Ellen Tracy, Inc. Business Information, Profile, and History

Company Perspectives:

What started with a shirt? Ellen Tracy did.

History of Ellen Tracy, Inc.

Ellen Tracy, Inc., which originally made blouses, is now a leading maker of bridge apparel--clothing that falls in between high-price designer lines and lower-priced labels. Located on Manhattan's Seventh Avenue, Ellen Tracy is especially adept at producing quality garments suitable for the professional woman, workhorse items that complement a wardrobe for many years despite changing styles. Its Company Ellen Tracy label produces casual clothing aimed at a younger market. In addition, Ellen Tracy has licensed agreements for shoes, hosiery, belts, eyewear, and a home collection. The company was acquired in 2002 by Liz Claiborne, Inc. and became a wholly owned subsidiary of that company.

Launching the Company in 1949

Herbert Gallen established Ellen Tracy in 1949. He grew up in Patterson, New Jersey, the grandson of a silk mill owner and son of a fabric manufacturer. Ironically, he never planned to become involved in the apparel industry. After graduating from high school, he went to work for an uncle who owned more than two-dozen auto supply stores. Gallen ran his own store before serving a stint in the army, and was still involved in the auto parts business during World War II. Because of wartime restrictions, fabric became difficult to acquire and he recognized a chance to take advantage of his Patterson connections to move into the apparel industry. With fabric procured from a friend, he produced several sample blouses, which he then took to the major department stores located on Manhattan's 34th Street. He visited Franklin Simon and immediately sold every blouse he had, a successful launch of a new business. For the next few years he produced plain-looking blouses, using his wife's name, Betty Barr, for a label. Along with a sales manager he opened a showroom on Third Avenue that also served as a warehouse and shipping point for the blouses he had produced in Manhattan. In 1949, with financial backing from a partner named Mike Brawer, Gallen formed a new company, which he called Ellen Tracy, a name he made up in the belief that a women's line should feature a woman's name.

Ellen Tracy blouses sold $28.50 to $30 a dozen at wholesale to such customers as Oppenheim Collins, B. Altman, and Macy's. As the business began to grow, Gallen hired more people, moved to a larger showroom, and opened a warehouse in Hackensack, New Jersey. Manhattan production also was supplemented by contractors in Pennsylvania. It was not until the early 1960s that the company began to do some manufacturing overseas. Gallen was very much a hands-on owner, involved in all aspects of the business, earning a reputation as a perfectionist. He hired a designer to produce more attractive garments, and over the course of a dozen years went through several designers before hiring a recent college graduate named Linda Allard who over the next 40 years would be instrumental in helping him build Ellen Tracy into an important bridge label.

Allard grew up on a farm in Doylestown, Ohio, her father a civil engineer and her mother a first grade teacher and 4-H Club adviser. By age ten she was designing outfits for her paper dolls. Along with her two sisters she learned to sew from their mother, who refused to accept anything less than excellent work. Years later Allard recalled, "If I sewed a seam and it wasn't exactly to her liking, I had to rip it out until it was perfect in her eyes." As a teenager she began to make her own clothes and although she knew she wanted to involve her life in some way with clothing she was simply unaware that fashion school was an option. Instead she went to Kent State University after winning a fine arts scholarship. There she was able to take a few pattern-making courses, but her art curriculum was essentially geared toward producing school teachers, which held no appeal for Allard. For a senior-year project she held her first fashion show and assembled a portfolio of photographs, revealing both a drive to succeed as well as ingenuity. To find models she approached friends, offering to make an outfit they could keep if they participated in the show, not to mention bought the fabric. She also received a glimpse of New York after winning a month-long internship with Mademoiselle in a guest editor contest.

