Eddie Bauer Holdings, Inc.

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Eddie Bauer Holdings, Inc.

EARLY HISTORY

FROM SHUTTLECOCKS TO GOOSE DOWN JACKETS

WORLD WAR II CONTRIBUTIONS

CONCENTRATING ON MAIL-ORDER CATALOGS

196871: BRIEF STAB AT INDEPENDENT EXPANSION

197188: THE GENERAL MILLS ERA

19882005: THE SPIEGEL ERA

2005: BEGINNING OF NEW ERA OF INDEPENDENCE

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

FURTHER READING

15010 NE 36th Street
Redmond, Washington 98052-5317
U.S.A.
Telephone: (425) 755-6100
Fax: (425) 755-7696
Web site: http://www.eddiebauer.com

Public Company
Founded:
1920
Incorporated: 1968 as Eddie Bauer, Inc.
Employees: 10,000
Sales: $1.01 billion (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: EBHI
NAIC: 448140 Family Clothing Stores; 454110 Electronic Shopping and Mail-Order Houses

Eddie Bauer Holdings, Inc., together with its principal operating subsidiary, Eddie Bauer, Inc., is a catalog, storefront, and e-commerce retailer specializing in casual outdoor apparel and accessories. The company mails out approximately 80 million catalogs per year, with about a quarter of revenues stemming from catalog and web site orders. On the storefront side, there are around 280 Eddie Bauer retail stores located throughout the United States and Canada, with an additional 115 Eddie Bauer outlet stores; the latter offer lower-priced merchandise consisting of both excess merchandise from the retail stores and products designed specifically for the outlets. Through joint ventures, Eddie Bauer operates retail outlets and distributes catalogs in Japan and Germany. The company also licenses the Eddie Bauer brand to several other companies, including Ford Motor Company, which has made Eddie Bauer edition sport-utility vehicles since 1984; American Recreation Products, Inc., for camping gear and accessories; the Lane Company, for a line of Eddie Bauer furniture; Dorel Industries, Inc., which sells Eddie Bauer car seats; and Skyway Luggage Company, for luggage and travel accessories.

EARLY HISTORY

Created by the son of Russian immigrants, Eddie Bauer, Inc., began as a tennis racquet stringing business in Seattle, Washington. While his parents would eventually play a significant role in the development of Eddie Bauer, Inc., Eddie Bauer initially drew upon his childhood years on Orcas Island, a sparsely populated island near Seattle, as the inspiration for what eventually would become a billion-dollar retail business.

Those early years were spent fishing, hunting, and trapping on the wooded island, imbuing Bauer with a love of the outdoors. When his family moved to Seattle in 1912, Bauer was 13 years old and looking for work. He immediately gravitated toward the only full-line sporting goods store in the city, Piper & Taft, and landed a job as a stock boy. Over the years, Bauer watched and learned, eventually becoming adept at making guns, fly rods, and golf clubs. In addition to these talents, Bauer also developed considerable skill in stringing tennis racquets, winning the world speed championship while in a display window at Piper & Taft, by stringing 12 racquets in slightly more than three-and-a-half hours. Still in his teens, Bauer already had gained the attention of Seattles sporting community. He often was referred to in local newspapers for killing the biggest elk, or catching the most fish, or for winning rifle- and pistol-shooting competitions. This local recognition would serve Bauer well when, in 1919, with $25 in his pocket and $500 borrowed on a 120-day loan, he rented 15 feet of wall space in a gun shop for $15 a month and began stringing racquets on his own. In this venture, Bauer enjoyed immediate success, stringing enough racquets to accumulate $10,000 within his first year. In 1920, encouraged by his initial success, Bauer arranged for credit from a bank and opened his own shop, Eddie Bauers Sport Shop, the predecessor of Eddie Bauer, Inc.

