Maxwell Shoe Company, Inc.
Maxwell Shoe Company, Inc.
101 Sprague Street
Hyde Park, Massachusetts 02136
Fax: (617) 364-9058
Sales: $165.92 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: MAXS
NAIC: 42234 Footwear Wholesalers; 316214 Women’s Footwear (Except Athletic) Manufacturing; 316219 Other Footwear Manufacturing
Maxwell Shoe Company, Inc. designs and makes women’s footwear under its own brand names and also makes private label shoes for other companies. Originally a wholesaler of discontinued shoes, the company introduced the Mootsies Tootsies line in 1979 and later made deals to license the Sam & Libby, Jones New York, and Dockers Khakis brand names. The company went public in 1994, at which time Maxwell Shoe still remained under the control of founder Maxwell Blum and his family. In 1997, a year before the Blums sold their remaining shares of Maxwell Shoe, the company branched out into retail via a joint venture with The Butler Group, Inc.
Maxwell Shoe Company was founded in 1949, when 24-year-old Maxwell Blum decided to go into the footwear wholesaling business. The decorated World War II veteran, who had recently graduated from Boston University School of Management, started the company in a small warehouse in Boston. Blum purchased discontinued or slow-moving lines of women’s shoes from manufacturers and wholesaled them to retailers at low prices. The business proved to be a success, and Maxwell Shoe grew gradually during the 1950s and 1960s, becoming officially incorporated in 1976.
In 1979, the year that Blum’s oldest daughter Betty Ann joined the company, Maxwell introduced its first line of shoes. Drawing inspiration from Maxwell Blum’s nickname of “Mutzie,” the reasonably priced young women’s shoes were given the moniker “Mootsies Tootsies.” The new line was a moderate success, but the company’s main business continued to be wholesaling discontinued shoes.
In April 1987 Maxwell hired Sperry Topsider President Mark Cocozza to head the Mootsies Tootsies division. Under Cocozza the company began to focus more seriously on sales of its own product line. Maxwell soon introduced infant’s and children’s shoes for girls called “Little Miss Mootsies,” changing the name to “Mootsies Kids” when boys’ footwear was added. Offerings initially included casual and party shoes and soon expanded to include oxfords, boat shoes, winter boots, and sandals. The footwear was packaged in eye-catching boxes that featured bold cartoonlike pictures. The company decided against marketing athletic shoes, which had become the leading sales category for the industry, though it had tested athletic designs. Maxwell chose instead to emphasize Mootsies Tootsies’ low to moderate price because there were few children’s lines in that range. The shoes were distributed to children’s shoe stores as well as department and specialty stores.
The company began to manufacture shoes under retail chains’ private label names in 1992. This required limited outlay of funds, as Maxwell merely labeled its existing Mootsies Tootsies designs with the name of the company that was marketing the shoes. The new venture was successful and grew in size over the next few years. The company’s shoes were being manufactured in Brazil and China, though designed in Massachusetts.
In 1993 Maxwell made its first move to sell upscale women’s shoes. Assembling a sample line of 200 shoes, complete with boxes and even mockup advertisements and sock labels, the company wowed women’s clothing maker Jones Apparel Group Inc. and was granted a license to manufacture footwear under the Jones New York name. Design of the shoes was handled by Maxwell, but they were intended to accessorize well with clothing manufactured by Jones. Shoes in this line were priced in the $65-$80 range, as opposed to $25-$40 for Mootsies Tootsies. Maxwell went to Italy for the Jones shoes’ manufacturing, citing that country’s reputation for high quality, fashionable women’s footwear. Annual sales of $79 million were recorded for 1993, with net income of $6.7 million. This year also saw Mark Cocozza assume the role of Maxwell Shoe Company president.
Initial Public Stock Offering in 1994
In 1994 Maxwell Shoe made an initial offering of common stock on the NASDAQ exchange, though the Blum family continued to control the company’s voting stock. The sale brought in $28.5 million. The company had been growing rapidly since the late 1980s, with five continuous years of 30 percent revenue growth. The year 1994 also saw Maxwell extend its Jones New York shoe line, introducing the Jones New York Sport brand. The company’s growth spurt continued during the year, with revenue jumping to $100.9 million. Maxwell boasted a backlog of orders worth more than $40 million at the end of the fiscal year.
In early 1995 several suitors approached Maxwell about purchasing the company, but talks broke off in each case. The retail shoe market slowed down during the year, and the company’s sales were nearly even with the previous year, at $101.9 million. Profits declined to $5.8 million.
August 1996 saw Maxwell add a second outside brand name to its stable, purchasing the rights to the trademarks of Sam & Libby Inc. for $5.5 million. San Francisco-based Sam & Libby had seen better days, but Maxwell believed it could reinvigorate the brand, which marketed shoes under several names including Just Libby and New Nineties. Maxwell saw Sam & Libby finding its niche with young professional women who were seeking fashionable footwear, with the Jones New York brand positioned to appeal to older, more established professionals. Sam & Libby shoes were priced at a point midway between Mootsies Tootsies and Jones, retailing at $35 to $50 per pair.
