Allen-Edmonds Shoe Corporation

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Allen-Edmonds Shoe Corporation

201 E. Seven Hills Road
Port Washington, Wisconsin 53074-0998
U.S.A.
Telephone: (262) 235-6000
Fax: (262) 235-6255
Web site: http://www.allenedmonds.com

Private Company
Founded: 1922
Employees: 750
Sales: $82 million (2002 est.)
NAIC: 316213 Men's Footwear (Except Athletic) Manufacturing

Allen-Edmonds Shoe Corporation is a manufacturer of handmade, upscale men's shoes, which range in price from $200 to $415. The privately owned Port Washington, Wisconsin, company is one of the few remaining independent shoemakers in the United States. Although little known to the general public, Allen-Edmonds is well regarded by shoe aficionados around the world. Manufacturing is labor intensive, a process that includes more than 200 separate steps. Allen-Edmonds shoes have been worn by U.S. presidents and other prominent office holders, as well as Hollywood stars and other celebrities. Although the company offers a limited number of styles, embracing traditional looks, it provides an impressive range of widths and sizes, some 164 combinations in all—from sizes 5 to 16, and widths AAA to EEE. The company also offers a Recrafting service, restoring older Allen-Edmonds shoes to like-new condition. Allen-Edmonds shoes are sold at high-end department stores such as Nordstrom, Marshall Fields, and Saks Fifth Avenue, as well as 25 company-owned stores in the United States and two in Europe (Italy and Belgium). Furthermore, the company has a network of agents and distributors in 33 countries and also sells its wares via the Internet. In recent years Allen-Edmonds has expanded beyond men's shoes. Its Woodlore division offers shoe trees and other aromatic cedar products and wardrobe accessories. The company sells shoe care products, leather accessories such as belts and wallets, hosiery, and even cologne. Allen-Edmonds also maintains an affiliation with Elefanten, maker of premium children's shoes. In addition to its Port Washington location, the company operates manufacturing facilities in Lake Church, Wisconsin; Milwaukee, Wisconsin; and Lewiston, Maine.

Founding the Company in 1922

Allen-Edmonds was founded in 1922 by Elbert W. Allen, Sr., who was born and raised in the Cumberland River area of Tennessee. In his early 20s he moved to Texas to run a prison shoemaking operation. It was here that he envisioned a way to produce the most comfortable shoes possible, shoes that would flex in the same way that people walked, from heel to toe with each step. Colleagues in the shoemaking trade, however, were skeptical that such an approach was commercially viable. Allen continued to nurture his idea after relocating to Milwaukee, where for four years he served as general manager of the Ogden Shoe Company. He found a partner in Ralph Spiegel, a co-worker, and together they bought the Belgium Shoe Company, located in the small town of Belgium, Wisconsin. Here Allen was able to perfect his vision for making a new shoe. He relied on the Goodyear welt method, whereby tops and soles were each sewn into a strip of folded leather (the welt) that ran around the outside of the shoe. To increase flexibility and comfort, Allen found a way to remove the metal shank and nails that were normally used in the instep, and also added a cork heel. The partners sold the new shoe under the name "Osteo-Path-Ik," promoting it as "the shoe that needs no breaking in." Allen reduced his business philosophy to obtaining "the best leather I can buy and the best craftspeople I can find."

In the late 1920s Spiegel left the company, bought out by William Edmonds, who owned a Milwaukee company called Edmonds Foot Fitters. Edmond's trade name soon replaced the "Osteo-Path-Ik" moniker, and the company's expanding range of shoes now became known as Allen-Edmonds Footfitters. Despite the Great Depression of the 1930s, the company was able to expand sales nationally, due in large part to Edmonds's willingness to travel widely promoting the company's innovative shoes. Allen's sons also became involved in running the company. World War II proved to be a turning point. Not only did Allen-Edmonds win contracts to make shoes for the Army and the Navy, the military personnel who wore the company's shoes were so impressed with the comfortable fit that they became customers after the war was over and they were discharged from the military.

Founder's Death in 1946

After Allen died in 1946, his eldest son, Elbert W. "Bert" Allen, took over management of the company, which continued to trade on the comfort of its shoes and quality of its craftsmanship. The company was so confident about the product that it offered a guarantee, promising to refund a customer's money if he believed that his Allen-Edmonds were not the most comfortable shoes he had ever worn. The company generally relied on word of mouth, helped to some extent by allowing retail clerks to buy the shoes at wholesale prices. In this way, clerks who normally would not be able to afford the product could provide personal testimony to their customers about the virtues of Allen-Edmonds shoes. Bert Allen also proved to be a tireless promoter of the product, traveling around the world extolling the virtues of Allen-Edmonds shoes.

