Esprit de Corp.

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Esprit de Corp.

also known as: esprit founded: 1968

Contact Information:

headquarters: 900 minnesota st. san francisco, ca 94107 phone: (415)648-6900 fax: (415)550-3951 toll free: (800)4-esprit url: http://www.esprit.com

OVERVIEW

In the rag trade, as some call the clothing business, today's hot look can be tomorrow's thrift store remnant. No company knows that better than Esprit de Corp., which, in its tumultuous history, has had to reinvent itself time and again in order to stay current and keep its products in America's closets. Esprit designs, produces, and distributes sportswear, children's wear, shoes, accessories, and eyewear. It sells its products through department stores and mail-order catalogs in the United States and 350 of its own retail stores in 44 countries. The company has recently launched an effort to reposition its line of clothing to appeal to more mature customers.

COMPANY FINANCES

Esprit's 1997 sales reached $350 million, which was a 16.7 percent increase over 1996 sales. Of this, 65.2 percent was derived from retail sales and 33.5 percent from wholesale sales.

ANALYSTS' OPINIONS

In a 1997 WWD article, Michael Steinberg, chairman of Macy's West, claimed that Esprit's fortunes had been turned around under chairman Jay Margolis' direction. "The strength of the company is that they have a very solid leader and experienced management . . . . The product looks better and is selling at retail." Steinberg had initially placed a new line of Esprit's sportswear in 12 Macy's stores, then rolled it out to 18, then expanded it into 30 stores. Said Steinberg, "We are rolling them out more aggressively as their performance improves . . . . It is a slow rebuilding process, and we weren't going to start them off in 60 or 70 stores until they proved themselves, and they are proving themselves. . . . They have a better understanding of who the customer is and how it translates into the Nineties."

In a 1996 poll conducted by Fairchild Publications, publisher of WWD, which is the leading apparel trade newspaper in the United States, Esprit was named as the twenty-eighth most-recognized brand in the United States.

HISTORY

Esprit de Corp. was an outgrowth of Plain Jane, a company that was founded by Susie Tompkins and her friend Jane Tise. Doug Tompkins, then Susie's husband, joined that company in 1968 after he sold North Face, his skiing and climbing apparel and equipment company. Tise and the Tompkinses parted ways in the mid-1970s and the Tompkinses became sole owners of the company. In 1978 the name of the company was changed from Plain Jane to Esprit de Corp.

For its first several years, the line was especially popular with teenagers. Fashions reflected their tastes with easy-to-wear casual clothes in durable fabrics and engaging colors. Eventually, Esprit clothing would represent both youthful style and career-minded fashion—that is, playful looks that can be worn in more "adult" settings such as the casual office.

Shopping, of course, has been the prime way to gain access to Esprit fashions. Ironically, retailing was nearly the downfall of the Esprit de Corp. organization. In the early 1980s the company was a leading sportswear manufacturer, selling in all the major department stores and boutiques. But, as Working Woman writer Ellie McGrath described it, "The company's decision [in 1981] to create boutiques within major department stores . . . was akin to booking passage on the Titanic. Retail giants like Macy's and Bloomingdale's are struggling under the weight of heavy debt and poor sales. Meanwhile, Esprit faced big-time competition from the Gap and the Limited, which invested in freestanding stores and now dominate the very niche that Esprit pioneered."

The rejuvenation of Esprit came about in spite of—or perhaps because of—the turmoil occurring in Tompkins' personal life. According to a 1990 article in WWD, "Conflicts between [Doug and Susie Tompkins], in addition to an uncertain retail climate and lackluster junior market, prevented Esprit from becoming domestically the billion-dollar company that many observers thought it could be. Although worldwide sales reportedly topped $1 billion, much of that was from international sales, which, except for southern Europe, is owned and operated by a series of partnerships, in which the Tompkinses have various stakes." The company first suffered a loss in 1986. About this time, the Tompkinses became estranged, and the company was torn by divergent views as to its fashion focus.

In the spring of 1988 a new board of directors was formed to replace the Tompkinses and another board member. Mr. Tompkins was demoted from chief executive officer to chief operating officer. Susie Tompkins was demoted from creative director to consultant. She even resigned for a time and then later returned to the company.

Power struggles for ownership of the company continued and, in 1989, Doug Tompkins was granted an exclusive, 120-day option to purchase the 50 percent of Esprit de Corp. owned by Susie Tompkins. Additional problems ensued because the company, valued at $380 million, was said to have been valued too low. Finally, in December 1989, the company was put up for sale.

In June 1990, the Tompkins' joint ownership of Esprit de Corp. was dissolved, and the two-year struggle over leadership of Esprit ended when the company announced that Susie Tompkins was heading an investment group to buy out Doug Tompkins. Susie Tompkins also lent $10 million to the company to create an employee stock ownership plan, which she said was a gesture to thank loyal employees.

FAST FACTS: About Esprit de Corp.

Ownership: Esprit de Corp. is a privately held company whose controlling partners include Oaktree Capital Management, Cerberus Partners, and Jay Margolis.

Officers: Jay Margolis, Chmn. & CEO; Alison May, COO & CFO

Employees: 5,000 (about 1,350 in the United States)

Chief Competitors: Key competitors include: Tommy Hilfiger; Gap; The Limited; Calvin Klein; and Guess.

The company's U.S. revenues dropped from $400 million in 1990 to $250 million in 1996. Jay Margolis, formerly an executive with such companies as Liz Clai-borne and Tommy Hilfiger, joined Esprit as its chairman and chief executive officer. Later in 1996 it was decided to restructure Esprit. Oaktree Capital Management and Cerberus Partners, as well as Margolis, became controlling shareholders in exchange for equity in the company. Soon after, Susie and Doug Tompkins sold their remaining interests in Esprit's worldwide operations to Michael Ying, Esprit's partner in Hong Kong.

