Nine West Plaza
Nine West Group, Inc. is a leading designer, developer, and marketer of women's casual and dress footwear, offering a full selection of women's shoes in three retail price ranges, from $25 for a pair of shoes to $150 for a pair of leather boots. The three market segments of the U.S. women's shoe market in which Nine West competes are classified by industry terms as 'better,' 'upper moderate,' and 'moderate.' Nine West has realized considerable success in both wholesale and retail operations, and the company's footwear is available through department, specialty, and independent stores nationwide, in addition to the company's own retail outlets. The company's nationally recognized brands include Enzo Angiolini, Calico, Spa, and Westies. In 1999, in the wake of slumping sales and an SEC investigation of the company's accounting practices, Nine West was purchased by Jones Apparel Group, Inc., becoming a wholly-owned subsidiary.
The Women's Shoe Market in the 1970s and 1980s
The company commenced operations in May 1977, when Jerome Fisher and Vincent Camuto incorporated a wholesale women's shoe business named Fisher Camuto Corporation. The company was a logical extension of business ties the two founders had formed nearly a decade earlier with manufacturers in southern Brazil, where costs associated with production were relatively low. Specifically, raw materials were abundant in Brazil, labor was cheaper, and capital expenditures were minimal. Fisher Camuto Corporation's utilization of Brazilian manufacturing facilities and personnel was a boon to the company, a hallmark of its success, and one not to be underestimated in understanding the history of the company's growth.
As the relationship with factory managers in Brazil matured and facilities there became more sophisticated, Fisher Camuto Corporation grew. The company generated $9 million in sales within its first year of business, a total that increased to more than $300 million over the course of the next decade. Although its design and marketing operations were based in the United States, and manufacturing was performed abroad, the Fisher Camuto Corporation nevertheless managed to maintain a production schedule commensurate with those of other U.S.-based shoe designers and manufacturers. Moreover, Fisher and Camuto proved adept at adjusting the company's designs to suit rapidly changing fashion trends.
In 1988, Fisher and Camuto formed Jervin Inc., a name derived by combining the first three letters of their first names. Jervin was established as a private-label concern engaged in arranging, on an agency basis, the sale of unbranded, or private-label, women's footwear manufactured in Brazil to retailers and wholesalers. The following year, when the company's annual sales were $338.7 million, Fisher and Camuto attempted to acquire the footwear division of U.S. Shoe Corporation, the assets of which had already aroused the interest of several other companies. A bidding war ensued, with Merrill Lynch Capital Partners emerging as the leader. Although Fisher and Camuto were willing to better Merrill Lynch Capital Partners bid of $422.5 million, U.S. Shoe Corporation's financial adviser, Merrill Lynch Capital Markets, claimed that the terms of a binding contract between U.S. Shoe and Merrill Lynch expressly forbade U.S. Shoe from providing the wholesaler with any confidential material or allowing it to participate in the bidding process. Rebuffed, Fisher and Camuto were forced to turn their attentions elsewhere.
Nevertheless, over the next three years, Fisher and Camuto's company embarked on a period of prodigious growth. From 1989 to 1992, annual sales climbed from $338.7 million to $461.6 million, while net income increased more than 60 percent, from $14.3 million to $38.2 million. These increases were particularly impressive given the business environment at the time. The late 1980s and early 1990s were deleterious years for women's specialty apparel and footwear retailers, as overall sales had declined dramatically during a recession that stifled the nation's economy.
New Concepts in Shoe Retail: The 1990s
By the end of the 1980s, Fisher and Camuto's company was involved in both the wholesale and retail markets of the women's shoes business. On December 31, 1991, these concerns--Fisher Camuto Corporation, Fisher Camuto Retail Corporation, and Espressioni, Inc.--merged to form a new company, which was soon renamed Nine West Group Inc. Preparing to go public, Fisher and Camuto merged Jervin Inc. into the Nine West Group, of which it became a division in 1992. Once this transaction was completed, Nine West became a public corporation in early February 1993, selling shares of common stock on the New York Stock Exchange.
By this time, Nine West was operating 236 retail and outlet stores as well as designing and marketing branded and private-label shoes to more than 2,000 department, specialty, and independent store customers. Of its five nationally recognized brands, its Nine West brand was the most successful, having been redefined and repositioned in 1989 to compete in the $50 to $65 price range. The company's more moderately priced Calico brand represented its most traditionally styled shoe, typically selling for between $40 and $50. Nine West's Westies brand, sold only by independent retailers, competed in the under $40 market segment, while the Enzo Angiolini brand, the company's designer label, comprised leather shoes priced between $65 and $80. The company's fifth brand, 9 & Co., was created to attract a younger clientele and featured a line of junior footwear priced below $50, which was sold through the company's new retail store concept, also named 9 & Co.
In the wholesale side of its business, Nine West distributed private-label shoes to a host of large, nationally recognized customers, including J.C. Penney Company, Sears, Roebuck & Co., Thom McAn Shoe Company, and Kinney Shoes. Design, manufacturing, and sales operations of the private-label footwear were overseen by Nine West's Jervin division. The company's branded shoes were distributed to several of the largest department stores in the country, including The May Department Stores Company, R.H. Macy & Co., Federated Department Stores, Nordstrom, and Dillard Department Stores.
