Oshkosh B'Gosh, Inc. Business Information, Profile, and History

Company Perspectives:

At OshKosh B'Gosh, we have a clear vision. We've created a global, leading brand of products for children ages newborn to 10. In our constantly changing competitive environment, we continue to develop and strengthen our retail partnerships, leverage our existing brand franchise, and create fashionable, contemporary, high quality products—the products we're known for throughout the world. After being in business for more than a century, much has changed at our company, but our commitment to quality and innovation for fashion have remained strong. And that guarantees that OshKosh is, and will be, WHAT THE FUTURE WEARS.

History of Osh Kosh B'Gosh, Inc.

OshKosh B'Gosh, Inc. is a major marketer and manufacturer of children's wear and youth wear, best known for its trademark bib overalls. Most of the manufacturing of OshKosh goods is conducted overseas at company-owned facilities and through third-party contractors, although the company continues to operate two plants in Kentucky. The company's products are marketed through about 5,800 retail stores in the United States (mainly middle-market and upper-market department stores and specialty stores) and through overseas retailers as well. OshKosh B'Gosh also operates more than 130 domestic retail stores, most of which are factory outlets, and sells its products online through the company web site.

Formative Years: From Workwear to Children's Wear

OshKosh B'Gosh was founded in 1895 as Grove Manufacturing Company, a maker of "hickory-striped" bib overalls worn by railroad workers and farmers. Based in Oshkosh, Wisconsin, a town of 50,000 on the Fox River, the company went through several name changes before assuming its unlikely current name in 1937. Its name was changed in 1897 to Oshkosh Clothing Manufacturing Company, and to Oshkosh Overall Company in 1911, the same year that William L. Pollock took over as general manager. Company legend attributes the current name to Pollock, who heard the phrase in a vaudeville skit while he was on a New York buying trip. The company started labeling its bibs "OshKosh B'Gosh" as early as 1911.

The company has been run by one family since Pollock retired in 1934. That year, Earl W. Wyman bought the company with partner Samuel Pickard and over the next few years they rounded out the company's line with painter's pants, work shirts, and denim jackets. By that time, the company had garnered a reputation for manufacturing durable, dependable products. During World War II and the Korean War, OshKosh B'Gosh produced garments for the military, including pants, jungle suits, and underwear. Wyman remained chairman of the board until he died in 1978. Wyman's son-in law, Charles F. Hyde, ran the company as the CEO from 1966 until 1992, when his son, Douglas W. Hyde, took over as CEO. As of 2001, members of the Wyman and Hyde families controlled more than 85 percent of the company's voting shares.

In the early 1960s, after decades of producing heavy-duty utility clothing sold in men's and boys' clothing outlets around the Midwest, the company stumbled on a discovery. Although it had always made pint-sized bibs as a novelty item for boys to wear in order to look like their working fathers, they were not viewed as a serious commodity. That feeling changed in 1962 when Miles Kimball Co., an OshKosh mail-order house, included a pair of kids' bibs in its catalog and received more than 10,000 requests. The company, according to Forbes, was "on the verge of discontinuing the small-fry line, but thought better of doing so when it saw the catalog response." Then President Charles Hyde decided to see if there was an additional market to be tapped, and, following Kimball's lead, sent direct mail solicitations to children's stores around the country. Among the seven items included in the solicitation were overalls, coveralls, painter's pants, and caps.

The experiment was a success. The line made its big national break in 1971, according to Working Woman, when Bloomingdale's in New York asked to pick up the products. The chain's upscale competitors, including Lord and Taylor, Saks Fifth Avenue, and Nordstrom's, soon followed suit. Despite this initial success, however, OshKosh did not readily turn its attention from workwear, even though that market was beginning a steady decline. As the major retail chains came like so many suitors to the company's door, offering to pick up the line and requesting a greater range of styles, Charles Hyde was cautious of what could have been a passing fad. As orders for the children's clothes increased throughout the decade, however, the company realized that workwear was a shrinking market and children's overalls would be the company's new source of growth.

