Salant Corporation

views updated May 14 2018

Salant Corporation

1114 Avenue of the Americas
New York, New York 10036
U.S.A.
Telephone: (212) 221-7500
Fax: (212) 354-3470

Public Company
Incorporated: 1919 as Salant & Salant, Inc.

Employees: 600
Sales: $419.28 million
Stock Exchanges: New York
Ticker Symbol: SLNT
NAIC: 315223 Mens and BoysCut and Sew Shirt (Except Work Shirt) Manufacturing; 315221 Mens and BoysCut and Sew Underwear and Nightwear Manufacturing; 315224 Mens and BoysCut and Sew Trouser, Slack and Jean Manufacturing; 315228 Mens and BoysCut and Sew Other Outerwear Manufacturing; 315231 Womens and GirlsCut and Sew Lingerie, Loungewear and Nightwear Manufacturing; 315291 InfantsCut and Sew Apparel Manufacturing; 315999 Other Apparel Accessories and Other Apparel Manufacturing

A leading apparel company in the United States, Salant Corporation designs, manufactures, imports, and markets mens wear under several very well known brand names, including Perry Ellis, Ocean Pacific, and Axis. The companys clothing retails in upscale and mid-range department stores. Salant floundered in and out of bankruptcy court throughout the 1990s, during which time it shed its childrens wear, denim, and accessories businesses to focus on Perry Ellis branded mens wear in the early years of the 21st century. Having emerged from Chapter 11 reorganization in 1999, Salant diversified within the better mens wear segment in 2002.

Established 1893

Salant Corporation, incorporated in 1987, is the successor business to Salant & Salant, Incorporated, originally a manufacturer of work shirts. Solomon Salant founded the original company as a partnership with his son, Gabriel, and a third partner in 1893. The partner soon left the company, leaving no mark on its history. Gabriel stayed and the company became a father and son operation, incorporated in 1919. Although the company first became public in 1959 when it was listed on the NASDAQ supplemental, in 1971 Salant distributed enough shares through a primary and a secondary offering to be listed on the New York Stock Exchange. The Salant family decided to offer company shares publicly to diversify the family investments and reorganize equity.

In the beginning, the companys major business was selling to wholesalers and large customers like Montgomery Ward, which maintained a long and substantial account with the company. When the Spanish-American war broke out in 1898, the company also supplied uniforms for the military. Although the army account dried up upon the wars completion, the company maintained its small customer base of wholesalers and large firms well into the 20th century.

Diversification: 1930-70

The face of the company changed as it began to diversify in the 1930s. The biggest change occurred in 1938 when the company began to manufacture utility pants made out of twill. The pants were predecessors to the khakis of World War II. Utility pants became one of Salants principal products by the 1950s.

Although the company primarily manufactured slacks, jeans, and utility pants between the 1950s and 1970s, it diversified into many other areas, among them sportswear, with sport shirts in 1949, jackets in 1954, and casual slacks in 1955. It started selling childrens wear in 1962 and jeans in 1967. Acquisitions in 1964 and 1966 brought coveralls, mens and boys outerwear, suits and sport jackets, and a higher priced line of mens and boys slacks to the companys product mix. In 1964, the company also became one of the first to introduce permanent press apparel, which contributed a substantial amount to company sales until the early 1970s.

As clothing styles changed, the company moved away from the production of chambray work shirts and twill pants, favoring the manufacture of popularly priced jeans and sport and western shirts. This shift in focus by the companys original and largest division allowed it to retain its profitability and position as Salants mainstay until the demand for jeans slowed and competition, especially from overseas, grew in the mid-1970s.

Retrenchment: The 1970s

These market changes adversely affected the Salant & Salant divisions profitability beginning in 1976. The business, which Donald Hamilton of Furman Selz noted in Forbes was barely profitable when the jeans business was booming had to cut prices below breakeven when the jeans maker Levi Strauss lowered its prices. At the same time, rising interest costs and customer demands strained Salants ability to provide mostly low-margin private label goods to retailers like Sears, Roebuck & Co. and Kmart, according to Forbes. Between 1977 and 1980 the divisions cumulative losses amounted to $4 a share or about half of Salants reported earnings during that period. Believing the basic jeans business was no longer a growing market, the company closed the Salant & Salant division in 1981 and began to focus on mens wear, specifically its branded apparel in its large and successful Thomson division. By 1993, the companys product mix was 82 percent mens apparel and accessories, 8 percent womens apparel and accessories, and 10 percent childrens apparel and accessories.

