A REVIVED LESLIE FAY BACK AS MAJOR PLAYER WITH MULTIBRAND PLAN
Byline: Leonard McCants
NEW YORK — Anybody else would likely have hung it up.
But now that the drama of bankruptcy is well behind them, Leslie Fay Co. officials say they are ready to build their empire anew.
They are doing so with a series of rapid-fire acquisitions of several brands, which have placed them in more diversified price categories at the same time they are moving aggressively into licensing. In the past two years, Leslie Fay has ventured away from its moderate heritage to pick up Liz Claiborne Dresses in better, Cynthia Steffe’s contemporary line and the Rimini by Shaw better-priced label. The latter was part of the purchase of The Warren Group dress firm in 1998.
“A successful company will have to make acquisitions to grow,” said Roseanne Cumella, general merchandise manager for The Doneger Group buying office. “And Leslie Fay is becoming a giant and more balanced than they were before. So every retailer has to walk in there for something. To be a strong retailer today, you have to be exposed to Leslie Fay.”
That’s exactly what John J. Pomerantz, Leslie Fay’s chairman and chief executive officer, had planned after a skeleton of the former company emerged from the ashes of bankruptcy and financial scandal in 1997.
“We don’t want to go back to what we used to do,” Pomerantz said in a recent interview at the company’s 1412 Broadway showroom. “The plan is to have one or two more moderate companies and then better and bridge in both sportswear and dresses.”
That plan of attack has helped the company expand from a volume of $125 million just after it emerged from the four-year bankruptcy to a projected $230 million this year, including its recent acquisitions. At its peak in the early Nineties, Leslie Fay had a volume of about $800 million.
“I think we’re a factor now,” said Pomerantz, who took much of the heat during the company’s turmoil, but stayed at the helm nonetheless. “I think the stores think we’re back. But I don’t think the Wall Street community is raring to buy our stock yet.”
The stock has languished in the $4-per-share range in Nasdaq small-cap trading, near its 52-week low of $3.63, but the stock edged up 1/2 to 4 1/2 on Monday. Its high in the year is $7.13.
But that has not stopped the company from pursuing an aggressive acquisition and growth strategy, including a deal for the license of Liz Claiborne Dresses in February and, most recently, buying Cynthia Steffe’s contemporary sportswear business, a company Pomerantz said he’s had his eye on for a while now. The deal is scheduled to close this week.
“She’s in an arena where we want to grow,” he said. “I think she can make a dent in the contemporary market. She’s very marketable and she makes beautiful clothes.”
For Richard Roberts, president of Cynthia Steffe, Leslie Fay represents a parent company with expertise in distribution and the infrastructure to allow him and Steffe the opportunity to concentrate on the design and marketing of the label.
“It will be a nice symbiotic relationship,” Roberts said.”They’re a very healthy, well-respected company. John Pomerantz and John Ward [Leslie Fay’s president] are extremely well respected within the industry, by their customers and their employees.”
Meanwhile, Leslie Fay’s license of Liz Claiborne Dresses and the Elisabeth plus-sized line brings together two of fashion’s old-line competitors under one roof. The deal closed and became effective in February, and while Leslie Fay’s first impact on Claiborne dresses will be evident with fall selling, the arrangement will be in full swing with the spring 2001 collection.
Logistically, the deal made perfect sense, Pomerantz said.
“Everything they do is geared toward sportswear, and everything we do is geared toward dresses,” he said.
While the current synergies have dramatically improved the outlook for Leslie Fay, things looked much bleaker for the company in 1993. That year, two former employees were indicted in a financial fraud case over accounting irregularities that rocked the company’s bottom line and ultimately forced it to seek bankruptcy protection.
Ironically, in the same months that Leslie Fay has begun to rebuild itself, that case — which Pomerantz would like to put in his past — has returned to the media spotlight as events that took place during the fraud are currently being detailed in the ongoing trial in Scranton, Pa., of former Leslie Fay chief financial officer Paul F. Polishan.