Rapid Growth in the Late 1970s Through Mid-1980s

At the end of the decade, Hyde increased the company's sales force. At the suggestion of then Vice-President Douglas Hyde, the company added a little style into its product by dying the overalls bright primary colors and introducing patterns and stripes. As production rose, Charles Hyde made sure that quality—and the company's good name—did not suffer. Through the 1970s, the garments continued to be cut by hand in Oshkosh, Wisconsin.

The year 1979 was a turning point in several respects. Children's clothing then constituted 16 percent of the company's total clothing sales, or $5 million. To accommodate those sales, the company added two new production plants, paid for entirely out of cash flow. In order to raise its profile, the company also launched a national marketing campaign, enlisting the help of Milwaukee advertising agency Frankenberry, Laughlin & Constable. The agency advised them to adopt the tag, "The Genuine Article Since 1895," on a blue and yellow patch that would adorn all of the company's products. A few years later, the company took that advice a step further by calling its new group of outlet stores—the first of which opened in West Bend, Wisconsin, in 1981—"The Genuine Article" as well. Through the early to mid-1980s, the company's sales grew exponentially, as the mini-baby boom created a demand for children's products. Whereas children's products accounted for 16 percent of the company's sales in 1979, that percentage better described workwear, the company's former mainstay, by 1988.

In 1981 the company opened a showroom on Seventh Avenue in New York City, the nerve center of the garment business. That same year, OshKosh began to diversify its product offerings, adding infant wear and knit separates. Over the years, the company expanded its line to include newborn to children's size 14 clothing, and added dresses, activewear, and swimwear. In addition, the company signed licensing agreements with producers of accessories and clothing items, including hosiery, shoes, hats, sleepwear, outerwear, and woven and knit accessories. In 1985 the company introduced a line of maternity wear, including but not limited to bib overalls, which, the company learned, pregnant women had been buying for years in men's sizes.

Sales in the United States were increasing, but the company began to devote more resources to sales in the southern and southwestern United States. Prior to that, most of their sales were concentrated in the Midwest and along the two coasts. The company entered the global marketplace in 1985 by incorporating OshKosh B'Gosh International Sales as its first wholly owned subsidiary. Through 1985 and 1986, international sales still accounted for only about 1 percent of the company's total, but the OshKosh name was gaining recognition. In 1986 U.S. News and World Report noted that the company was making a splash in London's upscale boutiques. Among the company's satisfied customers were Britain's royal infants, Princes Harry and William, the children of the Prince and Princess of Wales.

Late 1980s and Early 1990s Struggles

In early 1987, Charles Hyde wrote to the company's shareholders that OshKosh was "monitoring very closely major changes taking place in the retail marketplace, changes which seem to be accelerating. Mergers, acquisitions and leveraged buyouts have changed retailers' sourcing strategies and presented us with challenges that we are positioning our marketing forces to meet. In the confused and competitive retail scene—with no consensus on promoting branded or private label apparel, with retailers doing manufacturing and manufacturers doing retailing—the long-term outlook must remain unclear." Hyde's comments were prescient, for in the following year, the company itself became a victim both of this uncertainty and of its own runaway growth: from 1977 to 1987, sales increased almost ninefold, to $226 million.

By the late 1980s, according to Forbes, "the company was sweating as it struggled to keep up with the growing demands of its retailers and customers. New stores such as Kids 'R' Us, started by Toys 'R' Us in 1984, wanted more product to fill their shelves and were looking for OshKosh supplies." In late 1987 and early 1988, orders for two consecutive seasons strained the company's production and distribution capacities to the limit, and orders arrived late. According to Forbes, retailers reported receiving shipments where the tops of matched separates arrived without bottoms. "We were unable to respond quickly enough to take advantage of stronger than anticipated demand for specific styles," CEO Charles Hyde wrote to his shareholders in April 1988. "External contractors proved harder to line up than usual and the larger design content of our Holiday 1987 and Spring 1988 lines caused hitches in our own production that led to some late deliveries and increased production costs. We encountered these combined difficulties at the very moment that the October stock market decline undermined retailers' confidence and prompted a few of our customers to cut back or cancel their orders." These problems continued through the remainder of 1988 and early 1989, so while the company's overall sales figures continued to grow, unit shipments were sluggish and the company's stock valuation fell by half between 1987 and 1988.