In addition to his renowned racquet-stringing abilities, Bauer also offered golf equipment and trout fishing flies during his first year of business, and the 20-foot storefront quickly became a haven for sporting enthusiasts throughout the Pacific Northwest. Bauers success during these nascent years was in large part due to his reputation as an experienced outdoorsman and his active participation in the sporting community. He worked at his store from February through August each year, then hunted and fished throughout the winter. During these sojourns in the wild, he field-tested all of the equipment he sold in his stores, which, after the first year, included an array of outdoor equipment and clothing. Two years after he opened for business, this firsthand knowledge of his stock enabled him to offer an unconditional guarantee of satisfaction on all of the products sold in his store, a rarity for retail businesses during the 1920s; he also established a company creed. Bauer promoted sporting activities in his spare time, increasing the publics awareness of such sports as skiing by importing Norwegian hickory skis and persuading Norwegian skiers to come to the Pacific Northwest to help foster growth in the sport.

By 1924, Bauer had added a complete selection of fishing tackle, firearms, and skeet and trap equipment to his store and renamed it Eddie Bauers Sporting Goods. Customers continued to flock to Bauers store, lured by his unconditional guarantee and his knowledge of the outdoors. Eddie Bauers Sporting Goods had quickly become a favorite place for outdoorsmen to outfit themselves for a wide variety of sporting endeavors. With a large and loyal clientele, Bauers future success appeared as guaranteed as the products he sold, but, in the coming years, Bauers position as a successful operator of a local sporting goods store would be elevated to a height not imagined even during the optimistic 1920s.

FROM SHUTTLECOCKS TO GOOSE DOWN JACKETS

Bauers success had been predicated on his experience and interest in sporting equipment, so it was fitting that the innovation that would eventually launch his company into the upper echelon of the outdoor apparel industry came as a result, at least in part, of his desire to improve sporting equipment. In the late 1920s, Bauer attempted to improve the consistency of flight in badminton shuttlecocks. He imported premium feathers from Europe and developed a method using buckshot that achieved the desired results. In 1934 his design was patented and eventually adopted for use in the badminton world championships.

COMPANY PERSPECTIVES

Our Creed: To give you such outstanding quality, value, service and guarantee that we may be worthy of your high esteem.Eddie Bauer, founder

While investigating which type of feather would improve the flight of shuttlecocks, Bauer came across goose down, reminding him of an uncle who had once extolled the virtues of goose downs insulating quality. Years earlier, Bauers uncle, a Cossack fighting in Manchuria during the Russo-Japanese War, had worn a coat lined with goose down to stave off the 50 degrees below zero winter weather. Bauer, who had suffered through many cold winters fishing and hunting in the mountains near Seattle, decided to use goose down to make a coat for himself. After designing and sewing a quilted goose down jacket for himself, Bauer discovered the truth of his uncles story and soon was making down jackets for a few of his friends. The popularity of these jackets led Bauer to patent his design and begin production of Americas first quilted goose down insulated jacket in 1936. Called the Skyliner and selling for $34.50, the jacket was an immediate success, particularly with Alaskan bush pilots, and led to the production of a wide assortment of garments with different quilting styles. Starting with ten seamstresses in 1936, Bauer needed 125 by 1940 to meet the voracious demand for his quilted jackets. By this time, Bauer had secured a virtual monopoly on the insulated jacket market, employing as many seamstresses as his rapidly expanding business required and purchasing all the European and North American goose down he wanted.

WORLD WAR II CONTRIBUTIONS

This supply of goose down, however, ended just as Bauers quilted down garments began to attract orders through the mail. When the United States entered World War II in 1941, the war production board requisitioned all of the goose down supply on the market and froze Bauers existing supply. No longer able to purchase or use goose down, he was relegated to using eiderdown (down from an eider duck) as a replacement, a substitute that negatively affected his sales. It appeared as if his flourishing retail trade had been swept away from him, but whatever losses Bauer incurred as a result of the governments seizure, he more than made up for by providing goose down products to the U.S. Army Air Corps beginning in 1942. At first, Bauer provided the military with sleeping bags and snowshoes and binders, which he sold at retail prices, and eventually his business with the government increased considerably. Using the war production boards goose down, Bauer manufactured 25,000 flight suits and nearly 250,000 sleeping bags for Air Corps flight crews and those fighting in the frigid Aleutian campaign. To satisfy the militarys needs, Bauer constructed a production factory, invested roughly $200,000 in specially built machinery, and hired 400 power sewing machine operators to work in three shifts, seven days a week. This prodigious wartime production salvaged what otherwise could have been a recessive period for Bauers company and, more importantly, it also carried the Eddie Bauer name across the nation. All of the garments Bauer manufactured for the military had the Eddie Bauer label stitched on them, the only garments during the war that carried the manufacturers private label.

