Casual Male Retail Group, Inc. Business Information, Profile, and History
Canton, Massachusetts 02021
With our expertise and thorough understanding of the apparel needs of large men, Casual Male Big & Tall develops its line of quality clothing that combines contemporary style with guaranteed comfort.
History of Casual Male Retail Group, Inc.
Casual Male Retail Group, Inc. is the name assumed by Massachusetts-based apparel retailer Designs, Inc. in 2002. For many years devoted to the selling of Levi Strauss jeans and Dockers casual wear, the company has elected to shift its focus, due in large part to Levi's merchandise falling out of favor with younger consumers. After acquiring Casual Male, which sells clothing for big and tall men, Designs has adopted the Casual Male name to better reflect its new emphasis. Although continuing to operate Levi's and Dockers stores, the company has taken steps to greatly reduce its Levi's business, closing a number of the outlets and combining others. In addition Casual Male has obtained a license to own and operate Candie's outlets and has also entered into a joint venture agreement to open and operate EcKo outlets.
Predecessor Founded in 1976
Designs, Inc. was cofounded in 1976 by Calvin Margolis and Stanley Berger, with the older Margolis serving as chairman and CEO of the company. He originally entered the retail clothing business after a stint in the Army during World War II, and by 1950 he owned his own men's store, called Cal's, in the south end of Boston. In the 1960s he and Berger established a business to cater to young people called the Slak Shak, featuring bell-bottom jeans, tie-dyed pants, and other hippie-era clothing. As those clothes fell out of fashion in the early 1970s, the partners were approached by Levi's sales reps and decided to focus on Levi's jeans, in 1972 launching a new Levi's-only chain called You & You. Ultimately the company had 34 units, essentially 2,000- to 3,000-square-foot jeans shops, spread across New England. In 1975 Margolis and Berger sold the business to The Gap, a move that allowed The Gap to jumpstart its expansion into the Northeast.
The partners formed a new company, Designs, Inc., in 1976 and after some deliberation concluded that they should continue their relationship with Levi's and take advantage of the vendor's strong brand. After reviewing the Levi's product line they developed a Levi's-only department store concept and obtained permission to incorporate "Exclusively Levi Strauss" in its logo. Although the new stores would be much larger than the You & You units and offer full lines of men's, women's, and children's clothing, Designs would maintain no warehouse or distribution center. Rather, Levi Strauss would ship directly to the stores. The first Designs store, 8,800 square feet in size, opened in Manchester, New Hampshire, in October 1977. Even as the Designs chain grew over the next decade, Manchester would remain the top-selling store for the next decade. In 1986 Designs opened its first outlet store, located in the Potomac Mills Outlet Center in the Washington, D.C. area. Initially this channel was created because Levi's had a surplus of Dockers, its casual line that debuted in 1986. These outlet units, offering Levi's overruns, irregulars, and discontinued lines, proved to be a good complement to Designs' traditional stores. Not only did they broaden the customer base to include tourists and value shoppers, they provided a place for the company to transfer the traditional stores' unsold merchandise at the end of each season.
During its first decade in operation, Designs grew at a modest pace, by 1987 totaling just 29 units, all of which were located east of the Mississippi. Changes in the marketplace, however, provided an opportunity for more rapid expansion. The Gap and other large apparel chains cut back on their Levi's lines, turning instead to private-label jeans manufactured offshore. With Levi Strauss actually growing in popularity at the time, Designs saw a chance to inherit Levi's customers abandoned by the competition. In June 1987 Designs went public at $13 a share to raise funds to fuel expansion, with the goal of growing to 100 units over the next three years. By the end of 1990, the chain reached that threshold, split between its "Designs exclusively Levi Strauss & Co." traditional stores and its "Specials exclusively Levi Strauss & Co." discount units. Although management expected profits to be muted somewhat by expansion, the rollout of new stores proved too fast and each unit required additional time to become profitable. The situation was exacerbated by major competitors such as Sears cutting their prices on Levi Strauss merchandise and forcing Designs to follow suit. As a result the company lost $1.7 million in fiscal 1989 and overall suffered through six consecutive losing quarters.