"It was at that point," Forbes observed, "that Hyde showed his true mettle. Many businessmen would have shrunk from the problems and cut back their businesses." However, using a strategy the magazine called "investing one's way out of trouble," the company moved quickly to remedy the causes of the distribution problems by upgrading and expanding manufacturing facilities. Four new plants were opened, and in the company's OshKosh plant, woven fabric cutting was computerized. The company also opened a new centralized distribution and finishing center in Tennessee. These expanded facilities cut down the company's dependence on outside contractors—which had caused so much of the trouble—to about 80 percent of total sales in 1990, down from 34 percent in 1988.

In view of all of these new challenges, the company also invested in its future growth by retaining an outside management consultant. Based on the consultant's report, in 1990 the company added three new executive positions: president and chief operating officer, vice-president of human resources, and vice-president of management information systems. Under the change, Harry Krogh, formerly president of Interco Inc., became president, Charles F. Hyde's title changed to chairman and chief executive officer, and Thomas R. Wyman was promoted to vice-chairman. "Both of us have been freed up from the daily operations of the business to concentrate on long-range planning to meet the challenges of a new decade. At the same time a clear and comfortable succession plan is now in place," Hyde wrote of himself and Wyman in March 1990.

Also in 1989, the company began to turn its attention toward diversification, both geographically and in terms of product offerings for both older and younger consumers. Toward the end of the year, the company started a joint venture with Poron S.A., a publicly held company with $130 million in revenues based in Troyes, France. The resulting venture, designed to market both companies' children's wear throughout Europe, was christened OshKosh B'Gosh Europe, with majority ownership going to OshKosh. "The accord," the Wall Street Journal observed at the time, "will position OshKosh to take advantage of the breakdown in trade barriers among European countries in 1992." Through the agreement, OshKosh also acquired its second wholly owned subsidiary, the U.S. operations of the company, which made baby and infant clothing under the well-known Absorba label.

In 1990, the company further advanced its diversification campaign. In April, the company acquired its third subsidiary, Essex Outfitters Inc., which held a long-term licensing agreement to use the Boston Trader brand name for children's clothing. The Boston Trader label was known in adult clothing for its classic casual style, and the children's line—fitting kids age six and older—had a similar look and was sold in higher-end retail outlets. A few weeks later, the company reached an agreement to sell some pieces of the OshKosh B'Gosh children's line in J.C. Penney and Sears stores.

The latter agreement constituted more of a change for the company than the former. Throughout the 1980s, the company's children's products were regarded in the same class as Volvos and pricey mineral water: for the consumption of upscale customers. In 1991, Business Week noted that when the legendary jeans maker Levi Strauss & Co. began distributing to Sears and Penney's, "R.H. Macy & Co. discontinued its Levi's jeans because it felt their image had been cheapened." Having studied Levi's experience, OshKosh decided to go ahead with the deal for several reasons. First, as Hyde and Krogh told their shareholders in 1991, "the heavy debt loads being carried by some of our major customers [including, according to Business Week, the bankruptcy proceedings of Federated Department Stores], as well as Sears' and Penney's repositioning in the retail market" indicated the wisdom of their decision. Second, the company said it would reserve some high-end specialty items for the likes of Saks Fifth Avenue and Bloomingdale's.

In 1992 the company put its succession plan into effect, moving Charles F. Hyde to the position of chairman and his son Douglas W. Hyde, who had been in charge of merchandising for 12 years, to the position of president and chief executive officer. Michael Wachtel became chief operating officer and executive vice-president. In 1992 the company continued its foreign expansion by beginning operations at a manufacturing facility it had purchased in Choloma, Honduras, the year before, its first plant outside of the United States. Foreign business, including sales through OshKosh B'Gosh Europe, export sales to overseas distributors, and sales by foreign licensees totaled approximately $23 million, an 83 percent increase from the previous year. In addition, the company was moving into new markets in Argentina, Brazil, Chile, Mexico, Taiwan, and Thailand. The company's Essex Outfitters also proved a good investment, with its retail stores and sales to other outlets outperforming expectations.