After graduating from Kent State, with $200 from her parents in her purse, Allard took the Greyhound bus to New York, checked into a women's hotel, and began to search for a job in the fashion industry. She assumed it would be a short-term career, followed by marriage and a life devoted to raising a family. With no contacts and little knowledge, she naively went door-to-door in Manhattan's garment district asking if anyone was in need of an assistant designer. No one was interested, including Ellen Tracy at first. After three weeks, with her money all but exhausted and facing the prospect of returning home, she was asked to return to Ellen Tracy to interview with Gallen. His designer at the time was Dorothy Avazian, who according to Gallen had recently angered him: "She showed me things I didn't like, and the sales manager said there was a girl who was here earlier in the week, and we called her in." Allard's memory of their meeting was vivid: "It was 2 p.m. on September 27, 1962, a fateful day. I sat across from Mr. Gallen and it happened to be a really lousy, New York, rainy, drenched day. I think he felt I was desperate for a job. He looked at my portfolio and asked, 'How much money would you like to make?' Well, I hadn't even thought about that. So I said, 'I would like to make $50 a week.' He said, 'Sorry, but if you'll take $60, you can have a job.'"

Linda Allard Becoming Head Designer in 1964

Allard became Avazian's assistant and learned the technical side of the garment industry before being allowed to try her hand at designing. After Avazian quit in 1964, Gallen asked Allard if she was interested in taking over the collection, and despite a fear of failure she accepted, becoming director of design. Ellen Tracy at this point was still devoted to the business of producing quality blouses, as well as shirtwaist dresses. It was also a time when women's work attire was a suit, hat, gloves, and high heels, but the 1960s, a decade that produced a wide range of social changes, would soon see a more youthful, casual approach to fashion, one that a young designer like Linda Allard would be well able to exploit. The first move into sportswear for Ellen Tracy was a white ottoman peacoat with brass buttons and sailor pants that Allard designed. The blazer was a major departure for the label, as well as being expensive, yet it sold by the thousands and established Ellen Tracy in the junior sportswear sector.

The maturation of the Ellen Tracy label reflected both Allard's life and a changing society. As an increasing number of its junior customers joined the workforce, and in the 1970s more women began to enter the ranks of management, Allard started to design suitable clothing, which in many ways was the kind of apparel she, occupying a similar place in the business world, wanted to wear. She and Ellen Tracy grew along with their customers, creating a strong bond. She also learned a practical lesson from Gallen: "He said we were in business to make money and not to make a press statement." It was advice she followed; for the runway she might cut the clothes in one way, but they were always shipped in a more wearable, modest version. The clothes were to serve the customer, not the ego of the designer. To keep in touch with customers and maintain relevance of the line, both she and Gallen made periodic trips around the country to visit stores that carried the Ellen Tracy line and receive direct feedback. As the company's manufacturing moved overseas, Gallen and Allard also made regular extended trips to Hong Kong. Eventually Ellen Tracy also turned to China, South Korea, and other parts of the world to produce their garments, without losing sight of maintaining high quality.

In 1979 Ellen Tracy moved beyond junior sportswear, becoming involved in the designer-sportswear category. In 1983 the company added a petite division, and a year later, with designer names becoming an important aspect of marketing apparel, Allard's name was added to the Ellen Tracy label. It was also around this time that the bridge category began to emerge in the fashion industry and Ellen Tracy found a natural niche within it. The company added a dress division in 1985, then in 1986 made its first attempt at licensing the Ellen Tracy name, a deal for scarves with Collection XIIX Ltd. As would be the case with subsequent licensing arrangements, Allard provided a major influence over accessories bearing the Ellen Tracy name, making sure they complemented the apparel and exercising final approval. During this period the label was supported by advertising campaigns that in 1983 featured model Carol Alt and in 1987 a young Cindy Crawford.

1991 Launch of Company Ellen Tracy

With its core customer growing older, Ellen Tracy in 1991 launched a new line, Company Ellen Tracy, to appeal to a younger market and offer casual weekend attire rather than more formal, business clothing. Although much smaller in scale than the original line, it proved popular with customers. The success of Company also led to the addition of plus sizes in spring 1993. In 1992 Ellen Tracy made an attempt to enter the fragrance business, signing a licensing agreement with Revlon. Despite being accepted by customers, the perfume was soon discontinued when Revlon elected to focus on the mass market and eliminated prestige product lines. Ellen Tracy grew internally at a steady pace, yet Gallen never showed any interest in acquisitions. The label was also very much a domestic business, with attempts to penetrate the European markets never successful. Nonetheless, Ellen Tracy topped $200 million in annual revenues during the 1990s. It was a solid performer in stores, had a loyal customer base, and attracted a number of suitors who believed that the company held tremendous promise. Gallen turned down several offers, but as he approached 80 years of age he began to take bids more seriously.

