|
E N Q U I R E R B U S I N E S S C O V E R A G
E |
|---|
Sunday, October 26, 1997 Isotoner looks good under Totes umbrella
The Cincinnati Enquirer
Forget the reliability of winter weather; of blue-cold fingers alternating on the steering wheel in snow-slowed traffic.
When Totes Inc. in August finalized a merger with Aris Isotoner - pulling it under its umbrella, as it were - the glove maker was seeking a rainy-day solution.
And Totes, both companies figured, had it. After all, the issues at the weakening Isotoner whispered deja vu to the rain-gear titan. Its stale products, high operating expenses and nagging delivery problems arrived like snapshots from a closed book in Totes' own operating history.
''I've got a management team here that is battle-tested, if you will,'' Totes' Chief Executive Doug Gernert, 39, said.
The new company, Totes-Isotoner Corp., then, has front- and back-end goals as a leading purveyor of foul-weather accessories. To get the products out on time, it has to brush up Isotoner's service based on Totes' own scrapes with delivery issues and cost problems. To keep the customers interested, it will combine the two companies' technologies.
In time, executives envision self-sufficient Totes-Isotoner ''concept shops,'' or boutiques, at department stores, each well-stocked with slippers, gloves, umbrellas and new items that combine water-repellency with warmth.
''Selfishly, we think it's a way to dominate our industry segments,'' Mr. Gernert said. ''In the trade, the quid pro quo is, 'Look, we can take a lot of management headaches off your hands.' ''
But don't expect lined raincoats or glove-handled umbrellas on the shelves this holiday season. Mr. Gernert said products combining Totes and Isotoner technologies won't see the light of day - or drop of rain - for another year. Last year's technology will bear this season's fruits for the company - flashlight-handle umbrellas, tiny umbrellas made of aluminum, and, from Isotoner, fleece products.
By wooing Isotoner's former owner, Sara Lee Corp., Totes created a franchise whose products are different enough to grow sales significantly but similar enough to limit distribution costs.
''The synergism is terrific. The channels of distribution are identical, and the buying groups are usually the same,'' said Sheldon Kopin, board member and former president of Totes. ''I think it's a terrific move, and Doug his people are certainly to be complimented in putting this together.''
Consider that Totes just three years ago struggled under heavy debt and product failures before Bain Capital Inc., a Boston-based investment company, acquired a majority interest. The June 1994 deal came months after Totes hit a deadline for the expiration of bank credit.
Mr. Gernert was brought in by Bain in 1994 as the chief operating officer and became chief executive in November 1996.
Signs of the benefits to which Mr. Kopin made reference formed just a month after the ink dried on the Totes-Isotoner contract. Witness the new Totes headquarters, being built in Union Township, Butler County. The 452,000-square-foot warehouse and office complex at International Boulevard in World Park will combine Totes' Loveland headquarters with an Isotoner distribution center relocating from Virginia.
If all goes well, perhaps the company - whose annual sales at the time of the merger reached $300 million - can realize a talked-about goal of being publicly owned.
Until then, there's a lot of foul-weather merchandise to move. ''Pray for rain'' could be a standard mantra at Totes-Isotoner, but market forces override Mother nature when it comes to staple items.
Totes gains market share not just by convincing shoppers to buy its gloves and umbrellas over other brands but by beating out competition from earrings, books and assorted gift items.
''Umbrellas are not a category in (which) everyone in America wakes up in the morning, dashes to the paper to find out what innovative things are happening,'' Mr. Gernert said.
''No one derives self-esteem from their umbrella.''
And it's just as well, since Totes-Isotoner would like its products in Jaguars as well as Hyundais - and offices and homes. The trick is tiptoeing the line between innovation and what-were-you-thinking. In the crazy 1980s, where from new-found wealth emerged the Salad Shooter, Cabbage Patch dolls and countless BMWs, Totes bombed with its creation of a gas-pump glove and a stain-proof tie.
Nowadays, practicality rules. Innovation differentiates. Development is more focused but still essential. Witness: More than 50 percent of Totes' umbrella volume derives from styles that did not exist three years ago.
Among this year's products:
Consumers can expect big products next year, Mr. Gernert said. In the meantime, Totes-Isotoner lines already command strong placement - sharing coveted first-floor space with other accessories at most department stores. Mass merchants, such as Wal-Mart, carry lines of different names that Totes manufactures, such as Chromatics umbrellas.