KEY DATES

1920:
Eddie Bauer opens Eddie Bauers Sport Shop in Seattle.
1922:
Bauer begins offering his customers an unconditional guarantee of satisfaction.
1924:
Store is renamed Eddie Bauers Sporting Goods.
1936:
Bauer patents and introduces the first goose down insulated jacket, marking the companys entrance into outdoor apparel.
1942:
Bauer begins providing goose down products to the U.S. Army Air Corps.
1945:
Company sends out its first mail-order catalogs.
1953:
Company is reorganized as a 50-50 partnership between Eddie Bauer and William F. Niemi, Sr., under the name William F. Niemi Co., doing business as Eddie Bauer Expedition Outfitters.
1968:
Bauer retires, selling his interest in the company to Niemi; the company is incorporated as Eddie Bauer, Inc.
1971:
General Mills, Inc., acquires Eddie Bauer for $10 million.
1984:
Through a licensing deal with Ford, the first Eddie Bauer edition SUV makes its debut.
1988:
Spiegel, Inc., acquires the company for $260 million.
1991:
Eddie Bauer Home makes its debut.
1993:
Company enters into joint venture to open stores and start catalog operations in Japan.
1995:
Joint venture is created to form retailing and cataloging operations in Germany.
1996:
Company moves into e-commerce with the launch of www.eddiebauer.com.
2002:
An enduring pattern of poor sales prompts the first of several rounds of store closings.
2003:
Spiegel is forced to file for Chapter 11 bankruptcy protection.
2005:
Out of the reorganization of Spiegel, Eddie Bauer Holdings, Inc., emerges as a new holding company for Eddie Bauer, Inc.; Eddie Bauer appoints its first board of directors and shuts down all of its Eddie Bauer Home stores.
2006:
Eddie Bauer agrees to sell itself to two private equity firms for $286 million.
2007:
Shareholders vote down the proposed sale.

Although Bauers civilian business slackened during the war, he continued to advertise to create a demand for his products when the war ended. Once it did, he steeled himself for an immediate return to the prosperous days of the late 1930s. Expectations ran higher, however, considering the tremendous strides in name recognition the company had made as a result of the war, so Bauer introduced a new way to bring his products to the public. In 1945, just as many of those who had worn Eddie Bauer products during the war were returning home, Bauer issued the companys first mail-order catalogs, through a division that had been formed in 1942 to sell the goose down products, Eddie Bauer Expedition Outfitters. Although the introduction of the catalogs represented a significant landmark in the companys history, a more pressing concern during these immediate postwar years overshadowed their import. Bauers company seemed in danger of failing.

CONCENTRATING ON MAIL-ORDER CATALOGS

To fill the demands of his contract with the Air Corps, Bauer had invested in equipment that could serve his production needs only during the war. Both the profits and the machinery were temporary, so, once the war ended, Bauer was left with the machinery and nowhere to sell it, leaving him in a precarious situation. As he would later recall, We were stuck with the machinery and I lost practically everything I owned, down to where I had to start all over again. To assist with this rebuilding process, Bauer entered into a partnership in 1953 with William F. Niemi, Sr., a friend with whom Bauer hunted and fished, and together they strengthened the company by placing an emphasis on the mail-order side of the business and concentrating on producing a larger selection of products (the company was officially called William F. Niemi Co. but was doing business as Eddie Bauer Expedition Outfitters). From this point forward until the 1970s, Bauers company would be primarily a mail-order business. Before the end of the decade, Bauer would close his stores in Seattle and rely almost exclusively on purchases made through the mail, with the only retail sales being generated by a factory store in Seattle. In the late 1950s Bauer and Niemi also brought their sons into the partnership.