Joint Retail Venture: 1997
In April 1997 the company announced its first move into retail, with plans to form a joint venture with The Butler Group, Inc. called SLJ Retail LLC. Butler owned a chain of mostly mall-based shoe stores called Dolcis, which had shrunk from a peak of more than 500 stores to less than 130. The outlets were spread out over 28 states. Dolcis stores had previously sold their own house brand of shoes, but that segment of the business had been in decline and analysts saw it as a good move for the company to change its focus to nationally advertised footwear. The stores were converted by December, with 93 bearing the Sam & Libby name and 27 converted into Jones New York outlets. Maxwell owned 49 percent of SLJ, and had an option to expand its stake to 55 percent if the venture was a success. The retail operation was costing the company very little, as Butler was funding the store makeovers. In 1997 Maxwell also licensed the name J.G. Hook to give its private label customers the choice of a brand name other than their own. The company’s revenues began to climb again following a period of shoe retailer bankruptcies and consolidations. Revenues for fiscal 1997 hit $134 million with net income back up to $9 million.
In early 1998 founder Maxwell Blum stepped down as CEO and board chairman, staying in touch with the company he had founded as a member of its board. The Blum family sold five million shares of company stock in a secondary offering. Daughters Betty Ann, a co-designer for Sam & Libby, and Marjorie, a sales representative for the New England region, also retired. Both gave up their roles as board members and executive officers of the company as well. Mark Cocozza took on Maxwell Blum’s leadership responsibilities in addition to his duties as president.
In August 1998, Maxwell opened a new 220,000-square-foot distribution center in Brockton, Massachusetts. At that time shoes were being made in China, Brazil, Italy, and Spain. The year also saw the company roll out a $2 million national advertising campaign for the Sam & Libby shoe line.
Late in 1998 SLJ Retail announced that it was closing nearly half of the former Dolcis stores, which had already declined in number to 99. The company attributed this in part to locations that were not appropriate for the lines they were selling. The continuing tough retail environment for shoes was also a major factor. The Burton Group’s share of the joint venture increased, while Maxwell’s ownership dropped to 35 percent. Meanwhile, Maxwell Shoe had made a deal with Levi-Strauss & Co. to market women’s shoes under that company’s Dockers Khakis brand name. Dockers were to be a casual, moderately priced line of footwear fitting in between the Sam & Libby and Jones New York price brackets. The new shoes were given their debut in New York in December at the national Shoe Expo.
Sales for fiscal 1998 had reached a new peak of $166 million. The Mootsies Tootsies line accounted for nearly half of the total, with Jones New York making up a quarter, private label shoes 13 percent, and Sam & Libby ten percent. Discontinued shoe lines, the company’s bread and butter for the first 30 years of its existence, now amounted to only three percent of its revenues. The company’s largest customer was discounter TJX Companies, which accounted for about 20 percent of sales. Maxwell had an order backlog of $68 million at the end of the year.
The Company’s financial success has been largely a result of its ability to design, develop and market footwear with contemporary styles at affordable prices.
In July 1999 Maxwell sold its license to market the Jones New York brand name back to the Jones Apparel Group, which had purchased shoe maker The Nine West Group, Inc. The deal netted Maxwell $25 million in cash. Though it would bring a reduction in revenue, the company chose to look at the bright side, announcing that it planned to use the infusion of cash to acquire more new brands.
Celebrating a half-century in business, the Maxwell Shoe Company had come a long way from its start as a wholesaler of discontinued shoes. With the growing success of its Sam & Libby and Mootsies Tootsies lines, as well as its private label business, the company was proving to be consistently profitable. Despite the loss of the Jones New York brand name and the disappointing results of the joint retail venture, Maxwell was positioned to grow with its newly acquired Dockers Khakis line and was also actively seeking additional brands to add to its portfolio.
The Sprague Co.; Maxwell Retail, Inc.
Berry, Kathleen M., “The New America: Maxwell Shoe Inc.—Old-Line Shoe Salesman Sings a New Tune,” Investor’s Business Daily, October 20, 1994, p. A6.
Brammer, Rhonda, “Sizing Up Small Caps—Best Foot Forward,” Barron’s, September 28, 1998, p. 28.
“CEO Interview: Maxwell Shoe Company Inc.,” Wall Street Transcript, December 12, 1994.
“Maxwell, Loaded for Bear, Hunts for New Acquisition,” Footwear News, September 23, 1996, p. 23.
“Maxwell’s Cocozza Takes Baton, Spells Out Growth Opportunities,” Footwear News, May 25, 1998, p. 7.
“Maxwell Slashes 46 Stores, But Gets More Cash,” Footwear News, November 16, 1998, p. 2.
Merritt, Jennifer, “Hyde Park Footwear Company Kicks into High Gear,” Boston Business Journal, September 11, 1998, p. 1.
“Sam & Libby, Jones Hit the Floor Running,” Footwear News, April 21, 1997, p. 1.
“Sam & Libby Slates 20 Units; Operation’s Heart in San Francisco,” Footwear News, February 9, 1998, p. 10.
Smith, Samantha, “Maxwell Shoe Co. Opens 115 Stores Across the Country,” Boston Business Journal, October 31, 1997, p. 14.
Sohng, Laurie, “Mootsies Kids Grow with Cocozza,” Footwear News, January 15, 1990, p. 33.