Stone Manufacturing Company Business Information, Profile, and History

History of Stone Manufacturing Company

Stone Manufacturing Company once ranked as one of the largest apparel manufacturers in the United States. From late 1997 until mid-1999, the company was known as Umbro International, in recognition of its production of the Umbro brand of soccer clothing, a business the company first became involved in during the early 1980s. After the $145 million sale of the Umbro segment in 1999, the company reverted to its original name and continued to manufacture one of its original mainstays, men's underwear.

Depression-Era Origins

Stone Manufacturing Company was the brainchild of Eugene E. Stone III. Stone was born in Spartanburg, South Carolina, and attended Fishburne Military School in Waynesboro, Virginia. He went on to Georgia Tech University in Atlanta and later graduated with a degree in geology from the University of South Carolina.

In 1929 Stone set out to strike it rich in the oil fields of east Texas. He joined the Seaport Oil Company working out of Houston and developed a close friendship with the man who started the company. At the time, drilling for oil seemed to be an easy route to success. Seaport Oil drilled seven wells and came up with seven oil gushers. However, Seaport Oil was just one of many companies that found oil, and, within a bare six months, the oil market was completely glutted. As a result, the price of a barrel dropped from a high of one dollar to a low of just six cents. Stone's dreams of wealth were shattered, and he returned to Greenville a poorer but wiser man.

Back in Greenville, Stone soon found that conditions were even worse than in Texas. The entire nation was in the grip of the Great Depression, and South Carolina was particularly hard hit. Property values for both residential and commercial real estate had dropped dramatically, and wages were approximately one-third of what they had been before the Wall Street crash of 1929. Small farms in rural South Carolina hd suffered the same fate as farms in the Dust Bowl of the plains states, and many families moved to cities in order to find work at factories or small businesses.

One of the small apparel manufacturing companies in Greenville was also struggling to survive. The firm was forced to reduce the wages of its employees so that it could continue business operations. An embittered worker sabotaged the firm's boiler and left the entire factory and all its personnel working in the cold. When Stone's father, the owner of the building, was asked to repair the boiler, the younger Stone, who had gained some experience fixing boilers in his student days, volunteered to tackle the problem. Stone fixed the boiler, the company resumed its normal operations, and the young man was offered a job at ten cents an hour for 68 hours per week. Stone assumed the job with his usual enthusiasm, and despite the long hours found the time to court and marry Allene Wyman, known affectionately by her friends and family as "Linky." Stone and Linky left on their honeymoon with a guarantee from his boss that they would not only receive the two weeks' pay for his time off, but a new icebox upon their return.

After the honeymoon, however, they discovered that there would be neither a two-week paycheck nor an icebox. Stone immediately resigned, and with the skills he had acquired at the apparel manufacturing company, he opened the Stone Manufacturing Company on July 9, 1933. Stone hired five seamstresses and purchased eight sewing machines that formed the cornerstone of his company for the first few years. Stone himself did all the fabric cutting, as well as all the packaging and shipping. His wife was in charge of designing all clothes.

The first order received by Stone Manufacturing Company was from Sterling Stores of Little Rock, Arkansas, for the production of 25 dozen pink bloomers of knit jersey made from cotton. Although the shipment got lost in transit, Sterling Stores gave Stone another chance and soon developed into one of his most loyal customers. Also during the company's first year of business, Stone made a sales call to G.C. Murphy Company, a retailer with stores throughout Pennsylvania. Before he finished showing the buyer his entire line of clothing, the buyer began filing out an order pad. After the meeting, Stone happily announced that the company had enough orders for the entire year.

During the mid-1930s, the nation was still in the midst of the Great Depression. Stone Manufacturing employees worked in cold, damp conditions since the company was only able to afford one potbellied stove for heat. Yet the firm produced high-quality clothes that people could afford, which was quite an accomplishment during the Depression. By 1935 the company was not merely surviving but making a profit, and Stone decided to buy a furnace for the clothing plant. One of the few apparel manufacturing firms in the country whose sales were always increasing during the 1930s, Stone Manufacturing Company was the envy of the entire industry.