Overall earnings dropped during 1991 because of a number of factors. The largest burden turned out to be the Absorba line, which the company had purchased only the year before. In view of what were seen as weak long-term prospects for the subsidiary, the company decided to take a loss and phase out the label. Both Essex and Absorba, however, added to the company's administrative expenses. Continued trouble for retail stores also gave sales of men's and women's wear rather mixed results.

The company experienced financial loss in 1992 as well. The nationwide recession reduced overall consumer demand, particularly in the company's largest markets, California and the Northeast. The recession, plus the continued expenses of the Absorba phaseout, contributed to a drop in sales figures from the year before. Faced with these problems, the company went to work to improve its main trouble spot, the domestic wholesale business, which continued to be plagued by late deliveries and cost overruns. "Our customers and the marketplace sent a clear message that business as usual could not continue," Douglas Hyde informed shareholders in March 1993. Responding to the challenge, the company began implementing plans to streamline manufacturing and improve flexibility. The company revamped its central children's wear line by adding a new line of coordinated separates with simple styling that met consumer desire for clothing that was easy to mix and match. They also formed a special design team to make the products of the menswear division more appealing.

The bright part of 1992 was that the company increased its penetration into foreign markets. In September 1992, it completed the purchase of Poron, S.A.'s share of OshKosh B'Gosh Europe, making it a wholly owned subsidiary of the company. In addition, the company signed an agreement with Berleca Ltd., a Japanese company that would oversee marketing of OshKosh's products in that country. At the end of the year, the company was in the process of forming a new subsidiary, OshKosh B'Gosh Asia/Pacific Ltd., to provide sales and marketing support in that region.

Mid-1990s and Beyond: Revitalizing Through Global Production and New Initiatives

OshKosh's struggles continued into 1993, when sales dropped another $6 million, to $340.2 million. The company was in the process, however, of improving its productivity and its on-time shipping performance. Having been slow to join the bandwagon of the shifting of clothing production to cheaper overseas venues, OshKosh by late 1994 was operating two plants in Honduras and was contracting with third-party manufacturers in Mexico, Central America, and the Far East. Around this same time, three domestic plants were closed, and 100 workers were laid off from the Oshkosh plant, where the only product being manufactured was men's workwear. By mid-1995, 65 percent of the company's goods were manufactured domestically, 20 percent in Central America, and 15 percent in the Far East.

Also in 1993, the company launched its first catalog, an experiment that lasted only a few years. The following year, OshKosh opened showcase retail stores in New York, Paris, and London. From late 1993 to early 1994, OshKosh also was involved in advanced talks to acquire Rio Sportswear Inc., a major women's clothing maker whose annual revenues were nearly the equal of OshKosh's. The children's clothing maker backed away from the deal, however, after Rio signed an agreement to acquire the jeans business of Calvin Klein Inc. Also in 1994 the Trader Kids business, which included 77 stores, mostly in outlet malls, was replaced with a line called Genuine Kids, which featured girls' and boys' sizes infant through 16 and which had more of a fashion orientation and was more expensive than the OshKosh brand.

Although sales increased to $432.3 million in 1995 and then to $444.8 million in 1996, net income figures in the highly competitive retail environment of the mid-1990s were an anemic $10.9 million and $1.1 million, respectively. Further U.S. plant closings ensued. Whereas the company had 16 U.S. factories in early 1995, just two years later OshKosh owned a mere seven domestic plants. Then in 1997 the company closed its last factory in its namesake city in its continuing move to drive down costs through outsourcing. Only half of all OshKosh products were made in the United States in 1997. That year also saw OshKosh abandon the Genuine Kids line, which never caught on with consumers, and close or convert to the OshKosh format all of the Genuine Kids retail outlets. Replacing the Genuine Kids line were two new lines: Genuine Girls, for girl sizes 7 to 14, and Genuine Blues, for boy sizes 8 to 16, both of which were sold through OshKosh outlets. In a further retrenchment, OshKosh B'Gosh transferred its European operations to a licensee in 1997. The company also changed its domestic distribution strategy, eliminating as carriers of OshKosh products some discount-oriented chains, such as Kohl's and Mervyn's, in favor of higher-end outlets.