The changes made by Bauer and Niemi worked. By mailing catalogs to potential customers and outfitting those outdoorsmen who came to the factory in Seattle, the company generated $1 million in sales in 1960. Although Bauers financial position had seemed bleak 15 years earlier, the widespread recognition of the Eddie Bauer name had always remained secure. A new generation of potential customers were being introduced to the Eddie Bauer line of products through the catalogs arriving in the mail. By this time, Bauers company used nearly half of the worlds supply of northern goose down and had outfitted every American expedition to the Himalayas over the previous ten years. When mountain climbers needed to train for assaults on the towering peaks in the Himalayan range, they often selected the mountains in proximity to Seattle as suitable sites. By the 1960s, a visit to Bauers factory store became a natural stop for climbers needing clothing and equipment, which further bolstered the nations recognition of the Eddie Bauer name. When James W. Whittaker became the first American to reach the top of Mount Everest in 1963, he wore an Eddie Bauer parka, slept in an Eddie Bauer sleeping bag, and used Eddie Bauer gear, as did the entire expedition. Three years later, Bauers company outfitted the American Antarctic Mountaineering Expedition, and it continued to produce the preferred gear for expeditions to follow in later years.

196871: BRIEF STAB AT INDEPENDENT EXPANSION

By 1968, annual sales at the company were approaching $5 million and professional management and financial planning was clearly needed at the rapidly growing firm. Eddie Bauer and his son decided to sell their half of the company to Niemi and his son, Bill Niemi, Jr., for $1.5 million; a group of investors who had helped finance the buyout gained stock in the company, which was incorporated as Eddie Bauer, Inc. The completion of the sale in June 1968 marked Eddie Bauers retirement from the firm he had launched nearly 50 years earlier.

The new management team, headed by Niemi as chairman and Niemi, Jr., as president, made some initial moves back into retailing, opening the first store outside Seattle, in San Francisco, in 1968, and a new store in downtown Seattle, the companys first large store, in early 1970. The company also consolidated its scattered Seattle operations in a building on Airport Way in South Seattle that included administration, customer service, manufacturing, warehousing, and distribution at one location. By 1970 sales had surged to $9.1 million, with earnings exceeding $500,000. Needing capital to fund a more ambitious expansion, Eddie Bauer, Inc., made plans for an initial public offering (IPO) in the spring of 1970, but the underwriter of the IPO recommended a postponement following a stock market dip. It was at this point that the management concluded that the best course of action would be a sale of the undercapitalized company.

197188: THE GENERAL MILLS ERA

In March 1971 food conglomerate General Mills, Inc., purchased Eddie Bauer for about 311,000 shares of General Mills common stock, or about $10 million. The acquisition of Eddie Bauer was part of General Mills aggressive move into specialty retailing. What General Mills received was still essentially a mail-order business, with a small retail side. It was the latter segment of Eddie Bauer that General Mills wanted to fortify.

Several years passed, however, before the disparate merchandising philosophies of the two companies would effectively join together and even longer until Eddie Bauer obtained consistent leadership. From 1975 to 1978 the company went through four presidents, until finally settling on James J. Casey, who had joined Eddie Bauer three years earlier. At this time, the state of Eddie Bauers product line was still in flux, as General Mills attempted to reshape its subsidiarys market appeal. Six months after Casey assumed leadership of the company, he maneuvered it away from a merchandising failure that had added golf and tennis apparel to the companys product line. For customers inured to a product line whose reputation had been built on manufacturing down parkas and outfitting expeditions to the Antarctic, the shift was a difficult one to make, and potential customers went elsewhere when purchasing items for warmer climes. Although General Mills continued to struggle with the specialty outdoor market niche, it had increased the number of Eddie Bauer retail locations. By the end of the decade, there were 16 retail stores and plans in place to double that figure. In General Mills first year of ownership, Eddie Bauer posted $11 million in sales, and, with the boost in sales provided by the additional stores, sales climbed to $80 million, ranking the company second only to L.L. Bean, Inc., in the specialty outdoor market. The disparity between retail and catalog sales disappeared, with half of the total revenues generated by the stores, and 14 million catalog customers accounting for the remainder. In the meantime, the company moved its headquarters once again in 1973, settling into a 14-acre campus in Redmond, Washington.