Considering Selling: 1990
As the U.S. economy slipped into recession, Designs was unable to raise additional expansion money and in November 1990 hired an investment banker to search for a possible buyer. Less than a year, later, however, the company showed enough improvement that it decided to cease all efforts to sell the business. A change in focus from the traditional stores to the outlet operations helped in the turnaround, but of more importance was Levi's expanding its women's product lines and adding the popular Dockers line into the mix. Designs was now better able to compete with its department store competitors. Moreover, The Gap elected to stop selling Levi's merchandise altogether, providing an opening for many Designs' stores to attract loyal Levi's customers. As a joint venture with Levi's, Designs also added two new store concepts: a "Dockers Shop," devoted to casual clothing, and "The Original Levi's Store," which was designed to compete directly with The Gap in major urban areas: Manhattan, Boston, and Washington, D.C.
In January 1993 Margolis retired as Designs' chairman and CEO, replaced by Berger. Margolis died a year later at the age of 69 from complications of heart disease. In December 1994, Joel Reichman was promoted to the CEO position, while Berger stayed on as chair. Reichman had worked closely with Berger since their days together at Slak Shak. Designs was forced to make some adjustments in 1994 when Levi's informed management that it no longer intended to open additional outlet stores through Designs but, rather, would rely on a subsidiary to expand that channel. With a limited supply of overruns and irregulars to stock the outlets, this development did not bode well for Designs. In addition, there were indications that Levi's might open its own domestic retail stores. Designs now sought to diversify its business through the addition of private-label products. In the autumn of 1994 it launched a test program in seven of its stores, adding for the first time non-Levi's apparel. As a result, these units had to remove the "Exclusively Levi's" phrase from their exteriors. The new private-label merchandise was marketed under the name "EFD--Exclusively for Designs." To supplement private labels, the company also began offering Timberland brand apparel in 1995, then took a far bolder step by paying $6 million to acquire assets from Boston Trading Co., Ltd., including the Boston Traders brand and 33 Boston Traders outlet stores. Boston Trading, known for its rugbys, knits, and sweaters, bolstered Designs' offerings in men's and women's tops, which management hoped would improve its multiple sales transactions. The mix of the reconfigured Designs' stores would be 70 percent Levi's and 30 percent EFD, Timberland, and Boston Traders.
The move into private labels, however, did not pan out, and by mid-1997 Designs abandoned the effort and elected to return its focus to branded products. It tried offering a number of brands in its Boston Trading Co. and Designs stores. In addition to Levi's and other major brands like Polo Jeans, Tommy Jeans by Tommy Hilfiger, DKNY, and CK Calvin Klein, the stores began to offer emerging brands such as FUBU and Phat Farm that appealed to a younger, hip-hop audience. As part of this restructuring effort, Designs liquidated the Boston Traders brand and closed down 16 Boston Traders outlets and 17 Designs stores. But the shift to multiple brands proved equally disappointing and in 1998 Designs changed gears yet again, deciding to once more focus on Levi's and Dockers product lines, primarily through its outlet stores. In furthering this effort to become more of an outlet-based business, Designs bought 25 outlets from Levi Strauss for $12 million. It also discontinued its joint venture with Levi's, acquiring Levi's interest in 11 outlets in exchange for Designs' interests in Original Levi and Docker stores. Unfortunately for both parties, Levi's was losing touch with its younger consumers, particularly those influenced by hip-hop culture who actively disliked the Levi's brand. In an attempt to appeal to this market Designs converted four old Boston Trader Outlet locations into Buffalo Jeans Factory Stores on a test basis, but this effort also failed to be the cure for the progressively ailing enterprise, which now shed stores at a steady clip. In late 1999 Boston Traders, Boston Traders Outlet stores, and the Buffalo Jeans Outlet stores were all terminated.
At the start of 1996 Designs had 157 stores in operation, but at the end of five years it was down to just 103. Revenues also peaked in fiscal 1996 at more than $300 million, then dipped to $290 million in 1997, $266 million in 1998, and $201.6 million in 1999. With the price of Designs' stock depressed, Seymour Holtzman, president of buyout firm Jewelcor Management, acquired close to a 10 percent stake in the company in 1998. He then led a proxy fight to replace the entire board, with the exception of Berger. The matter grew contentious and raged for more than a year. At one point Holtzman offered $58 million for the company, then withdrew the bid. In the end, however, Holtzman prevailed. In late 1999 Reichman resigned as president and CEO, replaced by board member John Schultz on an interim basis. In April 2000 David A. Levin was hired to replace Schultz, and Holtzman was placed on the company's board. Only days later Holtzman would be named chairman, completing the management turnover.