Further initiatives aimed at revitalizing the company came in the late 1990s. In 1998 the company began rolling out OshKosh showcase shops within major department stores, garnering large sales increases from the shop-within-a-shop concept. By mid-2000 there were more than 400 such mini-shops operating, with several hundred more in the works. The company also began leveraging the strength of the well-known OshKosh brand by entering into licensing deals with other companies. For example, the company in 1998 reached an agreement to develop a line of OshKosh strollers, high chairs, and car seats. In late 1999 OshKosh began selling its products over the Internet and also began experimenting with retail outlets located in strip malls, the first two of which opened in Denver. The latter initiative was in reaction to market research showing that Americans were beginning to turn away from the regional mall format in favor of the rapid store access offered by strip malls. Revenues for 1999 were $429.8 million, while the net income figure of $32.4 million showed that the company's efforts at improving profitability were beginning to pay off.

OshKosh entered 2000 operating four domestic plants, two each in Tennessee and Kentucky. One of the Tennessee plants was shuttered during 2000, with the other slated for closure during 2001. By the latter year, domestic production had been reduced to just 10 percent of overall production. Overseas, the company had particularly increased its sourcing in Mexico, where the company now owned two manufacturing plants. With its global sourcing strategy beginning to pay dividends, OshKosh B'Gosh sought ways of continuing the revival of a classic American company. The company was, for example, making plans to return its products to the increasingly popular and rapidly expanding Kohl's chain. OshKosh also opened three new strip mall stores in the Seattle area. Finally, sales at the company's web site exceeded projections by 50 percent in 2000, and the company believed that the site could achieve profitability by 2002. OshKosh, in the early years of its second century, seemed to face a bright future given the familiarity of its brand name, its reputation for quality, and the many promising new initiatives that were being undertaken.

Principal Subsidiaries: OBG Sales, Inc.; Manufacturera International Apparel, S.A. (Honduras); OshKosh B'Gosh International Sales, Inc. (Virgin Islands); OshKosh B'Gosh Investments, Inc.; OshKosh B'Gosh Retail, Inc.; OBG Distribution Company, LLC; OBG Manufacturing Company; OshKosh B'Gosh Operations, LLC; Millenia Manufacturing SRL de CV (Mexico).

Principal Competitors: Toys 'R' Us, Inc.; The William Carter Company; The Gap, Inc.; Gerber Childrenswear, Inc.; Garan, Incorporated; Happy Kids Inc.; The Gymboree Corporation; Williamson-Dickie Manufacturing Company; VF Corporation; Lands' End, Inc.; Fruit of the Loom, Ltd.; Levi Strauss & Co.

Chronology

• Key Dates:
• 1895: Grove Manufacturing Company, a maker of "hickory-striped" bib overalls, is founded in Oshkosh, Wisconsin.
• 1897: The company changes its name to Oshkosh Clothing Manufacturing Company.
• 1911: The name is changed again to Oshkosh Overall Company; William L. Pollock takes over as general manager.
• 1934: Pollock retires; Earl W. Wyman and partner Samuel Pickard purchase the company.
• 1937: The company name is changed to OshKosh B'Gosh, Inc.
• 1962: Mail-order house Miles Kimball features OshKosh kids' bibs in its catalog, receiving tremendous response and sparking increasing sales of the children's line.
• 1966: Wyman's son-in law, Charles F. Hyde, takes over as CEO.
• 1971: Children's line gets big national break when Bloomingdale's in New York begins selling the products.
• 1979: National marketing campaign is launched with the tag "The Genuine Article Since 1895."
• 1981: First outlet store opens in West Bend, Wisconsin; infant wear and knit separates are added to the product line.
• 1991: The company purchases a manufacturing plant in Honduras, its first outside the United States.
• 1992: Douglas W. Hyde, son of Charles, is named CEO.
• 1993: U.S. plant closings begin.
• 1997: The Genuine Blues and Genuine Girls lines are launched.
• 1998: OshKosh showcase shops within major department stores are rolled out.
• 1999: The company begins selling products over the Internet.
• 2001: Only 10 percent of OshKosh products are being made in the United States.