By 1984, the changes initiated by General Mills had substantially altered the image Eddie Bauer projected to its customers. Apparel generated approximately 70 percent of the retail store revenues, and much of it did not resemble the clothing worn by members of a Mount Everest expedition, or even the clothing worn by weekend adventurers camping in the woods. Tents, backpacks, and fishing rods had slowly begun to disappear from the shelves of the companys stores and were replaced with oxford cloth shirts, lambs wool sweaters, and other items uncharacteristic of the rugged, expedition outfitter. With 41 stores located in Canada and the United States, the company broadened its appeal, enough for Ford Motor Company to begin production of the Eddie Bauer Bronco II in 1984, and attracted a more diverse clientele. The expansion of the retail side of the business represented a move toward greater growth for the mail-order segment as well. In 1983 Eddie Bauer mailed 14 million catalogs, and, by the following year, 30 million catalogs were sent to potential customers, two million of which were printed in French to accommodate the companys burgeoning clientele in Canada. Plans called for further expansion of the companys retail business, some 60 stores over the next five years. To lead the company toward this goal, a switch in leadership was made. In 1984 Michael Rayden replaced Casey and began separating retail, mail order, and manufacturing into three distinct divisions.

By 1988, Eddie Bauer had 57 retail stores located in the United States and Canada. Yet just as General Mills was announcing further plans to augment Eddie Bauers retail holdings, the corporation put Eddie Bauer up for sale along with another specialty clothing chain it owned, Talbots, in a bid to divest itself of all nonfood-related businesses.

19882005: THE SPIEGEL ERA

In 1988 Spiegel, Inc., a catalog marketer of apparel, home furnishings, and other merchandise, bought Eddie Bauer for $260 million, roughly equal to the sales the company generated at the time of its purchase. Wayne Badovinus was selected to lead Eddie Bauer and, over the next two years, 100 stores were added to the retail chain, bringing total sales up to $448 million. In 1991 Eddie Bauers first Premier store was opened in Chicago, which housed all of the companys recently introduced specialty product lines. All Week Long, Eddie Bauers collection of womens sportswear and casual attire, first introduced as a catalog business in 1987, had evolved into a retail business by 1991 with the opening of its first store in Portland, Oregon, and was part of the Premier store concept. Also included in the Premier stores were The Sport Shop at Eddie Bauer, featuring custom-built fishing rods, reels, and fishing flies, and The Eddie Bauer Home Collection, which sold a wide assortment of indoor and outdoor furnishings. The addition of these specialty retail concepts, each first introduced in 1991, marked another dramatic leap in revenues. In the three years since Spiegel had purchased Eddie Bauer, the parent company had witnessed an increase in revenues from roughly $260 million, to nearly $750 million, occasioned primarily by the dramatic increase in Eddie Bauers retail business. This expansion continued after 1991, giving the company 265 retail stores by the end of 1992. Eddie Bauer Home became the longest lasting of the new concepts, and by 1994 there were 15 such outlets in 11 states, and the company was mailing out separate Home catalogs six times per year. Revenues surpassed the $1 billion mark for the first time in 1993.

The mid-1990s were marked by continued expansion in North America as well as the companys first forays into overseas territory. The international expansion was pursued through joint ventures with units of Otto Versand (GmbH & Co.), a German mail-order giant controlled by the Otto family, which also controlled Spiegel. In 1993 Eddie Bauer entered into a venture with Otto-Sumisho, Inc., to open retail stores and sell through catalogs in Japan. Two years later the company joined with Otto Versand units Heinrich Heine GmbH and Sport-Scheck GmbH in another venture created to launch retail and catalog sales in Germany. By the end of the decade there were 35 Eddie Bauer stores in Japan and nine in Germany. A similar venture for the U.K. market was created in 1996 but was discontinued three years later, with catalog sales continuing through Eddie Bauers German joint venture.

