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With more than 40 manufacturing and distribution facilities throughout the world, The Warnaco Group Inc. is one of the largest international apparel companies. Most of its revenues (approximately 65 percent) derive from intimate apparel sold under popular brand names like Warner's, Olga, and Fruit of the Loom. But it also sells well-known menswear brands including Calvin Klein and Hathaway. In 1994, Warnaco distinguished itself as the only Fortune 500 industrial company with a female chief executive.
Brothers DeVer and Lucien Warner started what would become Warnaco in 1874. Both men had been trained as doctors, but each also had an entrepreneurial bent, as evidenced by their ventures ranging from traveling medical lecture series, to snake-oil remedies. Among the latter was "Warner's Safe Kidney and Liver Cure," a bottled formula prescribed for urinary disorders and malaria, among other afflictions. Another of the brothers' projects was a replacement for the corset, which they felt was hazardous to women's health. They had devised a less constricting "waist pattern" in the 1860s, but it did little to shape women's waists. In 1874, though, DeVer invented an improved version that sported shoulder straps. Manufactured samples were met with enthusiasm in New York. The brothers quit their other jobs and, with $2550 in start-up capital, began selling their "Dr. Warner's Health Corset."
Problems were numerous during the start-up phase. A competing manufacturer threatened to sue the Warner's for copying its design, and the brothers were forced to change the original name of their corset (Dr. Warner's Sanitary Corset) because somebody else already owned the name. Understandably, they also suffered from a dearth of pattern-making experience. While DeVer learned the necessary pattern-making skills, Lucien used his contacts in New York City to begin developing distribution channels for their corset. Lucien's wife, Karen, pitched in and the three labored in Lucien's home. Once they got the operation up-and-running, sales were swift. They moved the company out of the Warner abode in 1875, and by 1876 had already outgrown their small manufacturing plant in McGraw, New York.
As word of Warner's comfortable corset spread, sales soared at an astonishing rate. In 1876 the Warner's moved to Bridgeport, where they built a four-story factory. They continued to redesign and improve their corsets with considerable success. They even introduced new products like an innovative folding bustle (used to support the rear of a dress). Particularly successful was the Coraline Corset line, which was manufactured in part with Tampico grass imported from Mexico. In 1883, in fact, Harper's Bazaar identified the four most popular corsets in America as Warner corsets, three of which were Coralines. The incredible success of the Coraline and other Warner designs made both brothers millionaires by the early 1880s. By the mid-1880s the Warners employed more than 1,500 workers, most of whom were immigrant women or poor New England farm girls.
During the remainder of the late 1880s, Warner Brothers, as the company was called, continued to flourish. The brothers introduced a steady stream of designs, usually based on European fashions, and began importing products from England for resale. Some ideas languished. Failed efforts included wool underwear, a chemical business, a Florida orange grove operation, and an attempt to manufacture baseballs. But the corset company constantly prospered and both brothers amassed considerable wealth. Besides building opulent homes for themselves and their families, they heaped their fortunes on a number of beneficiaries. For instance, they established the Seaside Institute, a type of boarding house for poor women that served meals at cost and offered a reading and music room, among other amenities. Lucien also donated large sums to his alma matter, Oberlin College.
By the end of the century the Warner brothers had effectively retired from the day-to-day operations of the company. DeVer married a 26-year-old beauty after his wife died in 1895. He then purchased a succession of yachts that he sailed up and down the East Coast. DeVer wintered in Augusta, Georgia, where he established a strong friendship with John D. Rockefeller. Lucien, a frequent White House guest who cultivated friendships with Presidents Cleveland, Taft, Harrison, and Roosevelt, became a world traveler after his secession from the business, vacationing in China, Japan, New Zealand, Egypt, and elsewhere throughout the world.
With its originators no longer active in the company, Warner Brothers was legally changed from a partnership to a corporation in 1894. DeVer's son, D.H., took control of the company around that time. D.H. differed from his father and uncle in that he had little formal education. He started working at the company when he was 19 years old (in 1887) and worked as an apprentice in every department in preparation for his father's departure. Despite his lack of education, D.H. was a savvy businessman with multiple talents and a flair for leadership. As a young man, he had been an amateur boxer, flute player, and yachtsman, among other credits. By the time he took over Warner Brothers, he was also acting as the president or director of several other concerns, including the Bridgeport National Bank, a gas company, and a department store. When he finally focused his intensity on Warner, the company profited handsomely.