Nine West's success was largely dependent on its use of Brazilian manufacturing facilities. While these factories had initially manufactured 200 pairs of shoes per day for Fisher and Camuto, the production level had increased exponentially, reaching 130,000 pairs of shoes per day in 1993. During this time, the industry in Brazil employed a work force of over 39,000 and maintained cost-efficient factories, which operated their own tanneries. Moreover, through manufacturing arrangements with 25 independent Brazilian shoe manufacturers, which produced Nine West shoes in 40 factories, Nine West was able to deliver design specifications and receive completed products in an eight-week period, giving the company a supplier network that ranked among the best in the U.S. shoe industry.
Buoyed by this established supply network, Nine West capitalized on a fashion trend away from sneakers toward heavier, sturdier shoes, a trend widely embraced by younger consumers in late 1993 and early 1994. The shift in consumers' tastes caught several of the country's large athletic shoe manufacturers--Reebok International Ltd., Nike, Inc., and L.A. Gear, Inc.--by surprise, and their sales figures declined. However, Nine West and some other companies, such as Timberland Co., an outdoor apparel and shoe company, experienced a surge in profits. Nine West's stock price, which initially sold for $17.50 per share, shot up to more than $34 by the fourth quarter of the company's 1993 fiscal year.
As Nine West planned for the future, it focused on becoming a greater retail force in the U.S. shoe industry, a market segment that represented a $14 billion business in 1993. Toward this end, in 1994, the company planned to open 20 Enzo Angiolini stores, prompted by heightened consumer interest in elegant footwear. By 1997, Nine West's management hoped to derive half of its sales from the retail segment of its business, which during the mid-1990s recorded one of the highest sales-per-square-foot averages in the U.S. shoe industry at $555 per-square-foot a year. With more than 325 retail stores and its established wholesale business supplying more than 5,500 storefronts with women's shoes, Nine West expected to garner a greater share of the U.S. retail and wholesale market.
Highs and Lows in the Late 1990s
By the mid-1990s, however, prospects for the U.S. shoe industry were bleak. A glut of shoe products, combined with the rapid proliferation of retail outlets nationwide, drove sales forecasts down to two or three percent. Compounding the problem for shoe manufacturers was a recent practice among retailers and department stores of developing their own private-label products. To counter this trend, Nine West began opening a number of new boutiques in upscale urban areas, most notably in Union Square, San Francisco, in November 1994. At the same time, in an effort to diversify its product line, Nine West acquired LJS Accessory Collections, Ltd., a manufacturer of women's accessories, in January 1995.
In March 1995 Nine West finally acquired U.S. Shoe for $600 million. The deal doubled the size of the company and made Nine West the nation's third largest shoe manufacturer. More significant than this growth, however, was the acquisition of U.S. Shoe's major brands, which included Amalfi, Evan-Picone, and Bandolino. Particularly valuable was the Easy Spirit line of shoes, which saw $200 million in sales in 1994, and accounted for all of U.S. Shoe's $35 million profits. By the end of 1995 Nine West could boast 35 percent of all women's shoes sold in department stores, as well as 17 percent of the specialty footware market. Contrary to industry forecasts, Nine West's future seemed bright.
In November 1996, the company moved back to New York, taking advantage of a number of financial incentives, such as tax breaks and electricity savings, to relocate to White Plains. The year 1996 was another strong year for the company, with sales of $1.6 billion, and increase of 33 percent over the previous year, and net profits reaching $95 million. Riding the momentum of this continued success, the company embarked on a new publicity strategy, in the hopes of changing its image from a that of a manufacturer of affordable shoes into a major 'fashion brand.' In 1996 the company reached a licensing agreement with Calvin Klein, whereby Nine West would assume responsibility for the operation of 20 CK Shoe boutiques, and an ambitious advertising campaign, featuring photographs by Herb Ritts, was launched in early 1997. Meanwhile, the recently-acquired accessories business was doing far better than expected, with sales reaching $45 million after only two years.
This growth came to an abrupt halt in May 1997, however, when the SEC announced its intention to launch an investigation into Nine West's accounting practices, in particular its manner of reporting sales. The company's initial reluctance to report this development to its shareholders only made matters worse; when a press release became unavoidable the company's stock dropped 18 percent. By December the stock had fallen 45 percent from the year's high, and in 1998 the company was forced to cut production from five million to three million units, resulting in the closing of two factories and 100 retail stores, and nearly 1,000 job cuts. More problems followed in early 1999, when a number of independent Nine West store owners filed an anti-trust suit against the company, alleging that it was engaging in unfair pricing practices with major department stores.
It was in the midst of these difficult times that the Jones Apparel Group tendered a substantial offer for the company, and an acquisition, worth $885 million, was announced in March 1999. While the proposed deal did not sit well with some Jones Apparel investors, in light of Nine West's ongoing legal difficulties, the merger went through in June, and Nine West became a wholly-owned subsidiary. In the wake of the consolidation, the shoe manufacturer was forced to close three plants and lay off 1,900 workers, or 21 percent of its work force. After Jones entered into a settlement agreement with the Nine West Store owners in March 2000, it seemed the shoe company was once again on an even keel, and analysts were projecting sales for the newly-combined businesses to rise as high as $4.18 billion for the coming year, with profits increasing by 20 percent.
Principal Competitors: Brown Shoe Company, Inc.; Kenneth Cole Productions, Inc.; Candies, Inc.; Etienne Aigner, Inc.; Maxwell Shoe Company Inc.