During 1995, when the company celebrated its 75th anniversary, Eddie Bauer launched a new retail and catalog concept, called AKA Eddie Bauer, selling upscale dress clothing for men and women and aiming at the burgeoning market for more casual work clothes. The companys All Week Long concept was discontinued, with those stores converted into AKA Eddie Bauer units. Even amidst a slump in the entire retailing industry, Eddie Bauer continued to expand in other ways as well. In 1996 came the debut of the EBTEK line of high performance outerwear and casual activewear featuring such fabrics as Goretex and Polartec 200. That same year, the company established a third distribution channel with the launching of its Internet web site. Bucking the early trend in e-commerce, eddiebauer.com was generating a profit within two years of its debut. During 1997 Eddie Bauer opened its 500th U.S. store.

With its Ford partnership continuing, Eddie Bauer entered into several more licensing deals in the late 1990s to further leverage its increasingly well-known name. In 1997 the company inked a deal with the Lane Company for the development of a line of Eddie Bauer furniture. The following year Eddie Bauer mountain bikes were launched with Giant Bicycle, Inc.; Eddie Bauer eyewear debuted through an agreement with Signature Eyewear, Inc.; and Eddie Bauer infant and juvenile car seats were introduced in conjunction with Cosco, Inc.

After adding a net 39 stores in 1998, and suffering from declining sales because of increased competition and a slow reaction to hot new fashion trends such as cargo pants, Eddie Bauer reined in its North American expansion the following year, when the chains net gain was just nine stores. The company also made some alterations to its store concepts that year. Eddie Bauer Home was revamped to include less in the way of upholstered furniture and tabletop items and more of the domestic items for bed and bath, such as bedding and towels. The 40 home stores also began featuring the Eddie Bauer Juvenile line of bedding and beds and increased its baby by Eddie Bauer line of infant bedding and furniture. The AKA Eddie Bauer concept was discontinued in the form of separate stores, and the AKA merchandise was integrated into adjacent Eddie Bauer sportswear stores.

With a revamp of its sportswear lines, Eddie Bauer managed to post a 6 percent increase in comparable store sales in 1999, compared with a 9 percent decrease the previous year. Overall revenues increased slightly that year, reaching $1.79 billion. During 2000, when Eddie Bauer planned to increase its North American retail units to 565 and to expand or remodel 40 existing stores, a milestone was reached when the first Eddie Bauer store opened in Hawaii, completing the chains entrance into all 50 states.

The turnaround performance of 1999 did not last. In the summer of 2000, same-store sales began dropping precipitously, amounting to a 15 percent decline for the third quarter of that year. The consensus from analysts was that Eddie Bauer had veered too far to informal clothing styles and too young as well. The hot trend at the time was business casual clothing, and Eddie Bauers styles had grown too informal for business attire. For the full year of 2000, the company suffered from a 9 percent drop in same-store sales and a 3 percent fall in catalog sales. The one bright spot was its web-based business, which remained profitable and enjoyed a surge in sales of 130 percent, to roughly $135 million.

In the fall of 2001 Eddie Bauer introduced an overhauled merchandise mix featuring a classic casual look aimed at men and women between the ages of 35 and 55. The timing of this launch proved unfortunate as it coincided with an economic downturn and retail slowdown following the September 11, 2001, terrorist attacks on the United States. Same-store sales plummeted 21 percent in September and 19 percent the following month. In January 2002 Richard T. Fersch, who had served as the CEO of Eddie Bauer since 1997, unexpectedly announced his retirement, prompted in part by the companys continued poor financial performance.

As the search began for a new leader at Eddie Bauer, the retailers parent was itself experiencing serious financial difficulties stemming primarily from its money-losing credit-card division. In February 2002 Spiegel announced its intention to sell the troubled unit and also revealed plans to close 45 underperforming Eddie Bauer stores out of the total of 575. In July 2002 Fabian Månsson was brought onboard as the new Eddie Bauer president and CEO. The flamboyant Månsson, born in Stockholm, had previously helped turn the Swedish firm Hennes & Mauritz AB into one of Europes most successful retailers. Månsson immediately returned Eddie Bauer to its roots, launching new clothing lines and a marketing campaign that emphasized the outdoor heritage of the brand in the fall of 2002. Sales for the year amounted to only $1.42 billion, down more than 20 percent from the 1999 total.