As Salant diversified its products it also added to its distribution. In the 1930s and early 1940s, the company might have had 50 customers. In the 1950s, the company continued to sell to national chains and mail-order houses, but gradually wholesalers disappeared by either going out of business or becoming retail chains. As its traditional customer base changed, Salants management decided to increase volume by selling to smaller retailers and regional chains. By 1972, the company had widened its customer base to about 20,000 accounts, which represented about 37,000 separate stores. At that time, the company sold to most types of retailers, including national chains, mail-order houses, discount stores, regional chains, department stores, smaller independent retailers, and golf pro shops. Wholesalers had become an insignificant part of the companys business.

Although Salant began to broaden its customer base, some of its customers continued to make up significant portions of company sales. Sears, Roebuck & Co. remained one of Salants largest customers for nearly three decades. Two of Salants subsidiaries held agreements (one started in 1960 and the other in 1967) with Sears to buy a set amount of its requirements. In 1971 Sears was the companys biggest customer, accounting for 17 percent of sales. By 1980, Sears accounted for 34 percent of net sales, J.C. Penney Co. Inc. for 16 percent, and Kmart for 12 percent of net sales. In 1985, Sears accounted for 31 percent of sales and J.C. Penney for 18 percent. Salants efforts to diversify its customer base had succeeded to such a point by 1993, however, that no one customer made up more than 6 percent of the companys net sales.

Financial Difficulties Continuing: The 1980s

Salants financial difficulties, stemming from the drop in demand for jeans in the mid-1970s, continued into the 1980s. When Salant declared its first bankruptcy in 1985, it reported a net loss of $8.08 million, which compared with a net loss of $21.2 million the previous year. In an effort to return to profitability the company discontinued several of its clothing divisions, including its Salvation sportswear and Thomson womens wear product lines, terminated the operations of its United Pioneer Company outerwear division (which had made ski jackets and parkas part of the companys principal products line for about a decade), closed its retail outlet stores, and closed several production facilities. Also between 1980 and 1985, Salant had reduced the number of its employees from 9,200 to 2,700. Salant emerged from its first bankruptcy in 1987 with its debt almost halved to $4.8 million.

In 1988, Salant acquired Manhattan Industries, an apparel company with three times Salants annual volume. Manhattan president Nicholas DiPaolo emerged as Salants president and would be promoted to chairman and CEO in 1991. To finance the acquisition, the company raised its debt to $270 million. Two years later, the company became bankrupt a second time. The company was not alone, however, and joined about 25 other companies who between 1985 and 1994 had fallen into second bankruptcy. Although some of the other companies eventually liquidated, Salant got its balance sheet in order, reducing its debt to a manageable amount.

Salant had help deleveraging from one of the most successful corporate empire builders of the 1990s, Leon Black, and one of his companies, Apollo Apparel Partners, L.P. In 1991, Leon Black bought a significant number of defaulted Salant bonds. When Salant came out of bankruptcy in September 1993, Apollo Apparel traded its Salant bonds for company stock. The swap allowed Salant to discharge claims of $64.8 million in principal of some bonds due in 1995 and gave Apollo Apparel 43.8 percent ownership of Salant. Salants financial position in 1994 led Financial World to use it as an example of a potential winner, noting that Salant had more than halved its debt.

Company Perspectives:

Salant Corporation markets and distributes under license agreement from Perry Ellis International, Perry Ellis Mens wear to Department and Specialty Stores in the United States. Perry Ellis products include Sportswear, Pants, Dress Shirts and Accessories, under the Perry Ellis Collection and Perry Ellis Portfolio labels. Salant also markets Tricots St. Raphael, Library and TSR Branded products under its Tricots St. Raphael division and in its Axis Division markets Axis, Paradise and A(x)ist to Better Department and Better Specialty Stores nationally. Salant also markets under license agreements Ocean Pacific Mens wear and categories of JNCO jeans to the mid-tier department stores.

Focus on Mens Wear: The 1990s

As Salant emerged from its second bankruptcy, it concentrated on its largest business, mens wear. Salants purchase of Manhattan Industries, which led in part to its second bankruptcy filing, had a silver lining. Manhattan Industries brought a large international sourcing business to Salant and, more important, a license agreement with Perry Ellis. The Perry Ellis business was so strong it continued to thrive despite Salant Corp.s bankruptcy filing, according to Crains New York Business.