Between 1894 and 1913, Warner's sales vaulted more than three-fold to $7 million and profits averaged $700,000 annually. The gains were largely the result of ongoing innovation. Warner introduced rust-proof steel boning as a replacement for more expensive whalebone in corsets, and introduced a successful corset that doubled as a hose supporter. The latter innovation is recognized as an important evolutionary step in the development of the brassiere in the 1910s. Indeed, Mary Phelps Jacob patented the bra in 1915, and shortly thereafter sold the invention to Warner. The purchase of the bra proved to be an excellent move at the time, and during the late 1910s Warner achieved steady sales and profit growth, with revenues hitting $12.6 million in 1920.
Contributing to the success of the company during the early 1900s was Lucien's son, L.T. He was very different from D.H. in both background and personality. The two often clashed, but their skills were complementary and their combined efforts were ultimately beneficial to the company. The Warner's fortunes began to change, however, after 1920. Corsets quickly fell out of fashion early in the decade and were replaced with the "wraparound." The company scrambled to adapt its products with only tepid success. Throughout the Roaring Twenties, Warner's performance waned. Sales fell to a pitiful $2.5 million by the end of the decade. During the Great Depression, moreover, Warner began to lose money. By 1932 its balance sheet was bleeding more than $1 million in red ink.
Augmenting the company's downfall was the deterioration of D.H. Although an energetic businessman and leader as a young man, D.H. was a dissolute womanizer throughout his adult life. His decline hastened after his wife died in 1931. He continued to spend lavishly and drink to excess before his death in 1934 at the age of 66. D.H.'s son-in-law, John Field, became the new chief executive and L.T. became chairman of the board. A Yale graduate, Field had worked with D.H. and L.T. at Warner for several years. Under Field's control, Warner tightened its belt and revamped its product line during the 1930s, barely escaping bankruptcy. Vital to Warner's survival were inventions like the "Two-Way-One-Way" girdle, an elastic undergarment that wrapped around the body and flattened the hips yet still allowed full body movement.
By the early 1940s Warner's sales had surged back up to about $4 million, approximately $300,000 of which was retained as profit. The lean war years were followed by solid growth as the U.S. economy boomed. Warner's revenues topped $12 million and profits roared back to $1 million by 1947. John Field's son, John Jr., joined the company and was placed in charge of advertising, among other duties. Warner continued to prosper during the 1950s by selling its popular Warner brand lines of bras, girdles, and "corselettes." Sales rocketed to more than $25 million by 1956, growing at more than three times the industry average. Beginning in the mid-1950s, though, Warner Brothers lost focus and became too unwieldy. Frustrated by his 73-year-old father's authoritative, non-progressive management style, John Field Jr. wrested control of the company from the elder Field by persuading the board of directors to oust him.
New managers worked to whip Warner Brothers Company into shape during the late 1950s. In addition to restructuring, they grew the company at a rapid rate by diversifying, acquiring other companies, and expanding distribution channels. Specifically, Warner broadened its product lines to include menswear and accessories, and both men's and women's sportswear. It expanded distribution by selling through large chain stores like Sears and J.C. Penney, and by opening production facilities in Europe and South America. Importantly, Warner purchased C.F. Hathaway Company, America's oldest shirt manufacturer, and Lady Hathaway, a well-known women's sportswear division. That buyout instantly made Warner a major player in those respective industries. Warner went public in 1961 and by the early 1960s was generating annual revenues in the $100 million range.
During the 1960s Warner Brothers Company continued to grow through acquisition and merger. It purchased the popular Puritan and Thane brands in 1964, and then bought out White Stag, a casual sportswear maker. Sales careened to an impressive $185 million in 1968 and profits reached an all-time high of $77 million, reflecting annual growth since 1960 of more than 25 percent. By the late 1960s the company had unarguably become a leader in the U.S. apparel industry. It stepped up its rampant expansion strategy in the early 1970s. In an effort to keep up with rapidly changing fashions during this period, Warner tried to assemble a diverse group of holdings that would allow it to capitalize on consumer whims as they emerged. Brands accumulated in the 1970s included Speedo, Playmore, Rosanna, Jerry Silverman, and High Tide. Warner also branched into retail stores and launched a more aggressive international agenda.
Warnaco celebrated its 100th anniversary with record sales and profits. By the mid-1970s, though, the company had again grown unwieldy, ballooning into a diversified, international apparel conglomerate with nearly 20 divisions. The aggressive diversification strategy had made Warnaco a big player, but was failing to generate profit growth. In fact, Warnaco's profitability began to slip in the mid-1970s. During 1975 and 1976 the company experienced severe stress as a result of various mishaps. Warnaco's entry into the leisure suit business, for example, brought crushing losses when that short-lived style quickly faded. Its retail store division also suffered, contributing to hefty losses. Distressed by Warnaco's mounting difficulties, Field offered to allow a new, fresh management team to pick up the ball and carry Warnaco into the 1980s.
