Retirement didn’t really agree with Gary Smith — and that’s been the major game-changer for Polartec.
Under the direction of Smith, chief executive officer of the Andover, Mass.-based fabric producer, Polartec went from the verge of liquidation to a profitable business that provides active and outdoor brands — and now luxury fashion labels — with a variety of performance fabrics. Its most recent innovation is Power Air, a fabric that cuts down on shedding in synthetic fleece that hit the market this winter exclusively in Adidas products and has started rolling out to other brands.
As a result of the turnaround, Polartec’s private equity owners have “begun an active process to sell the company,” Smith said. While nothing is imminent, having private equity investors makes it inevitable a sale will happen. “It took a long time to turn this thing around,” the ceo admitted.
But Polartec’s about-face almost didn’t happen.
Smith was the president of Timberland’s Outdoor Group and senior vice president of its supply chain. He exited Timberland shortly before it was sold to VF Corp. After a career that included being a partner in McKinsey & Co., he thought it would be an ideal time to ditch the corporate world and engage in his passions of cycling and mountaineering.
So he retired and, with his wife, bought a custom bicycle company, Independent Fabrication, along with a bagmaker, BaileyWorks, both headquartered in New Hampshire. He also served on a few boards to “keep his toe in the water,” he said.
“But I got bored,” Smith added, “and I made the mistake of answering the phone.”
On the other end was Michael Spillane, an apparel industry veteran who had run Malden Mills, the predecessor company to Polartec, from 2004 until 2007 when Versa Capital Management bought the brand out of bankruptcy and renamed it Polartec. Although Spillane had moved on and was working for Nike, where he continues to this day, he was still advising Versa on Polartec and thought his old friend Smith had the skills necessary to institute a turnaround.
Never one to shy away from a challenge, Smith took the job.
Versa, which was the only bidder for the company, specializes in distressed assets, and Polartec fit the bill. Or as Smith refers to its portfolio: “The land of misfit toys. They only buy companies that are broken or bleeding and no one else wants.”
The 2007 bankruptcy filing was the third stint in Chapter 11 for Malden Mills, which traces its history to 1906. “It was a great brand with a great product,” he said. “It was just poorly managed.”
For most of its history, Malden focused on upholstery fabrics, and during the two World Wars, it also produced military fabrics. In the Fifties, Malden turned its expertise to apparel fabrics for the “acrylic poodle sweater phase,” Smith said, and “went in and out of apparel on an opportunistic basis.”
But Malden Mills’ one saving grace was a brushed polyester fabric it developed in the late Seventies that provided insulation and wicking properties. In 1981, Yvon Chouinard, owner of a small mountaineering company named Patagonia, was looking for a lighter, faster-drying alternative to wool and found Malden Mills. Together they introduced Synchilla to the sportswear market. Patagonia used it first in a pullover, and other outdoor brands, including L.L. Bean and Lands’ End, soon embraced the new fabric, which Malden Mills named Polarfleece.
Things went well for a while, but cheaper offshore options started to take their toll. A U.S. military contract for cold-weather apparel in 2007 helped sustain Polartec upon its emergence from bankruptcy and allowed it to survive the recession of 2009. But when that contract ended in 2012, Polartec was in big trouble.
“It was in real financial jeopardy again,” Smith said. “The company had neglected its commercial business and fleece had become commoditized.”
That’s the situation Smith took on when agreeing to join the brand.
“My first order of business was to stabilize the business and focus on where we make money,” he said. Smith said demand by then had shifted away from strictly outdoor to “tech casual,” and brands were searching for performance attributes that were built into clothing that didn’t look performance.
So Polartec — which he calls “a textile company, not an outdoors company” — shifted its strategy away from strictly focusing on outdoor partners to target more-active labels as well as fashion brands.
Although it continued to service its longtime partners such as Patagonia and The North Face, the company also sought out “cycling, running and any other athletic or fashion brands who wanted technical fabrics.”
“The modern-day consumer expects things to be comfortable and the technology needs to disappear into the background,” he said. “But the question is, ‘Can you make it fashionable?’ It needs to look great and have technical features.”
Polartec has since collaborated with brands ranging from Supreme and Beams to John Elliott, Joseph Abboud, Michael Bastian, Moncler, Prada, Perry Ellis, Theory, Todd Snyder and Yeezy.
“These are cool and put a halo around the brand, but practically speaking, it’s more of a branded merchandise story about the technology enabling of fashion clothing,” he said. “That’s what driving fashion today.”
So Polartec continues to push innovation. Case in point is Power Air, a new type of fabric construction engineered to address microfiber shedding. Smith said that, while all textiles shed, fleece is among the worst offenders and much of it winds up in the oceans.
Adidas has been a champion of sustainability, particularly as it relates to the oceans, so when Polartec was searching out a launch partner for this new product, the brand signed on.
The product is a performance fabric with advanced thermal efficiency that sheds up to five times less than other premium mid-layer fabrics. Its marketing materials tout: “Warm More. Shed Less.”
Smith said that while Adidas had the exclusive for the launch, it is now being used by other brands, including Houdini, a Swedish sportswear label, which began offering the Power Air Houdi on Jan. 31.
“Polartec is our longest running partner and one synonymous with uncompromising quality and craftsmanship,” said Eva Karlsson, ceo of Houdini. “Besides offering some of the best fabrics money can buy, Polartec is so passionate about what they do it’s hard not to get inspired. It’s one of those partnerships that always seem to be moving forward, even after 20 years-plus of working together. In the end that’s what it’s all about — getting new ideas and passing those along.”
Rhone, a men’s activewear brand, also uses the fabrics.
“Our relationship to Polartec dates back to when we were first ideating on what Rhone was to become,” said Kyle McClure, chief product officer. “We knew we wanted to partner with suppliers who represented a commitment not only to quality but also leading edge innovation and sustainability. Beyond that we wanted a relationship that supersede the normal ‘supplier/customer’ construct, something where we felt like we were partners and in it together.”
Today, Polartec fabrics are used in a number of Rhone products including crews, T-shirts, tanks and polos. “Polartec represents one of the pillars we’ve used to build our brand and will always be one of the most important partners we work with,” McClure said.
The sustainability message that is important to Rhone and Houdini is core to Polartec’s mission as well. The brand has publicly said it is committed to “the pursuit of a future where everything is eco-engineered to use recycled inputs and to be biodegradable,” Smith said, adding, “Eco-engineering is in the DNA of what we are. In the textile world, you have to innovate or die.”
Other high-tech fabric options include the Neoshell, a breathable, waterproof, stretch fabric that Ornot, a cycling apparel brand, introduced last month in a Magic Shell jacket, and Power Fill, a insulation for very cold conditions.
Today, Polartec offers some 400 fabrics, half of which are not fleece. In addition to the company’s two factories in Tennessee and New Hampshire, Polarec also produces in Guatemala and Italy, Smith said.
With Polartec now back on steady ground, Versa is more actively looking to cash out. “Everything in a private equity portfolio is for sale,” Smith said.
He believes the most logical acquirer would be an apparel brand or a tech company. “It would most likely be a strategic buyer who thinks what we have is valuable to them or another fabric manufacturer that doesn’t have a brand, relationships with customers or an international sales force,” the ceo said.
But until that time, Smith and Polartec will just stay the course.
“We have lots of opportunity for growth and we’re just going to keep on keeping on and do what’s right in the long term and near term.”