The Daily News Record reported that in 1993 the Perry Ellis name was three times as strong as when Salant assumed control in 1988. By 1994, it accounted for 26 percent of Salants net sales, compared with Salants Manhattan trademark, which accounted for 12 percent, the John Henry trademark (9 percent), and the Thomson trademark (8 percent of net sales). No other of Salants more than a dozen trademarks made up more than 5 percent of Salants 1994 sales.

Salants 1993 introduction of its Thomson brand wrinklefree dress shirt also brought the first branded wrinkle-free dress shirt to market and came at a time when mens clothing was the fastest growing segment of the apparel industry. The company appeared to be back on track.

Salants acquisition of Manhattan had significantly increased its international business. Before the 1970s, Salant owned a Canadian subsidiary that designed, manufactured, and sold slacks, jeans, utility pants, and shirts in Canada, and in 1972, Salant built its first of several production facilities in Mexico. But by the 1990s, more than half of the companys products were produced abroad. Although the company continued to operate its Mexican plants and a Canadian subsidiary (the first was sold and another purchased in the meantime), much of the companys imported products and materials came from Manhattans extensive international sourcing business. In 1994, Salants facilities accounted for 84 percent of its domestic-made products and 28 percent of its foreign-made products.

Diversification: The Mid-1990s

As it had after its first bankruptcy, Salant sought to improve its competitive strength by buying a better product mix. This time, however, the company kept a keener eye on its balance sheet. Although its resources were limited, Salant acquired Canadian-based JJ. Farmer Clothing Inc. in June of 1994. The acquisition was notable, however, because it left Salants financial position almost unchanged. Salant retained its financial flexibility by making the acquisition on an earnout basis, which linked the purchase price of JJ. Farmer to its performance over a certain period of time. JJ. Farmer quickly helped boost Salants sales, accounting for approximately one-third of Salants $13.6 million net sales increase in the third quarter of 1994.

In addition to its acquisition, Salant added to its dress shirt business through a license agreement with Crystal Brands, Inc. in 1994. Salant agreed to produce dress shirts and furnishings under the Salty Dog and Gant trademarks. Salant President Nicholas P. DiPaolo noted the strong consumer following enjoyed by the Gant brand and remarked, With our marketing and manufacturing expertise we will be able to build on an already solid base. The addition of the Gant and Salty Dog brands to our existing well-known labels insures our continued growth and leadership role in the dress shirt and furnishings categories.

Salants focus on mens wear in the 1990s was on track with trends in the apparel industry. Mens clothing, which accounted for 36 percent of all apparel sales, outperformed all other apparel categories in 1992, according to Standard & Poors Industry Surveys. The sale of mens sportswear benefited from wrinkle-resistant textiles, which followed a trend toward more casual attire in the office. Although Salants start-up costs for entering the wrinkle-resistant shirt business had lowered operating earnings in 1994, the company was encouraged by sales of Perry Ellis sportswear and wrinkle resistant dress shirts and slacks, according to the Daily News Record.

Throughout its history, Salants corporate operations remained centered in its New York headquarters. But by the 1990s the companys production had become dispersed, mainly throughout the South. In 1994, Salant owned six U.S. manufacturing facilities located in Alabama, Georgia, New York, Tennessee, and Texas, three manufacturing facilities in Mexico, and five distribution centers located in Georgia, New York, South Carolina, and Texas. The company also leased space for 57 factory outlet stores and one retail store.

Key Dates:

1893:
Solomon Salant and his son, Gabriel, found Salant & Salant, Incorporated.
1919:
The father and son business is incorporated.
1938:
The company begins to manufacture one of its principal products, utility pants.
1959:
The company is listed on the NASDAQ supplemental.
1964:
The company introduces permanent press apparel.
1971:
The company is listed on the New York Stock Exchange.
1985:
Salant declares bankruptcy, reporting a net loss of $8.08 million.
1987:
Salant emerges from bankruptcy, with its debt almost halved to $4.8 million.
1988:
Salant acquires Manhattan Industries.
1991:
Nicholas DiPaolo becomes chairman and CEO.
1993:
The company falls into a second bankruptcy, but is able to reduce its debt to a manageable amount as Apollo Apparel acquires 43.8 percent ownership.
1994:
Salant acquires JJ. Farmer Clothing Inc.; through a license agreement with Crystal Brands, Inc., Salant begins to produce dress shirts under the Salty Dog and Gant trademarks.
1997:
DiPaolo resigns as CEO and is succeeded by Jerald Politzer.
1998:
Again in bankruptcy court, with $110 million in debt, Salant exchanges a controlling ownership to Magien Asset Management Corporation; Michael Setola succeeds Jerald Politzer.
1999:
Salant emerges from Chapter 11 reorganization.
2001:
Sales continue to decline, to $207.8 million, and the company records a loss of $1.9 million.
2002:
Salant acquires Ocean Pacific Apparel Corporations youth-oriented brand of mens wear.