In March 2003 Spiegel was forced to file for Chapter 11 bankruptcy protection as its financial situation deteriorated. One month later, Eddie Bauer retrenched once again, announcing that another 60 underperforming stores were to be closed. By the end of the year, plans were in place for a further 30 store closures. Despite a 7 percent jump in same-store sales in Septemberthe first monthly gain of that sort in more than three yearsEddie Bauers results for the full year were less encouraging: a 6 percent drop in same-store sales and a further decline in overall sales, to $1.3 billion.

2005: BEGINNING OF NEW ERA OF INDEPENDENCE

Still operating under bankruptcy protection, Spiegel placed Eddie Bauer up for sale in April 2004. That year, Eddie Bauer netted a profit of $108 million on revenues of $1.24 billion. Spiegel, in the meantime, sold its Newport News and Spiegel catalog businesses in 2004 but pulled Eddie Bauer off the block when no party came forward with an offer that matched what executives thought the retailer was worth. Then, in February 2005, Spiegel revealed plans to reorganize around Eddie Bauer, a plan that came to fruition on June 21 of that year. Out of the restructuring and bankruptcy emerged Eddie Bauer Holdings, Inc., a new holding company, initially wholly owned by Spiegel creditors, serving as the parent company for Eddie Bauer, Inc., and its subsidiaries. Eddie Bauer appointed the first board of directors in its 85-year history, and Månsson continued to lead the company as president and CEO. A standalone company for the first time in 34 years, Eddie Bauer began its new era focused on its 417-unit clothing store operation and its companion catalog and Internet channels. The 30 Eddie Bauer Home stores were closed during the second half of 2005. The company remained involved in home furnishings via arrangements in which it licensed the Eddie Bauer brand to other parties.

This new era began rather roughly. Same-store sales for the fourth quarter of 2005 fell more than 7 percent mainly because of another merchandising misstep. The fall and holiday apparel lines, which had been redesigned to be more fashionable with tighter styles and brighter colors, met with a cold reception from the brands core customers. During the second half of the year, Eddie Bauer lost $22.8 million on sales of $593.7 million. In 2006 the retailer went back to a focus on clothing for the modern outdoor lifestyle, began standardizing its stores around a 5,500-square-foot format, and launched its first full-scale customer loyalty program, called Eddie Bauer Friends. In October, stock in Eddie Bauer Holdings began trading on the NASDAQ.

At the same time, Eddie Bauer began exploring a possible sale of the company. In November 2006 the company reached an agreement to sell itself to Sun Capital Partners, Inc., and Golden Gate Capital, two private equity firms, for $286 million. Månsson contended that the deal would provide the company the additional time and resources necessary for his turnaround strategy to come to fruition. Many shareholders, however, were unhappy with the $9.25 per share price that had been negotiated, and in February 2007, at a special meeting, they voted down the sale. The next day, Månsson resigned and was replaced on an interim basis by Howard Gross, a board member with 35 years of retailing experience, including stints heading The Limited and Victorias Secret chains. Ironically, one month later Eddie Bauer released its results for the fourth quarter of 2006, which showed the firm posting its first quarterly profit since its emergence out of Spiegel: $63.2 million on sales of $381.9 million. Same-store sales were up 4.6 percent for the quarter, a trend that appeared to be accelerating in 2007, when the increase was 9.5 percent for the first ten weeks of the year. These amounted to early, though far from certain, signs of a sustained turnaround for the legendary Eddie Bauer brand.

Jeffrey L. Covell Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

Eddie Bauer, Inc.; Eddie Bauer of Canada, Inc.; Eddie Bauer Fulfillment Services, Inc.; Eddie Bauer Customer Services Inc. (Canada); Eddie Bauer Diversified Sales, LLC; Eddie Bauer Services, LLC; Eddie Bauer International Development, LLC; Eddie Bauer Information Technology LLC.

