13405 Yarmouth Road, N.W.
Best known for its Dearfoams brand slippers, R.G. Barry Corp. ranks among the world's leading manufacturers of washable house slippers. Offered under the Angel Treads, Madye's, and Snug Treds trademarks, Barry's comfort footwear is distributed through mass merchandisers, department stores, and women's specialty stores. The company also exports its products throughout North America and Europe. In the mid-1990s, approximately 20 percent of R.G. Barry's equity continued to be held by members of the founding Zacks family. The company was guided at that time by Gordon Zacks, who had served as president and chief executive officer of the company since the mid-1960s.
Having endured volatile swings in profitability and undergone several reorganizations throughout the 1980s and early 1990s, R.G. Barry sought stable sales and earnings growth through new product introductions in the mid-1990s. In 1993, the firm launched a line of "heat-to-go" products that incorporated a heat-retaining, microwaveable insert. These items included the Lava Buns stadium seat, ear muffs, a back warmer, scarf, and tabletop bread warmer. Company officials and industry analysts expected R.G. Barry to continue to record sales and income increases in the mid- to late-1990s in part by applying this proprietary technology to products for the medical, industrial, and military markets.
Post-World War II Creation and Early Development
The business was founded in 1945 in a Columbus, Ohio-area basement. That is when three partners--Aaron Zacks, his wife Florence, and a colleague, Harry Streim--created Shoulda-Moulders Co., a maker of slippers, bathrobes and pillows. Two years into the endeavor, the partners changed the company name to R.G. Barry Co., a veiled reference to their three sons. The "R" stood for Harry's son Richard, the "G" for Aaron and Florence's son Gordon, and Barry referred to his sibling.
Despite his prominence in the company moniker, Barry did not follow his parents into the family business, instead he went on to found the Max & Erma's restaurant chain. It was Gordon who joined the company upon his 1955 graduation from Ohio State University's College of Commerce. Knowing his son's penchant for learning by doing, Aaron Zacks assigned Gordon to establish a new corporate manufacturing division in New York. Gordon's operation lost money its first year, while the headstrong entrepreneur became acclimated to the intricacies of manufacturing. This "trial by fire" would prove vital to the younger Zacks's professional development. In 1957, Gordon was summoned back to R.G. Barry's suburban Columbus headquarters when his father's health began to fail. Aaron Zacks suffered a fatal heart attack in 1965, thrusting his relatively inexperienced 32-year-old son into the company presidency.
After taking a course on corporate management from the American Management Association, Gordon Zacks pared R.G. Barry's interests to Dearfoam slippers, then sought to boost its business via acquisitions. Over the course of the 1960s, the firm added operations in Puerto Rico, Tennessee, Texas, North Carolina, and New York, and expanded its family of brands to include Bernardo brand ladies' imported Italian sandals. In 1971, R.G. Barry acquired Maine's Quoddy Products Inc., retailer of hand-sewn Quoddy moccasins.
This strategy of diversification within the footwear industry was very successful; company sales doubled over the course of Gordon's first five years at R.G. Barry's helm. However, Gordon Zacks's early achievement may have endowed him with a bit of vainglory. In a 1985 interview with Business First-Columbus's Bill Atkinson, he admitted that "When I think I'm right I have great faith and confidence in my own judgment." While admirable to a certain degree, that egoism would later threaten R.G. Barry's fiscal health.
Introduction of Mushrooms in 1970s
Emboldened by his success, Zacks directed the development of a new line of women's comfort shoes. Dubbed Mushrooms, the footwear was five years in the making and was backed by a marketing program that took another three years to fine-tune. Zacks boasted that it was "one of the most successful marketing programs in the history of the shoe industry." Backed by hundreds of thousands in advertising dollars, R.G. Barry's sales and earnings "mushroomed" throughout the 1970s, peaking at over $120 million and $3.8 million, respectively, in 1978.
This relatively small, central Ohio company's successful diversification out of its traditional house slipper niche caught the attention of U.S. Shoe Corp., a billion-dollar southern Ohio shoemaker and retailer. U.S. Shoe responded to Barry's incursion on its market by developing a competing brand, Candie's, which it supported with a multimillion-dollar advertising campaign. Despite the odds--R.G. Barry had a mere fraction of the financial and market clout of its multifaceted competitor--Zacks struggled to maintain his company's hard-won position in women's shoes. As Barry Zacks commented in Atkinson's 1985 piece, "[Gordon] began to equate success or failure with his own personal success." By the early 1980s, his firm had 22 Mushrooms stores in California, Florida, Michigan, and Washington, D.C. During this period, R.G. Barry also expanded the Quoddy chain to 43 stores. The company supported its greatly expanded retail activities with the addition of three manufacturing plants and a network of warehouses, but Zacks failed to take into account the vagaries of popular taste. His bold growth plan soon began to look more like a hasty overexpansion, especially in contrast to U.S. Shoe's ongoing success. Zacks reflected on his skirmish with U.S. Shoe in the 1985 interview with Business First-Columbus: "We were holding our own, but we were bleeding to death."