In 1968 Bert's brother Boyd took over as president of the company. The 1970s was a difficult period for the company, as it was for the entire American shoe industry, which was adversely impacted by the increasing influx of cheap imports. It was in 1979 that Boyd Allen, needing help at a German trade show, enlisted the services of John J. Stollenwerk, a man who would transform the fortunes of Allen-Edmonds. Stollenwerk, a graduate of Milwaukee's Marquette University, had no experience in the shoe business. After college he worked in Latin America for a Catholic relief organization, the papal peace corps, became involved in the exporting of soybeans and animal feed, and later acquired an exporting consulting practice in Milwaukee, which accounted for Boyd Allen turning to him for help. Allen was so impressed with Stollenwerk during their trip to Germany that, according to Stollenwerk, he remarked over dinner one evening, "You're so enthusiastic about this business, why don't you buy it?" This comment planted a seed, Stollenwerk grew interested, and over the course of the next year he assembled the financing necessary to buy Allen-Edmonds. He took on partners Peter A. Fischer, head of Medalist Industries, and Ronald Creten, owner of RC Industries, and was also successful in securing support from Allen-Edmonds's bank, which believed that bringing in new management was in its best interest.

When Stollenwerk took charge of Allen-Edmonds in 1980 he faced some serious challenges. The company had just lost $400,000, after generating only $9.5 million in annual sales. Moreover, he had to contend immediately with rumors that he had merely bought the business in order to dress up the books and flip it for a quick profit. As a result, Stollenwerk had to devote a considerable amount of time visiting with customers to assure them that he was in the shoe business for the long haul. Stollenwerk also made a number of other changes to the way Allen-Edmonds conducted its business. According to a 1992 Direct Marketing profile, "Stollenwerk carved out a marketing niche, cut out the middlemen and went directly to suppliers, modernized the plant, cross-trained co-workers and changed management philosophy to one of quality, integrity and service. He also reportedly concentrated on a high-end market niche and reoriented distribution to concentrate on upscale retail stores. … Importantly, he instilled a sense of direction and pride." Stollenwerk's fresh approach to the business was evident in other ways. For instance, as a way to sell shoes during the traditionally slow summer period, he decided to hold a tent sale as part of an event he wanted to call Belgium Days. When he tried to get the town of Belgium behind the idea, however, he was met with skeptics who could not fathom that anyone would want to make the trek to their backwoods town. Stollenwerk held the tent sale anyway and surprised his critics when around 2,000 people showed up looking for bargains. Belgium Days quickly became a summer tradition, each year producing a tidy profit for Allen-Edmonds, which benefited from the high margin on the sales, despite the discounting.

Another significant change that Stollenwerk brought to Allen-Edmonds was to view the world as the company's marketplace, a sales task to which he was well suited, given his experience in the export business. Allen-Edmonds had sold some shoes overseas but relied on a distributor system that greatly added to the price of its product. Stollenwerk cut out this link and established a warehouse in Holland and hired a French logistics firm to handle distribution. In order to expedite payments, the company opened bank accounts in each country, which allowed customers to pay in their native currency. Furthermore, Allen-Edmonds now took care to tailor product lines to match the tastes of individual countries, and even created advertisements in 15 foreign languages. Stollenwerk also attended 15 trade shows around the world to help promote Allen-Edmonds's shoes. The company made significant headway in the European market but found a great deal of resistance in Asia.

Company Perspectives:

At Allen-Edmonds, we do everything possible to make sure customers are completely satisfied. That means offering only the highest-quality products. It means going out of our way to deliver exceptional service. And it means treating customers with honesty and integrity at all times.

Overcoming Fire in 1984

After four years at the helm, Stollenwerk had achieved solid progress. The business was once again showing a profit and annual sales had grown to $17 million. But everything would be placed in jeopardy one January night in 1984 when the temperature was 25 degrees below, and a malfunctioning boiler in the headquarters plant started a fire that burned the entire structure—other than the chimney—to the ground. For about 30 minutes, Stollenwerk watched the blaze, which would destroy $14 million in equipment and some 50,000 pairs of shoes, then decided there was nothing he could do and went home to bed, knowing that he and his workers faced many long days in the weeks to come. The company was well insured, having just rewritten its fire and business-interruption insurance. In recent years, hundreds of U.S. shoe manufacturers had moved offshore, and the fire now presented Stollenwerk with an ideal opportunity to join the exodus to another country, or even move to another part of the United States where labor was cheaper. Development agencies from other states were quick to feel him out on the possibility of relocating the business. But Stollenwerk firmly believed that a major factor in the company's success was its skilled workforce, many of whom had worked their entire lives for Allen-Edmonds.

On the Monday following the fire, Stollenwerk spoke to his employees at a subsidiary factory in nearby Lake Church and assured them that Allen-Edmonds was going to stay in Wisconsin and that they were going to find a way to keep the business running. Luckily, the Lake Church facility housed the cutandsew operation, where 14,000 pairs of shoes were in the process of being completed. Of even greater importance, the crucial dies used to cut patterns of leather were kept in Lake Church. Quickly, makeshift arrangements were made. A former school became the company's new headquarters and its gymnasium was converted to serve as a warehouse for finished goods and inventory. Union workers at the Levernz Shoe Co. voted to permit Allen-Edmonds nonunion workers to use their company's New Holstein plant, located some 45 miles away, on Fridays, Saturdays, and Sundays for ten- to 12-hour shifts. This accommodation was of great help until Stollenwerk was able to arrange the rental of a 50,000-square-foot factory, the former home of the Badger Outerwear Co. Customers were also helpful, many returning unneeded goods to Allen-Edmonds to allow the company to assemble a reasonable level of inventory. Stollenwerk also made sure that relationships with employees and customers were maintained. Workers who could not be of use in the beginning were given two week vacations until temporary production arrangements were completed. Commissions to salesmen also were paid promptly, despite the delay in order completion. Further, Allen-Edmonds increased its advertising to emphasize management's commitment to the product. By June the company was able to meet pre-fire production levels.