''It (the merger) will definitely have an advantage because both of them are vying for space, and cold weather tends to be seasonal,'' said Jeff Prine, administrative director of the New York-based Accessories Council. ''This gives them year-round clout.''
As for the value of the brands, Mr. Prine said Totes is probably the most recognizable name in the industry. He said the Isotoner name is ''almost used generically,'' in reference to gloves. Why would Sara Lee dump such a great name?
During the time of the merger, Theresa Herlevson, spokeswoman for the frozen-dessert maker, said Isotoner's pretax returns fell below the corporate standard of 20 percent.
''We've owned Aris for 26 years, and its products really are no longer a core focus for us,'' she said.
Ms. Herlevson would not comment on Isotoner since it has been sold. But Mr. Gernert said its shortfall was a symptom of underlying operational problems.
Sara Lee's priority, understandably, was its main business - frozen foods. And freezer cakes are not distributed in the same way or to the same clients as are gloves and slippers.
''With all due respect, Aris was not one of the central businesses of Sara Lee,'' said John Bierbusse, an analyst with A.G. Edwards. But it is much a part of Totes-Isotoner, which has compelling reasons to develop foolproof inventory-management systems. Totes has thousands of retail accounts, but the 100 largest represent 80 percent of its business.
And the big guys want more than a fast-moving black umbrella. Consolidation and pressures to reduce costs while improving profits have driven retailers to demand display management - such as stocking the display - forecasting and even advertising suggestions.
For mass retailers, inventory management has become crucial - an ''ethos'' - said Robin Lanier of the International Mass Retail Association.
''Our guys are selling large quantities at very low prices, so they want to reduce every possible extraneous cost,'' she said. Totes has necessarily incorporated such services for mass retailers and department stores. How else could it demand the prime spot near the front door? It now can extend the services to Isotoner and improve its darling status year-round.
''What we're really trying to do is replicate a lot of what we have done at Totes in the past three years into Isotoner's business,'' Mr. Gernert said. ''Both in product lines as well as in operating practices.''
If Totes, then, will ''take a page from the playbook of what we've done,'' it will have to start with the slash chapter. Totes in 1992 brought in former Rubbermaid chief Ronald Best to restructure the company. He cut operating costs by $6 million, cut 217 jobs and closed a distribution center. Painful, Mr. Gernert acknowledged, but a necessary first step.
Isotoner is under the knife, too.
''They have too much overhead costs for their business,'' Mr. Gernert said. ''We'll be able to consolidate a lot of corporate functions.''
The new offices and plant in Union Township will merge Totes and Isotoner operations, as well replace an existing distribution operation. The Loveland corporate office will move there, as will Isotoner's Virginia operations. Operations in New Jersey and New York will continue.
The streamlining should improve Isotoner distribution, which had been poor, Mr. Gernert and others say.
It's a good thing, Mr. Prine from the Accessories Council said. He said retailers scrambled last year after Isotoner shipments arrived late during the 10-week peak period in the fourth quarter. ''They advertise and they say they're going to have something there, they have to have it,'' he said.
The merchants turned to other vendors, including Totes.
Totes is using common management techniques to fix the problem - cross-departmental communications, accountability and tracking deliveries pretty much down to the stock-keeping unit, or SKU, level.
It isn't hocus-pocus, but it could work magic. Mr. Gernert said Totes has a 97 percent to 98 percent in-stock rate, meaning that customers carry as much of what they want almost all of the time. Last year, of 320,000 individual shipments from the Loveland operation, four were late.
But with the same distribution channels, assimilating Isotoner should be easily manageable. Isotoner is in the midst of the heavy shipping season - from August to November - and almost 97 percent of its deliveries are on time, Mr. Gernert said.
It makes for sunny prospects. The privately held Totes is in the window of the three- to five-year hold that Bain typically takes on a company, but the merger could reset the clock. That means at least five to seven more years under Bain's support and leadership, Mr. Gernert said.
Under such circumstances, Mr. Gernert probably doesn't mind a little sunshine.
|
|
Search | Questions/help | News tips | Letters to the editors Web advertising | Place a classified | Subscribe | Circulation Copyright 1995-2000. The Cincinnati Enquirer, a Gannett Co. Inc. newspaper. Use of this site signifies agreement to terms of service updated 4/5/2000. |