In 1995 rumors circulated that Ellen Tracy would soon be sold and by October a deal was signed, with Boston-based investment firm, Bain Capital Group, agreeing to pay an undisclosed amount. As part of the transaction, executive Jay Margolis was to be brought in as chief operating officer with the expectation of ultimately replacing Gallen. Margolis was well respected in the fashion industry, having previously served as vice-chairman of Liz Claiborne as well as vice-chairman and president of Tommy Hilfiger. Gallen told the press, however, that Margolis would have to prove himself before taking over. Several weeks later Margolis opted to become chairman and CEO of Esprit de Corp, a struggling junior sportswear company. The sale of Ellen Tracy to Bain Capital was subsequently called off, although both parties maintained that Margolis's change of heart played no role in the decision, instead calling it a "mutual decision."

Gallen and Allard continued to run Ellen Tracy, with the elderly majority owner showing no signs of relinquishing power. In 1996 the company awarded a three-year license for footwear to Intershoe Inc. for both of its major lines. Gallen chose Intershoe as a partner because of its international reach, which supported his goal of growing Ellen Tracy's international business so that within five years it would match domestic sales. Later in the year the company also signed a licensing agreement with Roma, a Norman M. Morris Corp. division, to produce belts under the Ellen Tracy labels. It took another stab at fragrances in 1998, licensing the Ellen Tracy label to Cosmopolitan Cosmetics, a well-respected company that also made and marketed cosmetics and fragrances for such major names as Gucci, Rochas, Anna Sui, and Charles Jourdan. When the fragrance premiered in March 2000 it was an immediate hit with consumers, prompting the launch of ancillary products.

Also in 1998 Ellen Tracy signed licensing deals for eyewear with Viva International Group and outerwear with Listeff Fashions. All told, 1998 proved to be a highly successful year for Ellen Tracy, due in large part to the introduction of the Ellen Tracy Club, which rewarded customers for paying full price for its garments: members received a $100 gift certificate toward regular-priced apparel for every $1,000 spent. In this way, Ellen Tracy was able to overcome the bridge category's habit of attracting customers through markdowns, as well as build brand loyalty. A newsletter sent to some 20,000 club members also reinforced the bond with customers, sharing developments at Ellen Tracy as well as giving out such prizes as free New York shopping trips.

A widower for several years, Gallen at the age of 84 in March 2000 married Allard, who at the age of 59 had never married. She continued to use her name professionally and there were no apparent changes in how Ellen Tracy operated, the two enjoying a long-term and well-established working relationship. They recognized that the lines had blurred between their two major brands and took steps to tie the two collections together. In many ways it was simply a recognition that Ellen Tracy customers were already mixing and matching apparel between the two lines. A more significant change took place in September 2002 when Gallen finally sold the business to Liz Claiborne for $170 million in cash and the assumption of $10 million in debt, a move that not only allowed him to plan his estate but also ensure that Ellen Tracy would outlive him. Moreover, Claiborne had the financial resources to take Ellen Tracy to another level. Gallen stayed on as chairman and continued to exert a major influence on the business, while Allard retained her position as Design Director.

Brought in as president to provide day-to-day management of the subsidiary was Glenn McMahon, former president of Kenneth Cole women's sportswear at Liz Claiborne, which now boasted some two dozen brands and annual revenues of nearly $3.5 billion. With the backing of its corporate parent, Ellen Tracy was poised for significant growth, with plans for more licensing agreements (jewelry and handbags being likely candidates), international expansion, and the possible opening of Ellen Tracy specialty stores in key markets.

Principal Competitors: Ann Taylor; Bernard Chaus; Jones Apparel.

Chronology

• Key Dates:
• 1949: Herbert Gallen establishes Ellen Tracy, Inc. to manufacture blouses.
• 1964: Linda Allard becomes design director and moves the business into junior sportswear.
• 1984: Allard's name is added to the label.
• 1991: Company Ellen Tracy label is added.
• 2000: Gallen and Allard marry.
• 2002: Ellen Tracy is sold to Liz Claiborne, Inc.