In the late 1930s, due to its rapid growth, the company moved to a larger facility and at the same time expanded its product line. Stone Manufacturing was making dresses, aprons, slips, panties, dustcaps, and sunsuits. The sunsuits sold at Woolworth Department Stores for ten cents. The company held to a high standard of quality: for example, while most bloomers at the time were made with eight or nine stitches to the inch, Stone bloomers were sewn with 15 stitches per inch. As a result, the clothing made by Stone Manufacturing gained the reputation of keeping its shape through continual wear and washing.

By the beginning of World War II, sales at Stone Manufacturing were growing approximately 30 percent per year. The U.S. government contracted the company to make clothes for its soldiers in various theaters of war, and was given a production allotment. This allotment meant that one-quarter of the company's manufacturing facilities had to be set aside for producing clothing for the government. One of the firm's most important products during this time was mattress covers. These covers were so well made that sailors reportedly inflated them and used them as floats to wait for rescue boats when ships sank. By the time the war ended, Stone Manufacturing Company employed over 300 seamstresses.

Postwar Drawers

After the war, Stone Manufacturing planned to take advantage of the demand for clothing necessitated by the return of servicemen to the United States. Stone himself thought that items such as the boxer shorts issued by the government and worn by military personnel during the war, popularly known as "skivvies," would transform the country's buying patterns. Stone purchased a new plant in Columbia, South Carolina, to foster its growth.

During the postwar years, as demand for its products grew, Stone Manufacturing began examining ways to improve the performance of the sewing machine. One of Eugene Stone's own inventions was the "clipper foot," a small attachment located next to the needle of the sewing machine to cut the thread after the seam was completed. This labor-saving device allowed the seamstress to continue sewing without having to stop and reach for a pair of scissors. Stone's invention was so efficient that sewing machine companies soon incorporated the "clipper foot" into the manufacture of their machines.

By 1949 Stone Manufacturing Company had grown so rapidly and had become so successful that it was profiled in Life Magazine as one of the leading clothing firms in the United States. The company had grown from a mere five employees in 1933 to over 2,000 by the end of the 1940s. Production was so efficient that it had doubled a total of five times in just 13 years. The new plant in Columbia was fast becoming the largest manufacturing facility of men's and boys' underwear in the world. Women's clothing items, a specialty of Stone Manufacturing, were also produced in ever greater quantities to meet the burgeoning demands of a populace entering a national economic boom.

During the 1950s, the company prepared to meet the growth in consumer demand by designing and constructing an entirely new manufacturing facility in Cherrydale, South Carolina. When the plant began operation in 1951, it was heralded as the biggest apparel production facility in the world. At a time when planning, outfitting, and operating a clothing manufacturing plant with 300 sewing machines seemed nearly impossible, the company's new Cherrydale plant included over 1,000 sewing machines.

The company's success continued into the 1960s. Stone Manufacturing broadened its product line to include more children's clothing such as T-shirts, pants, shorts, and underwear. The company's line of women's clothing also continued to expand, and began to gain a greater share of the domestic market. Men's clothing and boys' clothing, the firm's two mainstays, were enjoying their greatest popularity ever. Sales for men's underwear, especially the company's line of boxer shorts, were growing rapidly. Although far from the spotlight of Paris or New York fashions, Stone Manufacturing Company remained abreast of current trends within the fashion industry that affected the styles of clothing for both men and women.

With the advent of the 1970s, Stone Manufacturing Company expanded its line of children's wear and women's clothing. New product lines such as children's sweaters and women's jackets quickly gained the attention of consumers throughout the United States. In the mid-1970s, the physical fitness craze caught on in the United States, and Americans began to exercise on a more regular and vigorous basis. By the end of the decade, it was evident that this movement had become a permanent feature in the daily lives of millions of people. Management at Stone Manufacturing Company recognized the potential of such a new market and began to produce the simplest of exercise clothing—running shorts.

Soon Stone began to produce athletic socks, T-shirts, underwear, jerseys, sweatshirts, sweatpants, basketball shorts, and many other items. Then, in 1981, Stone Manufacturing acquired the rights to manufacture the Umbro brand of soccer clothing in the United States. It dedicated the Cherrydale plant in Greenville to the Umbro line. In 1982, Stone Manufacturing and Umbro Ltd. entered a joint venture to make and sell clothes in the world market outside Great Britain.