Salant looked toward a solid future in 1994. Despite a declining dress shirt market, Salant had increased its sales and market share in that category to benefit from any improvement in market conditions, according to the company. The companys Manhattan label had become the Wal-Mart chains bestselling brand of dress shirt while both the Perry Ellis and John Henry brands enjoyed increased sales in department and specialty stores. As Salant took steps to maintain the strength of its position in mens dress wear, it also expanded into the fastest growing area of mens wear, casual apparel. In 1995, the company inked a deal with Sears to make its private-label denim shirts and pants for men and boys under the Canyon River Blues name. Supported by its Childrens Apparel Group, which made sleepwear under brands including Dr. Denton, Barney, Disney characters, and Osh Kosh BGosh, and sales of its womens wear brands, including Vera and Made in the Shade, Salants mens wear business seemed capable of maintaining its solid and prosperous position.

Financial Struggles: The Late 1990s

That solidity and prosperity proved fleeting when an anemic market for dress shirts combined with increased competition to negatively impact Salants profit margins. In fact, the company chalked up a $7.9 million loss on sales of $419.3 million in 1994. After having its debt downgraded by Moodys in 1995, the company restructured twice in 1996, closing two Georgia plants and discontinuing its Liberty of London, Nino Cerniti, and Peanuts lines of dress shirts. Salant also sold off its JJ. Farmer division that year. At that time, the plan was to focus on five business areas: Perry Ellis sportswear, dress shirts, slacks, and accessories; John Henry dress shirts; Manhattan dress shirts; private-label brands like Canyon River Blues; and novelty accessories. DiPaolo told Daily News Record in March 1996, The provision for restructuring reflects our continuing effort to focus our business on those product lines that offer our customers significant value while maintaining higher margins.

DiPaolo resigned in 1997 and was succeeded by Jerald Politzer, who served as CEO for barely a year before the company again found itself in bankruptcy court. Mired in $110 million in debt, Salant was forced to exchange a controlling ownership in the company to Magien Asset Management Corporation. Under the direction of Michael Setola, Salant retrenched to what had become its bedrock: Perry Ellis mens clothing. The company divested its John Henry, Manhattan, Dr. Denton childrens wear, and Canyon River Blues jeans, leaving it with more than 80 percent of net sales from Perry Ellis licensed merchandise. Sales declined steadily throughout the late 1990s, from $347.7 million in 1997 to $248.7 million upon Salants emergence from reorganization in 1999. The company was able to vastly improve the balance sheet, however, from a net loss of $18.1 million to $20.6 million in the period.

It was not long before Salant again began to diversify, this time maintaining a focus on the better mens wear category. In 2000, the company licensed the Tallia brand for sportswear and accessories, and in 2002, acquired AXIS Mens wear, maker of better quality clothing sold in pricey department stores and specialty outlets. That same year, Ocean Pacific Apparel Corporation entrusted Salant to take its heretofore youthoriented brand to the 25 to 50 age group. Michael Setola, who had succeeded Jerald Politzer in 1998, told Daily News Record in January 2002, The relationship with Ocean Pacific Apparel represents yet another step forward for Salant in diversifying our mens wear distribution. It remained to be seen whether the companys new direction would prove profitable in the long run. Sales continued their multiyear decline to $207.8 million in 2001, and after two consecutive years of profitability, the company recorded a loss of $1.9 million that year.

Principal Competitors

Haggar Corporation; Tommy Hilfiger Corporation; Phillips-Van Heusen Corporation; Oxford Industries Inc.

Further Reading

Aided by Debt Restructuring, Salant Posts Earnings of $22.1 Million, Daily News Record, August 23, 1999, p. 110.

Charges Add Up to a $4.5 M 4th-Period Loss at Salant; Company

Back in Black For Year,Daily News Record, March 25, 1996, p. 1.

Curan, Catherine M., Report Salant to Make Private-Label Denim Tops and Bottoms for Sears, Daily News Record, March 23, 1995, p. 4.

