Russell Corporation Business Information, Profile, and History
From its beginnings in 1902, Russell Corporation has prided itself on the quality and value of its products--and on its commitment to its employees and the communities where it operates. Russell has long been a company that is able to take advantage of changes in the marketplace, changes in technology and changes in its products. Building on its heritage as an athletic company, Russell has become a global leader in the sporting goods industry with apparel and equipment for all levels of activity--from the playing fields of major colleges to the backyards of homes across the country.
History of Russell Corporation
From humble origins in a small Alabama town in 1902, Russell Corporation has evolved into a leading authentic athletic and sporting goods manufacturer. The company sells athletic uniforms, apparel, athletic footwear, sporting goods and athletic equipment, and accessories in over 100 countries across the globe. Its brands include Russell Athletic, Jerzees, Spalding, Brooks, American Athletic, Huffy Sports, Mossy Oak, Cross Creek, Moving Comfort, Bike, Dudley, Discus, and Sherrin. Through its Spalding arm, Russell operates as the largest provider of basketball equipment in the world. Conglomerate Berkshire Hathaway Inc. acquired Russell Corp. in 2006.
Early 20th-Century Founding
Founder Benjamin Russell was only 25 when he bought six knitting machines from R.A. Almond in 1902. Russell, a struggling lawyer in Birmingham, Alabama, was anxious to return home to Alexander City and open his own business. With borrowed money, he incorporated Russell Manufacturing Company in 1902, remaining its president until he died in 1941. Russell's knitting machines, 12 sewing machines, and 12 employees were crammed into a 50 by 100 foot wooden building. Because of the lack of electricity, Russell Manufacturing Company relied on steam for power. At the end of the first year of production, the company was turning out 150 items of clothing per day. Though first year profits were disappointing, the entrepreneurial young owner envisioned his plant expanding into all aspects of the garment-making business.
Russell's dream was slowly realized, and profits grew steadily in the following years. Six years after opening his plant, Russell acquired spinning frames, allowing the company to produce its own yarn. Several years later, it could bleach its own cloth. Electricity came to the plant in 1912, and two years later a second yarn plant went into operation.
Demand for cloth and yarn shot up dramatically during World War I, during which time the company expanded and prospered. When the war ended, the ensuing recession left the company unaffected because the demand for yarn continued. In response, the company added workers and plants. Also at this time, the Russell Mill School was established for educating the children of employees as well as for adult programs. The company's fourth yarn plant began operation in 1921, and in early 1927 a weaving operation was installed. By the end of the year Russell Manufacturing Company could dye its own cotton and yarn, coming close to realizing Benjamin Russell's ambition of making his company a completely vertical or "fiber to fabric" operation.
Moving into Athletic Wear and Screen Printing
Until 1932, however, fabric still had to be sent to other U.S. plants for finishing. Despite the company's losses during the Great Depression, Benjamin Russell decided to expand his business. The worst year of the Depression, 1932, turned into a milestone year for the 30-year-old company; it acquired full finishing operations, thereby becoming one of the few fully vertical fabric factories in the world. That same year Benjamin Russell's son, Benjamin C. Russell, established an athletics division called the Southern Manufacturing Company. Its first products were football jerseys sold to a sporting goods distributor in New York. In 1938 the company's first screen printing developed for the printing of names, numbers, and designs on athletic uniforms. In 1960 the Southern Manufacturing Company was renamed the Russell Athletic Division. No one in 1932 would have guessed that this unobtrusive sideline would alter the company's identity from that of a domestic fabric manufacturer to a global leader in the sportswear industry.
Civilian textile manufacturing declined during World War II because of enormous government clothing contracts that strained the company. By war's end, machinery was badly in need of repair because replacement materials had been difficult to obtain during the war years. In addition the company's founder, Benjamin Russell, had died at the outset of World War II. His son Benjamin C. Russell took over the helm during the difficult but prosperous war years but died prematurely of pneumonia in 1945. Another Russell son, Thomas Dameron Russell, succeeded him at the helm. By the time he stepped down as president 23 years later, the company had become a leading manufacturer of athletic and leisure wear and exited the fashion clothing manufacturing business.