After four years of declining earnings and slipping sales, Zacks conceded defeat in 1982. That year, the company took a $12.5 million loss on the sale of its degenerating Mushrooms chain to none other than U.S. Shoe, which converted the retail outlets to its Candie's format. R.G. Barry incurred an $8.5 million loss in 1982. Zacks must have taken some consolation in the fact that his giant rival licensed the Mushroom trademark from his firm for $1 million per year. Barry continued its retreat back to the core Dearfoams slippers with the 1983 spin-off of its Quoddy retail chain to Wolverine World Wide, Inc., manufacturer of Hush Puppies shoes. Two years later, the company sold its Bernardo operations to Jumping-Jacks Shoes, Inc.
Reorganization and Retrenchment in 1980s
Over the course of the next three years, R.G. Barry worked to pare operating expenses and reinvigorate its neglected slipper line. A 1983 restructuring--one of many to come over the ensuing decade&mdash⁄uttered three plants and reduced employment by 28 percent, from 3,200 to 2,300. Hoping to take advantage of the lower labor and production costs available overseas, the company launched an import division in 1983 and began moving manufacturing operations from the northeast United States to the Southwest and Mexico. By mid-decade, it had shifted its production ratio from 100 percent domestic to 20 percent domestic and 80 percent foreign.
R.G. Barry also worked to broaden its appeal in the slipper market from a near exclusive emphasis on women to include men and children. A licensing program used the popular Cabbage Patch Kids and Care Bear characters to appeal to children, while Dearfoams developed a line of slippers for men. Other lines with designer names like Oscar de la Renta and Christian Dior commanded higher price points. Barry also redesigned and repackaged its line of women's Dearfoams with particular focus on the product's "giftability." The footwear was such a popular gift that the vast majority, 80 percent, of R.G. Barry's annual sales were concentrated in the fall holiday shopping season. The company emphasized the luxuriousness of its Dearfoams with its first-ever celebrity advertising campaign featuring Zsa Zsa Gabor. In the latter years of the decade, R.G. Barry broadened its retail distribution from its core in department stores to mass merchandisers like K-Mart and Wal-Mart. By the end of the decade, CEO Zacks was able to boast that his company had "fresh and exciting products in every price point."
These strategies appeared successful. Although sales declined from $141.1 million in 1981 to $86 million in 1986, the company recovered from its loss position to effect a $4.3 million profit in the latter year. Barry's sales increased steadily to $122.8 million by 1989, but its net income fluctuated erratically throughout the latter years of the decade, from a low of only $23,000 in 1988 to $3.7 million in 1989.
Under pressure from increased foreign and domestic competition, the company slid into the red the following year, incurring total losses of $8.3 million in 1990 and 1991. Zacks mandated two "major restructurings" in the span of two months in late 1990 and early 1991. The company reduced its inventory, reorganized its sales force, installed an integrated database system, cut its administrative support staff and laid off 370 U.S. employees. Zacks estimated that this "right-sizing" would save the company $6 million to $7 million in operating costs each year. In one of its most surprising moves, R.G. Barry shareholders elected U.S. Shoe Chairman Philip G. Barach to a seat on the board of directors in 1991.
New Products, Global Expansion Pace Mid-1990s Growth
In the midst of these operational shifts, the company also laid the groundwork for the launch of a whole new class of products. In cooperation with Columbus's Battelle Memorial Institute, R.G. Barry developed a flexible, microwaveable pouch that could retain its heat for up to eight hours. Dubbed "ThermaStor," the product won a spot on R&D magazine's listing of 1994's top inventions. These units were used in cold-weather accessories like scarves, gloves, and vests as well as household and leisure articles like breadbaskets and stadium seats. The products were offered under the "Heat to Go" brand at mass merchandisers and under the venerable Dearfoams label in department stores. Barry boosted its manufacturing capacity in this segment with the 1994 acquisition of Vesture Corp., whose "microcore" was similar to Barry's own ThermaStor, but utilized a different technology.
Analyst Bart Blout told Business First-Columbus's Carrie Shook that "This technology has far-reaching applications and hundreds of products will be created with it--from shoes to toys." Not only did this open up a completely new and unique segment of the consumer market to R.G. Barry, but it also held great potential for the development of products for the medical, industrial, commercial, and military segments. In 1995, Barry and Battelle formed a joint venture known as ThermaStor Technologies, Ltd. to explore these opportunities. Barry also focused on the development of international markets in the mid-1990s, establishing operations in Europe, Asia, Canada, and Mexico.
R.G. Barry's financial performance improved dramatically in the 1990s. Sales increased from $101.8 million in 1992 to $136.6 million in 1995; profits grew to a record-breaking $6.3 million in the latter year.
Principal Subsidiaries: Vesture Corp.; ThermaStor Technologies, Ltd. (50%).
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