Umbro was a well-established brand of soccer apparel whose operations were based in Manchester, England. It had been started by brothers Harold and Wallace Humphreys in 1924. The first professional club to sport Umbro gear was Manchester City, which won the FA Cup final in 1934. Umbro outfitted dozens of winning professional soccer teams after that, including Manchester United, as well as the Scottish, English, Norwegian, and Brazilian national teams.

As Jack Stone, son of founder Gene Stone, later recalled, the company at the time faced a choice on whether to direct its resources into marginal businesses or high-growth ones. It chose the latter, selling its lingerie business in 1984. The younger Stone was appointed CEO in 1982 as the U.S. apparel industry was consolidating in the wake of a recession.

Stone Manufacturing had annual revenues of more than $100 million at the time of its 50th anniversary in 1983. It employed 4,000 workers at a dozen plants in the Carolinas and Georgia, half of them in Greenville County, South Carolina. Gene Stone boasted of never having to lay anyone off in five decades of business. Automation allowed each employee at the Cherrydale facility to control 2.5 machines.

Not O.K. with Elkay in 1985

Stone entered a partnership with apparel company Elkay Industries in November 1985. Headquartered in Wilkes Barre, Pennsylvania, Elkay operated a dozen factories in South Carolina. The combined company would employ over 8,000 workers and would be the third largest manufacturer of children's clothing in the United States. However, although Stone acquired management control, it never formally bought more than 11 percent of Elkay.

Elkay was licensed to make clothes under the Cabbage Patch name, and when the popularity of those dolls faded in 1985, it began to run into financial problems. Consolidation among department stores in the 1980s also lead to increased competition from large overseas manufacturers.

Stone sold Elkay its youthwear division for $7 million in March 1988. The $7 million was to be paid off through six-year leases on four of Stone's facilities. However, Elkay missed a payment in April 1989. The leases were canceled, one of the manufacturing sites was shut down, and Jack Stone was replaced as Elkay CEO by Marvin Crow, formerly president of J.P. Stevens & Co. Stone, however, remained chairman of Elkay until shortly before it filed for Chapter 11 protection in July 1990. Stone Manufacturing stood to lose some $10 million that it was still owed.

Elkay had arranged for new financing through Marine Midland Business Loans Inc. of New York but had been in default several times during the year. To stay in business, Elkay was required to relocate its headquarters to Camden, South Carolina, which had offered a $500,000 incentive loan.

Stone Manufacturing's sales were about $100 million a year at the end of the 1980s. Employment was more than 2,000. Stone closed its chain of S-Mart outlet stores in late 1989, when annual sales were about $75 million. It still made half the boxer shorts produced in the United States and led the soccer clothing market. Sales of Umbro soccer shorts continued to rise.

Internationalized in the 1990s

Fully committed to its premier brand, Stone bought Umbro Ltd. for £2.9 million in September 1992. It had reportedly offered £14.8 million for the U.K. company, but reduced the price since Umbro's financing was coming due and Britain was in a recession.

Umbro had pretax profits of £2.1 million on revenues of £65 million in 1992. Stone Manufacturing's revenues were about $200 million. After acquiring all the U.K. rights to Umbro, Stone cut its squash and rugby offerings and focused the unit on soccer exclusively. Stone soon opened five East Coast outlet stores dedicated to Umbro merchandise.

In 1994, Umbro posted after-tax profits of £4.2 million on U.K. sales of £75 million alone, as soccer made a comeback in Britain. Umbro was supplying more than 60 professional teams. The worldwide soccer equipment industry, including footwear, was estimated to be worth £2.7 billion a year.

Umbro had subsidiaries in Germany, France, Brazil, and the United States. It was also developing markets in Japan and Africa and becoming more dependent on outsourcing manufacturing as its operations became more internationalized. Stone used a high-tech fabric imported from Europe for Umbro's new, radically styled referees' uniforms. The Recovery polyester yarn, made from recycled plastic bottles, was woven in England and finished in Spain. Officials appreciated the superior coolness of the jerseys.

A new gray uniform designed for Manchester United, Britain's largest soccer club, was not as well accepted. Players blamed the uniforms for a losing streak early in the 1996 season and refused to wear them. Fortunately for Umbro, the white replacement shirts were a great success. Umbro was paying £10 million a year to sponsor Manchester United; other makers of soccer clothing also competed vigorously for these rights.