In the 1950s sporting and leisure wear had not yet caught on with the general public. With two domestic recessions, the company was hard hit by falling sales and growing competition, and expansion was temporarily impeded. Changes in the clothing industry, however, helped Russell rebound. By the early 1960s, T-shirts had become acceptable garb for both sexes. In the late 1960s the unisex trend in clothing strengthened while leisure clothing became popular in the early 1970s. These trends served to Russell's advantage. In 1966 a new sewing plant was established in Montgomery, Alabama (the first Russell plant to be built outside of Alexander City). Four years later, the Athletic Division had expanded so much that a separate plant became necessary. The company had gone public in 1963. The firm, whose name had been changed in 1962 to Russell Mills, Inc., would be a public stockholding company in which the Russell family and other insiders would continue to own approximately 32 percent of the stock.
Modernization and Expansion
In 1968 Eugene C. Gwaltney became president of Russell Mills (which in 1973 would become the Russell Corporation). That year company sales stood at $51 million. During Gwaltney's term in office, plant expansion continued. The company's screen printing facilities were enlarged, and it acquired a yarn manufacturing plant in northeast Georgia in 1977. In the mid-1970s Russell opened a new distribution center in Alexander City. All operations at this ultramodern facility, such as storage retrieval, shipping, and goods reception, were fully automated and consolidated. At the same time, new buildings went up to house operations including data processing, personnel, and security. By 1981, with the consolidation of knitting into one plant, Russell could boast the most modern knitting facilities in the world. Expansion into Florida and south Alabama took place after 1982, the year Eugene Gwaltney was elected chairman of the board and was succeeded as president by Dwight L. Carlisle.
In 1989 the Russell Corporation test and evaluation mill was constructed at a cost of $6 million. This was an innovative facility in which new machinery was evaluated before purchase, avoiding the interruptions in operations implicit in conducting tests during the production process. By 1990 the company owned and operated 13 sewing plants outside of Alexander City and employed 15,000 workers. Since 1976 sales revenues had increased by 13 percent annually. With the acquisition of two subsidiaries, Quality Mills in North Carolina and Cloathbond Ltd. in Scotland, in 1988 and 1989 respectively, the company had become a global contender in the sportswear industry.
According to market analysts, a key to the company's success was its aggressive technological modernization. In a five-year period ending in 1992, the company invested more than half a billion dollars in capital expenditures which translated into approximately 15 percent of annual sales--far higher than the industry's average of 8 percent. In addition, the company spent at least 3 percent of sales revenues on print and television advertising. In both 1980 and 1990 Textile World cited Russell Corporation as the "Model Mill" of the year. Another reason for the company's success was research and development. In 1992 an innovative new material that prevented pilling, NuBlend, was introduced in Russell's Jerzees line of sportswear and won accolades from the leisurewear industry. Partly because NuBlend was the preferred fabric for screen printers, Russell held the top market share in the fleece screen printing business at 30 percent.