, Salant Discontinues Vera Scarf; May Sell or License Trademark, WWD, March 13, 1995, p. 13.

, Salant Grabs an Oscar, Daily News Record, December 18, 1995, p. 3.

, Salant to Sell Farmer Division, Daily News Record, August15, 1996, p. 1.

DiPaolo to Leave Salant This Year, Daily News Record, March 10, 1997, p. 1.

Furman, Phyllis, Without Its Founder, Perry Ellis Thrives, Crains New York Business, October 26, 1992, p. 3.

Gellers, Annmarie Doddstan, Hartz Gives Salant License for Tallia Sportswear Line, Daily News Record, May 8, 2000, p. 1.

Hart, Elena, Perry Ellis Mens Stronger Than Ever, Daily News Record, February 19, 1993, p. 5.

Light, Larry, Trouble Outfits That Turn into Two-Time Losers, Business Week, April 26, 1993, pp. 81-82.

Moodys Downgrades Salants Rating; Points to Poor Financial Showing, Daily News Record, May 15, 1995, p. 2.

Romero, Elena, Ocean Pacific Brand Growing Up, Daily News Record, January 14, 2002, p. 8.

Salant Acquires JJ. Farmer, Canadian Sportswear Maker, Daily News Record, June 16, 1994.

Salant Corp-Acquisition of Axis Clothing Corporation, Market News Publishing, January 14, 2002.

Salant Operating Earnings Plummet 62% in Second Period, Daily News Record, August 9, 1994, p. 7.

Schifrin, Matthew, and Riva Atlas, Hocus-Pocus, Forbes, March 14, 1994, pp. 81-83.

Taub, Stephen,Market Watch: Double-Dippers, Bankruptcy Style, Financial World, March 29, 1994, p. 14.

Young, Vicki M., Debt Restructuring Gives Salant New Lease on Life, Daily News Record, March 4, 1998, p. 1A.

Sara Pendergast

update: April D. Gasbarre

Salant Corporation

views updated May 18 2018

Salant Corporation

1114 Avenue of the Americas
New York, New York 10036
U.S.A.
(212) 2217500
Fax: (212) 3543467

Public Company
Incorporated: 1919 as Salant & Salant, Incorporated
Employees: 4,200
Sales: $419.28 million
Stock Exchanges: New York
SICs: 2321 Mens/Boys Shirts; 2325 Mens/Boys Trousers
& Slacks; 2323 Mens/Boys Neckwear; 2337 Womens/
Misses Suits & Coats

A leading apparel company in the United States, Salant Corporation designs, manufactures, imports, and markets clothing products under several brand names, including Perry Ellis, Dr. Dentón, JJ. Farmer, John Henry, Manhattan, Thomson, Vera, Osh Kosh BGosh, and Peanuts. Among its several divisions, Salants mens and boys shirt business was ranked second in the apparel industry by Wards Business Directory 1995. Salants 1993 introduction of its Thomson brand wrinklefree dress shirt also brought the first branded wrinklefree dress shirt to market and came at a time when mens clothing was the fastest growing segment of the apparel industry. Apart from its focus on mens wear, the companys other activities include the manufacture and sale of childrens wear and womens wear.

Salant Corporation, incorporated in 1987, is the successor business to Salant & Salant, Incorporated, originally a manufacturer of work shirts. Solomon Salant founded the original company as a partnership with his son, Gabriel, and a third partner in 1893. The partner soon left the company, leaving no mark on its history. Gabriel stayed and the company became a father and son operation, incorporated in 1919. Though the company first became public in 1959 when it was listed on the NASDAQ supplemental, in 1971 Salant distributed enough shares through a primary and a secondary offering to be listed on the New York Stock Exchange. The Salant family decided to offer company shares publicly to diversify the family investments and reorganize equity.

In the beginning, the companys major business was selling to wholesalers and large customers like Montgomery Ward, which maintained a long and substantial account with the company. When the SpanishAmerican war broke out in 1898, the company also supplied uniforms for the military. Though the army account dried up upon the wars completion, the company maintained its small customer base of wholesalers and large firms well into the twentieth century.

The face of the company changed as it began to diversify in the 1930s. The biggest change occurred in 1938 when the company began to manufacture utility pants made out of twill. The pants were predecessors to the khakis of World War II. Utility pants became one of Salants principal products by the 1950s.

