Harold’s Stores, Inc.

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Harolds Stores, Inc.

765 Asp
Norman, Oklahoma 73069
(405) 329-4045
Fax: (405) 366-2588
Web site: http://www.harolds.com

Public Company
Incorporated: 1948
Employees: 1,345
Sales: $108.23 million (1997)
Stock Exchanges: American
SICs: 5611 Mens & Boys Clothing & Accessory Stores; 5621 Womens Clothing Stores; 5632 Womens Accessory & Specialty Stores

Harolds Stores, Inc. is a merchant and manufacturer of updated but classically styled mens and womens apparel. Each store in the chain features upscale specialty clothes for men and women ages 20 through 50, although typically the updated traditional styles appeal mostly to young executives and college students. Harolds designs many items exclusively for sales in its stores. The company markets its private label items through retail stores and through a direct-response catalog. Harolds maintains four distinct styles of stores. The first type of store offers full lines of original exclusive and semi-exclusive apparel for men and women. Secondly, some stores sell womens apparel and Old School Clothing brand mens sportswear. Other Harolds stores sell only womens clothing. Finally, Harolds outlet stores feature items with discounted prices or products with slow sales. The companys trademarks include Harolds, Harold Powell, Old School Clothing Company, and OSCC Bespoke.

The First Harolds

Harolds began in 1948 when Harold Powell founded a mens apparel business in a 900-square-foot store on Campus Corner across from the University of Oklahoma. Other stores followed, many in notable locations; for example, Powell opened a store in Utica Square, the oldest regional shopping center in Tulsa, Oklahoma, established in 1952. The company decorated this outletlike each of its storeswith antiques, special fixtures, and visual props.

Product Development at Harolds

Harolds traditionally imported much of its merchandise from the United Kingdom, Italy, and the Far East. The companys merchandisers visited Europe regularly throughout the years for fashion ideas. Harolds historically worked with only a few vendors to ensure control of the design and manufacturing processes involved in manufacturing its private-label items.

Powells product development philosophy set the stage for Harolds stores to offer new styles before its competitors. Stores featured clothing designed for Harolds or selected by the companys buyers from the merchandise of U.S., European, and Asian manufacturers. Harolds stores carried coordinated sportswear, dresses, coats, outerwear, shoes, and accessories for women. In 1997, womens apparel accounted for 78 percent of all sales, with 95 percent of sales attributed to Harolds product development and proprietary labels. Twenty-two percent of total sales in 1997 were mens apparel, 90 percent attributed to Harolds proprietary labelsOld School Clothing, in particular. Harolds tailored clothing for men included suits, sport coats, sportswear, shoes, and furnishings.

The 1970s

During the 1970s, Harolds continued to expand in store numbers and in customer services. In 1973 The Farm, a freestanding store in a 20-acre shopping center in Tulsa, Oklahoma, opened. A year later, Harolds first offered a proprietary credit card to its customers. The company believes that providing its own credit card enhances customer loyalty while providing customers with additional credit, explained a Harolds 10-K report. By the end of the decade, Harolds established its first store beyond the borders of Oklahoma. As the first Harolds store opened outside of Oklahoma, the companys Highland Park Village location in Dallas, Texas, was a big gamble, recalled an annual report. After all, what right-minded Texan would be interested in anything from Oklahoma? Well, as it turns out, a lot of Texans were interested. Opened in 1977, the Highland Park Village store eventually became known for selling the highest volume of womens apparel in the chain.

The 1980s

In the next decade, Harolds established more and more retail outlets. In 1980, a store opened in Jackson, Mississippi, in the Rogue Compound. Harolds launched another store in 1986 in Fort Worth, Texas. Harolds became a public company in 1987 and added still more retail outlets throughout the remainder of the decade. In 1989, for example, a store with a full line of womens apparel and Old School Clothing Company sportswear for men debuted near Memphis, Tennessee, in Saddle Creek South in Germantown. That same year also saw the market testing of Harolds first direct-response catalog.

StoresPlus Catalog Marketingin the 1990s

In March 1990 Harolds issued its first catalog. The company mailed its catalog to 100,000 addresses from its in-house database. Harolds viewed the catalog as a sales tool, a vehicle for market research, and a promotion device for announcing new stores. In fiscal 1992 the catalog earned $620,000 in sales. By 1997, the single catalog grew to six issues of nearly 100 pages each annually. With 72 million copies in circulation, the catalog sold more than $8.88 million of merchandise.

Despite initiating the catalog, Harolds remained energetic in establishing new and enhancing existing retail outlets. The company moved its Fort Worth, Texas, store to the University Park Village shopping center, regularly frequented by Texas Christian University studentsin 1990. In 1994, Harolds added a full line of mens clothing to the Highland Village Park store in Dallas, Texas. In July of that year, a womens apparel and Old School Clothing Company store opened in Charlotte, North Carolina. Austin, Texas, received a new womens apparel store in September. In October, a full-line of womens and mens clothing store debuted in Piano, Texas, and a womens and Old School Clothing store opened in Phoenix, Arizona, in November.

More Harolds stores began operations in 1995. A third outlet facility opened in Norman, adjacent to the original store. This store offered consumers discountsfrom 30 to 70 percent off regular priceson prior years styles. In the spring, Harolds established a store in the Plaza Frontenac, a regional shopping mall in St. Louis, Missouri. Stores also opened in Louisville, Kentucky, and in Baton Rouge, Louisiana, and an outlet center began operations in Hillsboro, Texas, in 1995. Nothing about our Hillsboro outlet facility says outlet, revealed the 1996 annual report. From the extravagant wooden barn-like store front to the cold drinks offered to customers by sales associates, youd never know this is a store where closeout bargains are to be found. And thats one reason Harolds Outlet is so different from the other national outlet stores that make up the Hillsboro Outlet Center in Hillsboro, Texas.