Plans to float Umbro as a public company in late 1996 never came to fruition. Analysts predicted such an offering would be valued between £100 million and £200 million. Stuart Humphreys and Ben Humphreys, son and grandson of Harold Humphreys, threatened to sue Stone Manufacturing, claiming the £2.9 million that Umbro had sold for in 1992 was not a fair price.

Instead of a successful IPO, what followed was Stone Manufacturing's annus terribilis. Company founder Eugene Stone III (Gene) died in June 1997. His son, Jack Stone, already CEO, succeeded him as chairman. The same year, the company had to sue to wrest the Internet domain name Umbro.com from the hands of a Canadian pornographer and the domain name registrar Network Solutions, Inc.

Umbro International had difficulty matching its vigorous competitors in the marketplace. Adidas had been strong in soccer for decades and another multi-sport apparel company, Nike, quickly gained market share in the late 1990s. While Umbro was also expanding aggressively, it overextended itself and defaulted on its debt.

Stone Manufacturing officially changed its name to Umbro International Inc. in late 1997. It posted sales of more than $600 million for the year, in a market spanning 55 countries. The U.S. division lost money in 1997, though the British business remained profitable. As financial pressures mounted, employees were furloughed for eight weeks in August 1997. They were laid off for another two weeks in February 1998.

Leaving the Soccer Field in 1998

By this time, the company was looking for a new CEO. It hired turnaround specialist Larry Ramaekers, who soon closed the Greenville plant entirely and returned manufacturing operations to Manchester, England. Umbro was also planning to sell two plants in Merseyside and Stoke-on-Trent in England as well as its Kaepa volleyball subsidiary.

The Cherrydale plant had been serving as Umbro International's U.S. headquarters and distribution center. Its closing left 220 administrative employees and 342 factory workers jobless. Employment there had been double that a decade earlier and reached 2,200 in the 1950s. The company did not offer a severance package, only a bonus equal to a week's pay to workers who stayed through the final weeks.

By the end of the summer, developers were planning to place a shopping mall on the site, and demolition began in July 1999. Plans were made to relocate a historic residence on the property to nearby Furman University, whose founder originally built the house. The Stone family had remodeled the Cherrydale residence in 1997, intending to use it as a corporate guesthouse. Stone's historic building on Court Street in downtown Greenville was sold to Kent Manufacturing Company, the venerable wool producer.

Two thousand sewing machines were among the equipment auctioned off in September 1998. In the same month, Umbro International licensed Signal Apparel and Riddell Sports Inc. (through its Memphis-based Varsity Spirit subsidiary) to make and market Umbro products in the United States. Signal had found its greatest success marketing sweatshirts and T-shirts to discount department stores, while Riddell was best known for its protective football equipment.

Umbro America, led by longtime Umbro executive Ian McLaren, continued to develop and market Umbro products from Greenville, though production was coordinated by Varsity in Memphis. Riddell/Varsity focused on making clothes for soccer teams; Signal in New York continued to specialize in department store sales.

In April 1999, Umbro Europe Holdings Ltd. and Umbro World were sold for $145 million to a unit of London investment firm Doughty Hanson & Co. Umbro Holdings Ltd. (the new name for the Cheshire-based company) had subsidiaries in the United Kingdom, Germany, France, and Hong Kong and licensing agreements with 52 other countries. After the sale, Umbro International changed its name back to Stone Manufacturing Company. It continued making men's underwear, though its glory days appeared to be over.

Principal Competitors:Courtalds plc; Sara Lee Underwear Co.

Chronology

• Key Dates:
• 1933: Stone Manufacturing begins making swimsuits and underwear.
• 1948: After years of growth, a second plant opens.
• 1951: World's largest clothing factory opens.
• 1981: U.S. rights to Umbro brand are acquired.
• 1992: Stone buys U.K.-based Umbro Ltd.
• 1997: Company changes name to Umbro International Inc. and post sales of $600 million; Umbro's bottom line, however, is showing signs of strain.
• 1998: Umbro International closes its U.S. manufacturing operations in favor of outsourcing.
• 1999: Stone sells Umbro's world business and returns to underwear manufacturing.