Under president and CEO John C. Adams, who succeeded the retiring Carlisle in 1991, approximately 80 percent of Russell Corporation's early 1990s sales were derived from its principal divisions: Athletic, Knit Apparel, Fabrics, and its major U.S. subsidiary, Cross Creek Apparel, Inc. (formerly Quality Mills). The company had become the top manufacturer of athletic uniforms in the nation. In 1992 Russell was awarded a five-year contract to serve as the exclusive producer and marketer of athletic uniforms for most Major League Baseball teams. The contract also stipulated that the company held the exclusive right to manufacture and market replicas of major league uniforms, T-shirts, and shorts. This put the company in an advantageous position in relation to its main rival, Champion, Inc., the supplier of uniforms to the NBA teams. The Knit Apparel Division produced the Jerzees brand of activewear, which had been introduced in 1983, and included T-shirts, fleece, knit shorts, and tank tops, which were sold to specialized retailers and large merchandisers such as Wal-Mart. Cross Creek produced the Cross Creek Pro Collection, featuring casual knit shirts and rugbys, which were sold mainly in golf pro shops, and Cross Creek Country Cottons, which were purchased by screen printers and embroiderers for resale. The remainder of Russell's revenues were derived from the Fabrics Division, which manufactured and marketed lightweight cotton material for sale to clothing manufacturers, and from its European subsidiary, Russell Corp. UK Ltd. in Scotland. This subsidiary had been acquired in 1989 under the name Cloathbond, Ltd.; it was a vertical establishment that manufactured and marketed a full line of Russell clothing, from the cotton fiber to the finished product, for the European market. This international expansion helped the company approach $1 billion in sales in the early 1990s. In 1992 alone, Russell's international sales increased 40 percent over 1991.
In April 1993 Gwaltney retired as chairman of Russell, ending a 41-year career at the company. Adams then served as chairman, president, and CEO. Later that year Russell paid $35 million to acquire The Game, Inc., a maker of licensed sports headgear and apparel, with a leading position in the marketing of such products for colleges and universities. The name of the acquired entity was changed to Licensed Products Division in 1994. That year Russell acquired Fort Payne, Alabama-based Desoto Mills, a finisher/manufacturer and marketer of sports and casual socks under the Desoto Players Club, Athletic Club, Performance Club, and Player Performance brand names. Russell also acquired the trademarks and licenses of Chalk Line, Inc., in 1994, a year in which the company's revenues exceeded $1 billion for the first time.
Major Restructuring Near the End of the Decade
Although sales and net income reached record levels in 1996, in part because of the impact of the Summer Olympics which were held in Atlanta that year, Russell's fortunes turned south in 1997 when both sales and net income fell. The decline was caused by intensifying competition as industry-wide over-capacity and price-cutting by rivals forced Russell to lower its own prices, all of which hurt the company's results. Particularly troubled was the Licensed Products Division, which Russell dissolved in 1997, dividing its operations among the other divisions. In 1997 Russell also ended its licensing deals with the professional football, basketball, and hockey leagues.
In early 1998, as the company's troubles continued, Adams retired; stepping in as chairman, president, and CEO was John "Jack" Ward, former CEO of the Hanes Group and senior vice-president of Sara Lee Corporation. Within months of Ward's arrival, Russell announced a major restructuring. Over a three-year period, the company planned to eliminate about 4,000 jobs, or 23 percent of its workforce; close about 25 of its 90 plants, distribution centers, and other facilities; and move most of the final assembly of garments abroad, to Mexico, Honduras, and elsewhere in the Caribbean basin. The company expected to take charges of $100 to $125 million during the restructuring period. Russell hoped these efforts would result in annual savings of $50-$70 million. Part of these funds would then be used to bolster the marketing and advertising of Russell's brands, including tripling the advertising budget to $25 million per year. Russell also established a second headquarters in Atlanta in February 1999, a move designed to make travel more convenient and to aid in recruiting efforts, particularly of marketing aces who did not relish the idea of living in the small town of Alexander City.
Finally, in January 1999 Russell reorganized into six strategic business units as part of its transformation from a manufacturing-driven organization to a consumer-oriented marketing corporation. Each of the units was self-contained, with full responsibility and accountability for results; each included such functional areas as manufacturing, sales, marketing, finance, information systems, and human resources. Three of the units centered around a major Russell brand: Russell Athletic, Jerzees, and Cross Creek. Fabrics and Services focused on quality woven fabrics, as well as housing some central service functions operating companywide. Russell Yarn was established as a supplier of yarn for the manufacture of Russell textiles and apparel. The International Division was charged with marketing all Russell branded products outside the United States and Canada; it conducted business in 50 countries in all.