Polishan was indicted in 1996 by a federal grand jury, which charged him with “directing and authorizing a $131 million financial fraud relating to the purported earnings” of Leslie Fay. He had been implicated by Donald F. Kenia, the former corporate controller, who pleaded guilty in October 1994 to two counts of making false statements to the Securities and Exchange Commission in connection to the fraud.
The trial, in which Kenia is expected to be a key witness for the prosecution, is currently on hiatus until May 15.
Pomerantz declined to comment about the case.
But the scandal and bankruptcy are all water under the bridge, retailers said, while they were also quick to praise the stamina of the 53-year-old company, founded by Pomerantz’s father, Fred.
“They came back, but a lot of people didn’t think that would happen,” Doneger Group’s Cumella said. “These people understand the dress business, and they understand timing and flow.”
Not only that, said Lavelle Olexa, senior vice president for fashion merchandising at Lord & Taylor, their products sell.
“Their business with us is phenomenal,” she said. “It really is a growth vendor.”
Olexa said the relationship with Leslie Fay has always been up-front and open.
“I think we like them because they represent a profitable resource for us ,and we really do feel it’s a partnership with them,” she said. “The general merchandise managers do feel quite strongly about their performance.”
But one good resource does not make a strong dress market. For years, the sportswear business, with its more comfortable and casual pieces, has been chomping away at the dress market at the expense of companies like Leslie Fay.
“We need to get the stigma out of the customer’s eye that dresses are passe,” said Beverly Rice, senior vice president of fashion and merchandising strategy for Jacobson’s. “What the customers need in dresses is what they need and like in sportswear: practicality, good fit and good fabric. There’s such a void of colorful, practical clothing. If the dress people can pick up on that too, then they will revive themselves.”
In order to replace lost business, Leslie Fay has had to diversify its offerings, company officials said.
“Something that is called a dress now is not necessarily a dress, but an outfit,” said Ward, noting that dresses with jackets and pants with long jackets are also in the category.
“We’re in the fashion business, and we have to be on top of trends and ahead of trends to capture the type of business we want to get,” he added.
Furthermore, officials said the company’s current distribution has peaked at about 500 doors. To grow, the company has built shop-in-shops for its core brand, which includes different fixtures and signage.
“We have to continue to grow our existing account base through closely monitoring sales and stock on a door-to-door basis,” Ward said.
While Pomerantz also reported first-quarter sales this year were “doing well,” it was not as good as he wanted because “we got stuck with some extra merchandise because of the millennium.”
The current quarter should be better, he said, because Easter, normally the best holiday for dressmakers, fell late in the year.
Leslie Fay ranked number five among dresses/suits/
eveningwear brands in last year’s Fairchild 100 consumer survey of brand awareness and preferences. But company officials already know the power of the brand and are setting up licenses for several categories in another effort to boost the bottom line.
As reported, Leslie Fay signed an agreement with the Simons Co. to develop hosiery, which will bow for fall. Last week, the company signed on with Valley Lane Industries to license footwear under the Leslie Fay name for spring 2001 retailing. The line, which will include slippers, casual and dress shoes and retail for between $35 and $55, will coordinate in color and fabric to the dresses and sportswear within the Leslie Fay line.
“We believe it’s a great way to uphold the brand and strength of the Leslie Fay name,” said Bob Salem, corporate vice president of marketing for Leslie Fay. “We don’t see powerhouse multiclassifications in the moderate world. Who else out there has the unaided consumer recognition?”
Also on the horizon is the reintroduction of its Outlander line, which has been dormant for two years. Leslie Fay has licensed its Outlander sportswear label to Regent International for better-priced knitwear, set to relaunch for spring 2001.
“We think Outlander has legs,” Salem said, “and it can walk into men’s and children’s. It had sales of $50 million back in the early Nineties. We think we can greatly exceed that.”
Pomerantz said he has remained characteristically good-natured and pensive throughout this nearly decade-long roller-coaster-like ordeal, resolving to keep the company going with its current crop of loyal employees.
“We’re just a $200 million company looking to grow again,” he said. “But I think with the consolidation of the departments stores, the same thing has to happen in the manufacturing field, and we want to be a part of it.”