brands like Perry Ellis, Savane, Cubavera and Champions Tour—the company has hedged its bets by developing and acquiring labels that sell in a broad range of retail channels. “I think they’ve done a very good job of diversifying, in particular getting more into J.C. Penney and Kohl’s, the two biggest retailers in the mid-tier channel,” says Mintz, the analyst. Brands like Axist, Havanera, Grand Slam and Gotcha have each found their niche in the national chains, totaling another 25 percent of sales for PEI.
The company has also slowly increased its presence in terms of its own retail activities, having inherited some Perry Ellis outlets from Salant Corp., a Perry Ellis licensee that PEI acquired in 2003. It has since built the outlet business, and executives including retail head Barry Shapiro are pondering the launch of a full-price Perry Ellis store. “I don’t think it’s that difficult to launch a full-price store when there are outlet stores already in existence,” says Oscar Feldenkreis. “A full-price store would also help to strengthen the identity of the brand.”
PEI already has some experience in full-price retailing through its five company-owned Original Penguin stores. Penguin, a trademark that PEI secured with its purchase of Munsingwear in 1996, has proven to be a hit among young men in the three years since its relaunch. Riding the trend in vintage-style sportswear, the brand now brings yearly revenues of $55 million to PEI, according to Oscar Feldenkreis. (The Penguin retail operation contributed $1.5 million last fiscal year.)
Though it is certainly a success story, Penguin has yet to prove itself in terms of volume and longevity, Wedbush’s Mintz says. “I don’t think Penguin is big enough now to have a lot of tremendous impact, but it has some significant growth opportunities,” he explains. He is cautious, though: “The risk with Penguin is that it’s very subject to changes in trends. [PEI has] done a good job addressing retro, but if that trend weakens, there may be some trouble.”
Management’s response to those sorts of concerns is to point to the ever-growing matrix of brands (now numbering 27) and licenses (139) under the PEI umbrella. In the last few years the company has further expanded its reach with key purchases in the action sports and swimwear arenas, and says that in so doing it has minimized its exposure to downturns in any one corner of the men’s wear market. Though both new businesses were initially troublesome, the Feldenkreises have advised analysts and investors that each is now a growing part of the business. They are especially excited about the prospects of the 2008 Beijing Olympics driving sales for Nike swimwear, which PEI produces under license.
Action sports and swimwear are just two of several lifestyle-oriented niches that the company addresses. It produces several golf lines, as well as two brands dedicated to meeting the style needs of Latin customers. This ability to be all things to all consumers has endeared PEI and its management to retailers. “They know how to evolve and change, and that’s why they’re growing,” says Stuart Goldblatt, senior vice-president at Macy’s Merchandising Group. “And there is a big advantage in dealing with such a men’s-oriented company—they understand the nuances, and through their acquisitions they have demonstrated their awareness of how brand-driven the men’s business is,” he adds.
PEI also recognizes the importance of delivering unique product to volume-driven customers. “[PEI’s] exclusive development of brands, like Havanera and PGA Tour, has provided a competitive advantage for us,” says Lana Cain, executive vice-president and general merchandise manager for men’s wear at J.C. Penney. “PEI has helped us gain market share in categories where they have a unique ability to deliver trend-right product at smart prices.”
THE FACES OF LEADERSHIP
When it comes to talking with retailers and those who know the company’s history, praise is not reserved solely for PEI’s operational successes. With every word of encomium directed at the company, which employs 2,200 people, comes an equal amount for the Feldenkreises themselves. “The Feldenkreis story is the kind that makes you proud to be an American,” says Larry Leeds, chairman of Buckingham Capital Management, and a key figure in the founding of the original Perry Ellis sportswear label. (Leeds owns stock in PEI through his investment fund). “[George] has built a terrific company, with the highest ethical standards, and in that regard Oscar is a chip off the old block. Their father-son relationship makes for an atmosphere of warmth and an overall esprit de corps at the company.”
Not that the two are considered interchangeable. Feldenkreis père is more strategically oriented, Leeds says, preferring to stay closer to home base and oversee business, while Oscar spends much of his time jetting around to the company’s major customers. George, who turns 72 this month, is known as a thinker, willing to consider all options. “I’ve known George for 15 years,” says Macy’s Lundgren. “He is willing to say what he thinks, but flexible enough to entertain sound ideas from others. He’s forthright and direct, and open-minded about change. He’s constantly learning about the business, and doesn’t ever get comfortable.”
Oscar, 47, is described by Leeds as “more impulsive, and very ebullient.” Known to have an appreciation for the finer things—a recent Forbes article described his taste for Brioni suits and Bentleys—he is widely seen as the only possible successor to his father.
Neisen Kasdin, an attorney and former chair of a public-private economic development partnership in Miami-Dade County, gives a local perspective on the family: “They are considered to be leading businessmen in the city of Miami. There was a time in the ’60s and ’70s when there was a large apparel industry here, in terms of manufacturing, and a lot of that was fueled by the influx of Cuban refugees and the availability of a well-trained work force. As that industry vanished because of competition in Central America and Asia, George took this smaller Miami company, Supreme International, acquired Perry Ellis, and became a global leader.” Further endorsement comes from Rep. Mario Diaz-Balart, congressman for Florida’s 25th District. He says that “Perry Ellis International is a huge contributor to the booming economy of South Florida, and the Feldenkreis family is truly an integral part of the fabric of our community. I cannot imagine the South Florida business sector without them.”
In addition to his business acumen, George Feldenkreis is well known for his civic contributions. He is a major supporter of many charities, universities and hospitals, and is especially active in South Florida’s Jewish philanthropies. He has had a street named for him in the city of Doral, and was recently honored by Massachusetts’ Babson College. “In Mr. Feldenkreis we saw an individual with a remarkable history,” says Carol Hacker, chair of the honorary degree committee at Babson. “He has created a highly successful multinational company and overcame obstacles to find success in a new country. Additionally, his tremendous philanthropic life echoes our core values as an institution.”
As the company and its shareholders look toward the future, there is a sense that PEI is on solid footing. Should George elect to retire, the succession of Oscar is all but a sure bet. Management says the company in poised to ride the future of fashion and retail with a dynamic, risk-managed portfolio of brands, selling in channels ranging from Wal-Mart to Barneys New York. And though the four decades to come will no doubt bring challenges, just as the preceding 40 years have done, PEI has proven that it will never stay down for the count. Larry Leeds sums it up succinctly: “They’ve come a long way. When I first met them they were a tiny little company, but they also had a nice way about them.” Growth, it seems, doesn’t diminish character.