According to a Wall Street Journal article, the fire was "a blessing of sorts. The factory Allen-Edmonds lost was old and inefficient. Because the company was well-insured and has been able to resume production in rented quarters, it has time, Mr. Stollenwerk says, 'to sit back and build a facility we really need … a year 2000 manufacturing facility.'" Two years later a 69,000-square-foot state-of-the-art shoe factory opened a few miles away in Port Washington. The company resumed its steady pattern of growth. In 1987 Allen-Edmonds launched a women's line of shoes, produced by a California manufacturer familiar with the different requirements in making women's shoes. In that same year, the company also decided to become involved in the production of shoe trees, establishing its Woodlore division. In 1988 Allen-Edmonds opened a dedicated plant for the business.

Overseas, Stollenwerk caused something of an international stir when he crashed a Tokyo trade fair, after enduring five frustrating years attempting to crack the Japanese market. Due to the publicity he generated, Allen-Edmonds achieved some success in exporting its wares to Japan and Taiwan, in order to avert negative publicity, also opened its markets somewhat. Nevertheless, Asia remained a difficult market in which to do business.

Allen-Edmonds was in line to top $30 million in revenues in 1988, but Stollenwerk's partners expressed a desire to cash in and sell the company to Timberland Co. Discussions took place, but in the end Stollenwerk put together a buyout deal, worth in excess of $10 million, working with the Wisconsin Investment Board and several banks. As a result he gained a 90 percent interest in the company and the employees held the remaining 10 percent.

In 1990 Allen-Edmonds attempted to employ a just-in-time manufacturing process but the plan proved to be counterproductive, resulting in a $1 million loss. The company returned to its more traditional approach and restored profitability. Allen-Edmonds's aggressive moves on other fronts, however, were more successful, as the company enjoyed annual sales growth in the 10 percent range. It steadily opened company-owned stores and established leased departments with retailers. With the advent of casual Fridays in the workplace in the early 1990s, the company added a line of "corporate casuals." It enlisted the services of Maine Shoe in Lewiston, Maine, to produce handsewn loafers. The demand for these shoes was so strong that in 1998 Allen-Edmonds bought the operation. One of the greatest challenges for the company during the decade was finding enough skilled workers. The children of longtime employees were now going to college and looking for other ways to make a living. Allen-Edmonds attempted to bus in workers from Milwaukee, but many left after they found employment closer to home. The company now decided to take the jobs to the workers, in 1998 opening a satellite state-of-the-art cut-and-sew plant in downtown Milwaukee.

The sale of Allen-Edmonds men's shoes was so strong in the late 1990s that the company suspended the women's line simply because it lacked the production capacity. In the meantime, the company branched out into accessories, adding belts in 1998, followed two years later by other high-end leather goods, such as wallets, organizers, and key chains. In 1999 Allen-Edmonds introduced hosiery and a line of $100 ties, and in 2001 tested the market for high-quality slippers.

Key Dates:

1922:: Elbert W. Allen and Ralph Spiegel found the company.
1946:: Allen dies, and the firm is now headed by his eldest son.
1968:: A second son, Boyd Allen, becomes president.
1980:: John Stollenwerk leads a buyout of the company.
1988:: Stollenwerk gains a 90 percent interest in the business.
1998:: Allen-Edmonds begins producing leather belts.
2000:: The company begins selling on the Internet.

With the start of a new century, Allen-Edmonds began selling its broadened line of wares on the Internet. Sales now reached the $95 million range, as the company prepared to build another new plant near Milwaukee. But when the economy took a downturn, especially in the aftermath of the terrorist attacks of September 11, 2001, the company held back on the start of construction. A dip in sales forced management to put some employees on a short leave until inventory levels were reduced. The workforce was also allowed to shrink by 10 percent due to attrition. Revenues recovered over the next two years, despite the poor economy, and Allen-Edmonds continued to open new retail stores in Dallas and southern California, while scouting for sites in Boston and Washington, D.C. Another challenge was a shortage of leather caused by the breakout of Mad Cow Disease in Europe. To maintain its place in a highly competitive marketplace, the company took steps in 2003 to change its production process, employing a cell system of manufacturing that called for workers to be trained to perform multiple tasks, and thereby achieve greater efficiency. Allen-Edmonds had considered sending work overseas, but in the end decided against the idea. Nevertheless, Stollenwerk would not foreclose on that option in the future. The economics of the shoe industry were such that the Wisconsin company might have little choice but to follow its competitors overseas. As Stollenwerk told Milwaukee's Business Journal, "We can't be the last one operating here."