Levin came to Designs with some 30 years of retail experience, including stints with Revlon's Prestige Fragrance & Cosmetics division, the Camp Coleman division of The Coleman Company, and the Parade of Shoes division of J. Baker, Inc. which became Casual Male. Ironically, Levin started his busi- ness career in Iowa in the early 1970s selling painters pants and Army surplus stock, launching a small chain of stores located in college towns in Iowa, Nebraska, and Michigan. Levin's immediate goal at Designs was to make it a pure-play outlet operation. He also looked to cut costs and improve distribution. For years Designs had relied on direct shipping to its stores, but once it opened a 60,000-square-foot distribution center in Orlando, Florida, it was able to cut down on the size of its stores by a fourth. Space dedicated to excess inventory was eliminated, which meant smaller stores and lower rents. To diversify beyond Levi's and tap into a younger demographic, Designs sought new retail partners in 2002. It entered into a licensing agreement to open and operate 75 Candies stores in outlet malls and value centers. Candie's designed, manufactured, and marketed young women's shoes, apparel, and accessories. Only weeks later Designs announced that it entered into a joint venture with hip-hop lifestyle brand EcKo Complex to operate 75 EcKo branded outlet stores.
Designs Has Designs on Casual Male: 2002
All of Designs' plans were soon superceded when Levin recognized an opportunity to buy Casual Male's big-and-tall men's store operation. Having worked for Casual Male when it was known as J. Baker Inc. he was fully aware of the company's strengths and weaknesses. J. Baker was originally a shoe retailer, with the Casual Male business just a sideline, but as shoes became a low-margin business, requiring scale in order to effectively compete, J. Baker began to flounder. Levin was among the executives who advocated that the company abandon the shoe business to focus on Casual Male. They recognized that while most big-and-tall chains catered to women, men were generally served by mom-and-pop retailers. In following this strategy, J. Baker changed its name to Casual Male but assumed too much debt in exiting the shoe business and was ultimately forced into bankruptcy. Levin knew that in fact the Casual Male business had essentially been subsidizing J. Baker's shoe business for years and that unfettered by the parent company's debt it was a very attractive business. In August 2002 he told Daily News Record, "It was a hidden jewel. So I approached Seymour and the board of Designs and told them we should buy it."
Designs entered the game late, however. Charlesbank Capital Partners already had a tentative agreement with Casual Male's board for a $137 million purchase. Because of the due diligence phase of Charlesbank's offer, Designs had little more than a month to arrange financing for an offer before its rival's bid was formally accepted. Receiving little help or encouragement from the Casual Male board, Designs managed to place a $145 million bid in time, which then triggered a 14-hour auction that did not conclude until the early morning hours. In the end, Designs won with a bid of $170 million and acquired Casual Male's 473 stores and the Casual Male catalog. Thus, in one stroke Designs increased its annual revenues from around $200 million to $700 million (pro forma).
Although Designs was pleased with Casual Male's merchandising, real estate, and marketing groups, it moved quickly to cut its top-heavy senior management staff. Levin originally planned to lop off $15 million in expenses but soon upped that amount to $25 million. Warehouses and inventory systems of Designs and Casual Male were consolidated, as was administration. Designs moved into the larger Casual Male headquarters located 12 miles away in Canton, Massachusetts. One area of Casual Male that Levin vowed not to change was the chain's emphasis on sportswear, most of which was provided by Casual Male's own private label. Casual Male would also continue to target less expensive shopping strip centers rather than malls. With the Levi Strauss brands continuing to experience erosion, Designs saw its Casual Male business as the future of the company and began to significantly downsize its Levi's and Dockers outlet stores. To acknowledge its major shift in focus, Designs decided in August 2002 to change its name to Casual Male Retail Group, Inc. Management's optimism for the future was reflected in an analysis of Casual Male offered by Levin to Daily News Record in August 2002: "The nice part of this business is that it's not sexy. It only turns two times a year, and size management is a huge issue. It's very predictable--the comps are oblivious to the gyrations of other retailers. There's not a lot of fashion leadership, and sales per square foot are not off the charts. But we're 75 percent private label, the margins are good, and we have a very loyal customer who is more concerned about finding his size than getting a bargain."
Principal Competitors: American Retail; J.C. Penney Company, Inc.; Brooks Brothers Inc.; Calvin Klein, Inc.; Eddie Bauer, Inc.; The Men's Warehouse, Inc.; The Gap, Inc.; Wal-Mart Stores, Inc.
- Key Dates:
- 1976: Calvin Margolis and Stanley Berger found Designs, Inc.
- 1986: First Levi's outlet store is opened.
- 1987: Designs goes public.
- 1993: Margolis retires as chairman and CEO.
- 1999: Proxy fight leads to management change.
- 2002: Casual Male is acquired; Designs changes name.
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