Vendor Negotiations in 1995

Harolds negotiated a new arrangement with its largest apparel vendorCMT Enterprises, Inc.in 1995. In the past, Harolds paid CMT Enterprises for producing and manufacturing items; however, Harolds retained control of the design process. Under the new arrangement, CMT, acting as an agent of Harolds, purchased raw materials and oversaw the manufacturing of Harolds products by contractors. CMT Enterprises received a commission on the cost of finished items, resulting in financial savings for Harolds and an increased inventory of piece goods and work in process. Harolds believes its new relationship with CMT permits the company to control the quality and cost of the companys inventory purchases, reported a company 10-K.

Harolds also launched its first restaurant in 1995. The company established Cafe Plaid next to the original Harolds store in Norman, Oklahoma, near one of the companys outlet facilities. The idea was to create synergism between the cafe and the store, the 1996 annual report explained. Diners might be interested in checking out Harolds seasonal styles. Likewise, shoppers might want to take a break in Cafe Plaid.... Together, Cafe Plaid, Harolds Outlet, and the original Harolds store offer shoppers a variety of attractive incentives to visit the Campus Corner area. Management expects that the long-term effect will be advantageous to all three entities, not to mention other unrelated Campus Corner merchants.

In 1996, Harolds offered 460,000 shares of newly issued common stock, raising more than $6 million in the sale. With the additional capital, the company continued updating and building new stores aggressively in 1996. The original store in Norman underwent a two-phase expansion project, including a significant enlargement of its womens apparel section. Harolds opened full-line mens and womens apparel stores in Leawood, Kansas; Raleigh, North Carolina; McLean, Virginia; and Littleton, Colorado. A womens clothing and mens Old School Clothes sportswear store also opened in Greenville, South Carolina, and Norman, Oklahoma, became home to yet another Harolds outlet facility in 1996.

Company Perspectives:

Every individual, hand-built store expresses our passion for going one step beyond that which is normal in modern retailing. Each location defines our all-consuming goal in creating for our customers a total shopping experience. And most importantly, every store proves that our success is based not only on the bottom line, but on a promise that our foremost consideration is and always will be helping people look and feel their very best.

In November 1996, Harolds initiated a store under the name Harold Powell in Houston, Texas. (An existing, unrelated mens clothing retailer in Houston called Harolds necessitated the name change.) Centrally located to the citys affluent areas, the store carried full lines of mens and womens clothing and accessories under a Harold Powell label. The companys 1996 annual report revealed that despite the inconvenience of having to modify our store name to Harold Powell..., our presence in Houston has flourished amid all the legal controversies over the name.

The number of Harolds stores grew throughout 1997, as well. The company opened another store in Memphis, Tennessee, in the Mall of the Twenty-first CenturyWolfchase Galleria. In addition, full-line mens and womens apparel stores were launched in Wichita, Kansas; Columbus, Ohio; Richmond, Virginia; and Birmingham, Alabama. Outlet stores debuted at the Sealy Outlet Center in Houston, Texas, and in Norman, Oklahoma. In addition, Harolds relocated its Fort Worth store to a new area of University Park Village, and the original Harolds storestill in operationstretched to 26,000 square feet through a location expansion program.

As of February 1997, Harolds operated 42 stores in 18 states. In each instance, these retail outlets were located in shopping centers and malls near other top-of-the-line retailersoften in the vicinity of colleges. Harolds expansion over the years resulted in sales as well as physical growth. According to a William E. Read and Company report, Harolds historical sales growth has been dramatic the past five years as the company has expanded its retail mens and womens upscale apparel operations.... Sales for fiscal February 1, 1997, totaled $108.2 million compared to $49.3 million in 1993, an increase of 120 percent for the five-year period, or a sales growth rate of 21.8 percent annually.

In 1997, Harolds maintained its headquarters in Norman, Oklahoma, in the Boomer Building, a former theater just one block from the very first Harolds store. Harolds also operated a distribution center in Norman, as well as merchandising and production offices in Dallas, Texas.

Plans for the Future

Harolds witnessed a decline in catalog sales in 1997. Owing to this, the company shifted its focus to reducing catalog expenses in upcoming years. Nevertheless, investment and securities firm William E. Read and Company noted that catalog sales continue to be a bright spot for Harolds. Hence, the retailers plans for the future included increasing the circulation of the direct-response catalog while maintaining sales momentum at its stores. Harolds believed its success in the future depended most on increasing the number of its mens and womens apparel stores. Our expansion efforts are continuing, wrote Harold G. Powell, founder and chairman of the board, in a letter to stockholders, and we look forward to welcoming several new stores to the Harolds family in the year to come. The company expected to open at least three stores in 1998, to relocate one store, and to expand one existing store.

Further Reading

Harolds Stores, Inc. Announces the Opening of an Outlet in Sealy, Texas (press release), Norman, Okla.: Harolds Stores, Inc., November 20, 1997.

Harolds Stores, Inc., Releases Sales Results for the Third Quarter and Thirty-Nine Weeks Ended November 1, 1997 (press release), Norman, Okla.: Harolds Stores, Inc., November 6, 1997.

Southwest Securities, Harolds Stores, Inc., Dallas, Tex.: Southwest Securities, December 4, 1997.

William E. Read & Co., Harolds Stores, Inc., Dallas, Tex.: William E. Read & Co., December 4, 1997.

Charity Anne Dorgan