PRINCIPAL COMPETITORS

L.L. Bean, Inc.; Lands End Inc.; The Gap Inc.; Target Corporation; Columbia Sportswear Company; The North Face, Inc.; Patagonia; Recreational Equipment, Inc.; AnnTaylor Stores Corporation; Banana Republic Inc.; The Talbots, Inc.; Chicos FAS, Inc.; Coldwater Creek Inc.; J. Crew Group, Inc.; The J. Jill Group Inc.; J.C. Penney Corporation, Inc.; Federated Department Stores, Inc.; Nordstrom, Inc.

FURTHER READING

Allison, Melissa, Eddie Bauer CEO out Day After Deal Dies, Seattle Times, February 10, 2007, p. E1.

Batsell, Jake, Bankrupt Spiegel Puts Eddie Bauer Up for Sale, Seattle Times, April 7, 2004.

, Eddie Bauer Goes Indoors, Seattle Times, November 14, 2001, p. C1.

, Eddie Bauer Taps CEO with Roots in European Retail, Seattle Times, July 12, 2002, p. C1.

Chandler, Susan, New Fashion Focus Helps Eddie Bauer Rebound, Seattle Times, August 29, 1999, p. F1.

Copple, Brandon, Fashionably Late, Forbes, August 12, 2002, p. 46.

Eddie Bauer: A Name You Can Trust, Catalog Age, September 1993, pp. 13536.

Eddie Bauer Catalog Sidesteps Recession Doldrums, Direct Marketing, November 1983, p. 72.

Eddie Bauer: The Man Behind the Name, Pacific Northwest Magazine, May 1983, pp. 6164.

Enbysk, Monte, Snug Fit: Eddie Bauer Inc. Has Profited Handsomely from Acquisition by Spiegel, Tacoma News Tribune, February 27, 1994, p. F4.

Evolution of a Down-Wear Retailer, New York Times, March 12, 1981, p. D4.

Fung, Shirley, Troubled Bauer Shifts Gears, Womens Wear Daily, November 1, 2000, p. 8.

George, Melissa, Why Eddie Bauer Is Lost in the Woods, Crains Chicago Business, August 10, 1998, p. 1.

Green, Jeff, Bauer Power, Brandweek, July 5, 1999, pp. 1617.

Hanover, Dan, EddieBauer.com Gets It Done, Chain Store Age, October 1998, pp. 19798.

Harris, Craig, Eddie Bauer Has First Profit Since Bankruptcy, Seattle Post-Intelligencer, March 15, 2007, p. D6.

Lim, Paul J., Eddie Bauer Plans Aggressive Expansion, Seattle Times, January 18, 1996, p. C1.

Merrick, Amy, Eddie Bauer CEO Says He Is Retiring Amid Sales Slump, Wall Street Journal, January 7, 2002, p. A18.

, Spiegel Files for Chapter 11, Wall Street Journal, March 18, 2003, p. B4.

, Spiegel Plans to Exit Bankruptcy As Operator of Eddie Bauer Chain, Wall Street Journal, February 22, 2005, p. B7.

Moin, David, Spiegel to Shut 60 Eddie Bauer Units, Womens Wear Daily, April 29, 2003, p. 4.

Moriwaki, Lee, It Takes More Than Flannel, Seattle Times, October 19, 1997, p. E1.

Nogaki, Sylvia Wieland, Out of the Woods: Eddie Bauer Hikes Trail Leading to Higher Profits, Seattle Times, July 26, 1993, p. E1.

Ouchi, Monica Soto, Eddie Bauer Deal Doesnt Sell, Seattle Times, February 9, 2007, p. E1.

, Judge OKs Spiegel Plan, Seattle Times, May 26, 2005.

, New Life for Eddie Bauer: Spiegel Reorganizes Around Its Outdoorwear Division, Seattle Times, February 19, 2005, p. E1.

Palmeri, Christopher, Indoor Sportsman, Forbes, March 29, 1993, p. 43.

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