STRATEGY

In an effort to revive its fortunes, the company announced in 1997 that it would open 10 new Esprit stores and 100 new in-store shops within department stores. As of early 1997, Esprit had approximately 90 of these so-called "shop-in-shops;" in 1996 they had only 10 such stores.

Other plans included the shifting of the customer demographic to attract the college and career markets in addition to their mainstay market, junior girls. The company aimed to reposition its products to appeal to women from 17 to 30 years of age and older by showing more attention to detail, using higher quality fabrics, and bringing closer collaboration with Esprit's European and Asian operations. The hoped-for result was to develop attractive new collections that would "possess a modern and sophisticated, yet distinctly fun Esprit feel."

Jay Margolis, in a 1997 WWD article, said, "The history of Esprit is great patterns, colors and little sundresses and T-shirts, and we went there for spring. It is back to looking like Esprit. . . . With Esprit U.S., we think the void is somewhere between the Gap and Banana Republic. . . . Ours will be more contemporary than Gap, and older, but not as old as Banana Republic." Under Margolis' leadership, sales rebounded in 1997 to $350 million, a 16.7 percent increase over 1996's disappointing results.

One of Esprit's most innovative sales tactics has been its mail order catalog. Launched in the 1980s, the catalog was hailed as ground breaking and was subsequently regarded as a predecessor of the lifestyle catalogs of the 1990s. The catalog went out of print in the late 1980s but was re-launched by Margolis in 1997. The new catalog, according to an Esprit press release, would promote "Esprit's renewed image and promises innovative approaches to graphic design and photography." Margolis viewed the catalog as "one facet of a comprehensive plan to revitalize Esprit's image, clothing design and retail presence, while targeting customers' contemporary apparel needs."

CORPORATE CITIZENSHIP

In the spring of 1992, the company initiated the Ecollection line of clothing. The line is notable for being produced in the most environmentally friendly way possible. From organically grown cotton, to recycled wool, to biodegradable enzyme washes and metal-free dyes, this line of casual sportswear supported the more environmentally conscious lifestyle of the 1990s. Even the accessories were earth-friendly and socially conscious; reconstituted glass for jewelry, hand painted buttons, and recycled sea shells were part of Esprit's Ecollection.

Esprit's advertising also has a history of social consciousness. A full-page installment was placed in its 1987 catalog titled "AIDS: A Global Epidemic." The text advised consumers to practice safe sex, contained current facts that served to dispel rumors about AIDS, and provided a national hotline.

In 1997 Esprit de Corp. was placed on the U.S. Department of Labor's "Trendsetter List," which is a roster of companies that meet criteria that prevent retailers from purchasing goods made in "sweatshop" conditions. According to WWD, "To get on the list, an apparel maker or retailer must demonstrate a commitment to labor laws and cooperate with those who enforce the laws. List members must also educate contractors about labor laws and routinely inspect these suppliers for compliance."

CHRONOLOGY: Key Dates for Esprit de Corp.

1968:: Plain Jane dress company is founded by Susie Tompkins and Jane Tise; Doug Tompkins, Susie's husband, joins the company as a partner
1976:: The Tompkinses become sole owners of Plain Jane
1978:: Plain Jane becomes Esprit de Corp.
1986:: Corrado Federico becomes the company's new president; the Tompkinses remain with the company as board members
1988:: A new board of directors is hired to replace the Tompkinses
1997:: Esprit is placed on the U.S. Department of Labor's "Trendsetter List"

In this same WWD article, Kathleen Anderson, vice president of administration at Esprit de Corp., said, "It just reflects what we've been doing for a long time. Esprit has been conscious of these issues since the early Nineties. . . . One new addition to Esprit's anti-sweat-shop program is the posting of posters at contractors' [facilities] with toll-free numbers that workers can call with complaints. The company already routinely inspects its contractors and has an outside company also conducting inspections."

GLOBAL PRESENCE

In 1997 the Esprit brand was sold in more than 350 free-standing Esprit stores in 44 countries around the world. The company maintained creative offices in Hong Kong, Dusseldorf, and San Francisco. The international arm of the company, Esprit International, functions as a separate entity and employs nearly 5,000 people worldwide. It posted sales of approximately $1.6 billion in 1997. Esprit de Corp. owns about 35 percent of Esprit International.

SOURCES OF INFORMATION

Bibliography

carlsen, clifford. "esprit dressed to thrill." san francisco business times, 24 january 1997.

——. "esprit told to sell fast or lose company." san francisco business times, 5 january 1996.

ellis, kristi. "esprit de corp.'s marching orders." wwd, 9 january 1997.

"esprit de corp." hoover's online. may 1998. available at http://www.hoovers.com.

esprit holdings ltd. annual report 1996/97. san francisco, ca: esprit de corp., 1997.

"esprit relaunches its revolutionary catalog: san francisco-based clothing manufacturer esprit de corp. will reinstate its mail order division for fall '97." esprit home page. may 1998. available at http://www.esprit.com/new/pr/pr970710_right.html.

marlow, michael. "susie buys out doug, prepares to lift esprit." wwd, 4 june 1990.

mcgrath, ellie. "esprit, the sequel." working woman, september 1991.

ramey, joanna. "labor adds to trendsetter list." wwd, 26 march 1997.

white, constance c. r. "susie tompkins: crossing a new bridge." women's wear daily, 10 march 1993.