Restructuring charges led Russell to post a fiscal 1998 net loss of $10.4 million on revenues of $1.18 billion. Results for the first half of 1999 also showed a net loss of $12.9 million but the restructuring had resulted in a decrease in selling, general, and administration costs of 13 percent. Russell had also increased its offshore apparel assembly to 55 percent of total capacity, a substantial increase from the 17 percent mark before the restructuring was launched. Russell had far to go before it could be considered fully turned around, but it appeared that the company was well on its way.
Russell in the New Millennium
The company completed its restructuring process in 2001. When the dust settled, nearly all of its retail outlets had been shuttered, over 6,000 jobs had been cut, and most of its manufacturing operations had moved overseas. At the same time, Russell continued to seek out opportunities that would strengthen its operations. In 2000, Russell Corporation acquired the apparel operations of Haas Outdoors, Inc., which later became the Mossy Oak Apparel Company.
Russell celebrated its 100th anniversary in 2002. That year the company purchased Moving Comfort, a manufacturer of women's activewear. It added the Jagged Edge trademark to its holdings the following year, along with Bike Athletic Company and Spalding Sports Worldwide Inc. The Spalding deal gave Russell a foothold in the sporting goods market for the first time in its history. Russell continued its acquisition spree in 2004 by purchasing American Athletic Inc. (AAI), Huffy Corp.'s sports division, and Brooks Sports. It also secured an extended contract to provide Spalding and Huffy branded products to the National Basketball Association. In 2005, Russell landed a five-year licensing contract with Itochu Fashion System Co. to market the Spalding brand in Japan and also secured a deal to manufacture and market athletic apparel and footwear in China.
The company faced challenges in 2005 due to rising costs and falling sales. During Hurricanes Rita and Katrina, over 40 containers of Russell products were lost or destroyed and nearly 70 percent of the ports it used for shipping were closed. Amid intense competition and faltering profits, the company launched a restructuring plan much like the effort of the late 1990s. Russell continued shifting its manufacturing base overseas and cut a total of 2,300 jobs. In 2006, the company closed its Huffy manufacturing facilities and moved production overseas. It also merged its Moving Comfort brand into its Athletic Division.
Conglomerate Berkshire Hathaway Inc. made a $600 million play for Russell Corp. in early 2006. Berkshire, led by billionaire Warren Buffet, believed Russell would be a good fit with its Fruit of the Loom Inc. subsidiary. At the same time, Russell stood to benefit from Berkshire Hathaway's deep pockets. CEO Jack Ward commented on the deal in an April 2006 Wall Street Journal article claiming, "Russell will be better positioned against our world-wide competitors in all three segments of our business, and that includes apparel, sports equipment, and athletic shoes." Ward ended up opposing the deal, however, during the shareholder vote. He argued Russell's restructuring efforts would lead to stronger financial results in 2006 and 2007 and that a purchase was no longer necessary to secure the company's financial future. His sole vote did not sway shareholders and in the end, Berkshire Hathaway completed its purchase.
Gildan Activewear Inc.; NIKE Inc.; Sara Lee Branded Apparel.
- Key Dates
- 1902 Russell Manufacturing Company is established.
- 1927 The company can dye its own cotton and yarn.
- 1932 Russell Manufacturing becomes one of the few fully vertical fabric factories in the world; athletics division Southern Manufacturing Company is formed.
- 1938 Screen printing is developed for the printing of names, numbers, and designs on athletic uniforms.
- 1960 Southern Manufacturing Company is renamed Russell Athletic Division.
- 1963 The company goes public as Russell Mills Inc.
- 1973 The company changes its name to Russell Corp.
- 1992 NuBlend is introduced in Russell's Jerzees line of sportswear.
- 1998 Russell launches a major restructuring.
- 2003 The Jagged Edge trademark, Bike Athletic Company, and Spalding Sports Worldwide Inc. are purchased.
- 2006 Berkshire Hathaway Inc. acquires Russell.
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