Warnaco's board brought in two outside managers--Philip Lamoureux and James Walker&mdashø work with Field and eventually assume leadership of the company. They immediately clashed with Field, assuming control of day-to-day operations, but then edging him out of the decision-making process. The situation deteriorated to the point where Field, like his father, had to be forced out of his leadership role. Warnaco's balance sheet improved significantly under the new management. Walker and Lamoureux jettisoned several of Warnaco's non-performing units, restructured management, and labored to improve the profitability of its successful core apparel lines. Profits soon recovered to record levels during the late 1970s. Even during the recession of the early 1980s Warnaco's sales and profits boomed.
After successfully reviving the embattled Warnaco, Lamoureux left Warnaco in 1982. The following year, Walker died unexpectedly from a kidney-related virus. The company itself, however, remained healthy to most appearances, and in 1983 hit a record net income of $28.3 million. Furthermore, the company's balance sheet was strong, with relatively little debt and a vigorous cash flow. But Warnaco's balance sheet failed to reflect some underlying problems. During the late 1970s and early 1980s Warnaco had reduced spending on research and development and cut back on its marketing efforts. These moves reduced costs, but boded poorly for Warnaco's long-term growth. In 1984 the company's profits again started to slide. Performance continued to slip into the mid-1980s, despite the purchase of the successful Olga Co. in 1984. Warnaco began to review its alternatives.
Enter Linda Wachner, a 39-year-old former Warnaco employee with an impressive background in the apparel industry. Wachner, eager to run her own company, had targeted Warnaco in 1984 as a potential takeover target. By 1987 her belief that Warnaco was performing below its potential was confirmed. She joined forces with Los Angeles investor Andrew Galef in a month-long battle for control of the company. Wachner and Galef, through their newly-formed W. Acquisition Corp., won the bid and Wachner stepped in as chief executive in April of 1987--Galef became chairman. Wachner quickly replaced Warnaco management with her own team and reorganized the company. Her strategy was to streamline the corporation, pay down the debt incurred as a result of the leveraged buyout, and build Warnaco into a dominant force in its key market niches.
Wachner, one of just a few women heading Fortune 500 companies, was a force to be reckoned with. She had known since her childhood in Forest Hills, New York, that she wanted to run something. She came to that conclusion at the age of 11, lying in a full-body cast after undergoing surgery to correct severe scoliosis. Facing the possibility that she may never walk again, she became determined to take charge of whatever she did in her life. "The focus I have today comes from when I was sick," she explained in the June 15, 1992 Fortune. "When you want to walk again, you learn how to focus on that with all your might, and you don't stop until you do."
Wachner translated her intensity into career success beginning in 1966. She graduated from the University of Buffalo in that year at the age of 20 and went to work in the retail industry with a division of Federated Department Stores. She immediately began telling her superiors how they could improve the operation, earning a reputation as an aggressive business woman. Wachner accepted a position in Warnaco's marketing department in 1974. Within less than a year she was promoted to vice-president. In 1978 she was recruited to head the sagging Max Factor division of Norton Simon, and in two years turned the operation from a $16 million loss to a $5 million profit. Wachner unsuccessfully attempted a leverage buyout of Max Factor in 1984, after which she resigned. She tried to buy Revlon in 1986 before setting her sights on Warnaco.
Wachner assumed an aggressive stance at Warnaco. She pared the company's 15 divisions down to two main categories: intimate apparel and menswear. She dumped other units, including the large women's apparel and sportswear businesses, and initiated widespread cost-cutting programs. She brought a new customer and cash-flow focus to Warnaco that resulted in significant gains. In addition, she broadened Warnaco's core product lines with new ventures, such as a deal to supply the popular Victoria's Secret retail chain. She also raised capital with a successful public offering. By 1992, Wachner had slashed Warnaco's burdensome debt load by 40 percent, boosted the company's stock price by a hefty 75 percent, and increased cash flow from $50 million to $90 million annually. The only criticism of her performance came from former employees who derided her tough, hard-nosed management style.
Few people were able to criticize Warnaco's financial performance during the early 1990s. Despite a recession during much of that time, Warnaco's sales steadily grew from $518 million in 1989 to more than $700 million by 1993. Warnaco experienced losses during the late 1980s, but was netting income of about $50 million by 1992. More importantly, the company had reduced its long-term debt from more than $500 million in the late 1980s to less than $250 million by 1993. And the company was positioned for future growth. Warnaco had plowed capital into its important Warner and Olga brands, allowing it to cash in on the growing upscale lingerie market in the mid-1990s. And its Speedo division was enjoying solid gains. Furthermore, in 1993 Warnaco purchased the underwear business of Calvin Klein. Following these successes, the company is projecting sales growth of at least 15 percent annually between 1995 and the turn of the century.
Principal Subsidiaries: Warnaco Inc.
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