Though the companys primarily manufactured slacks, jeans, and utility pants between the 1950s and 1970s, it diversified into many other areas, among them sportswear, with sport shirts in 1949, jackets in 1954, and casual slacks in 1955. It started selling childrens wear in 1962 and jeans in 1967. Acquisitions in 1964 and 1966 brought coveralls, mens and boys outerwear, suits and sport jackets, and a higher priced line of mens and boys slacks to the companys product mix. In 1964, the company also became one of the first to introduce permanent press apparel, which contributed a substantial amount to company sales until the early 1970s.

As clothing styles changed, the company moved away from the production of chambray work shirts and twill pants, favoring the manufacture of popularlypriced jeans and sport and western shirts. This shift in focus by the companys original and largest division allowed it to retain its profitability and position as Salants mainstay until the demand for jeans slowed and competition, especially from overseas, grew in the mid1970s.

These market changes adversely affected the Salant & Salant divisions profitability beginning in 1976. The business, which Donald Hamilton of Furman Selz noted in Forbes was barely profitable when the jeans business was booming ... had to cut prices below breakeven when the jeansmaker Levi Strauss lowered its prices. At the same time, rising interest costs and customer demands strained Salants ability to provide mostly lowmargin private label goods to retailers like Sears, Roebuck & Co. and Kmart, according to Forbes. Between 1977 and 1980 the divisions cumulative losses amounted to $4 a share or about half of Salants reported earnings during that period. Believing the basic jeans business was no longer a growing market, the company closed the Salant & Salant division in 1981 and began to focus on menswear, specifically its branded apparel in its large and successful Thomson division. By 1993, the companys product mix was 82 percent mens apparel and accessories, eight percent womens apparel and accessories, and ten percent childrens apparel and accessories.

As Salant diversified its products it also added to its distribution. In the 1930s and early 1940s, the company might have had 50 customers. In the 1950s, the company continued to sell to national chains and mailorder houses, but gradually wholesalers disappeared by either going out of business or becoming retail chains. As its traditional customer base changed, Salants management decided to increase volume by selling to smaller retailers and regional chains. By 1972, the company had widened its customer base to about 20,000 accounts, which represented about 37,000 separate stores. At that time, the company sold to most types of retailers, including national chains, mailorder houses, discount stores, regional chains, department stores, smaller independent retailers, and golf pro shops. Wholesalers had become an insignificant part of the companys business.

Though Salant began to broaden its customer base, some of its customers continued to make up significant portions of company sales. Sears, Roebuck & Co. remained one of Salants largest customers for nearly three decades. Two of Salants subsidiaries held agreements (one started in 1960 and the other in 1967) with Sears to buy a set amount of its requirements. In 1971 Sears was the companys biggest customer, accounting for 17 percent of sales. By 1980, Sears accounted for 34 percent of net sales, J. C. Penney Co. Inc. for 16 percent, and Kmart for 12 percent of net sales. In 1985, Sears accounted for 31 percent of sales and J. C. Penney for 18 percent. Salants efforts to diversify its customer base had succeeded to such a point by 1993, however, that the no one customer made up more than six percent of the companys net sales.

Salants financiar difficulties, stemming from the drop in demand for jeans in the mid1970s, continued into the 1980s. When Salant declared its first bankruptcy in 1985, it reported a net loss of $8.08 million, which compared with a net loss of $21.2 million the previous year. In an effort to return to profitability the company discontinued several of its clothing divisions, including its Salvation sportswear and Thomson womens wear product lines, terminated the operations of its United Pioneer Company outerwear division (which had made ski jackets and parkas part of the companys principal products line for about a decade), closed its retail outlet stores, and closed several production facilities. Also between 1980 and 1985, Salant had reduced the number of its employees from 9,200 to 2,700. Salant emerged from its first bankruptcy in 1987 with its debt almost halved to $48 million.

In 1988, Salant acquired Manhattan Industries, an apparel company with three times Salants annual volume. To finance the acquisition, the company raised its debt to $270 million. Two years later, the company became bankrupt a second time. The company was not alone, however, and joined about 25 other companies who between 1985 and 1994 had fallen into second bankruptcy. Though some of the other companies eventually liquidated, Salant got its balance sheet in order, reducing its debt to a manageable amount.

Salant had help deleveraging from one of the most successful corporate empire builders of the 1990s, Leon Black, and one of his companies, Apollo Apparel Partners, L.P. In 1991, Leon Black bought a significant number of defaulted Salant bonds. When Salant came out of bankruptcy in September 1993, Apollo Apparel traded its Salant bonds for company stock. The swap allowed Salant to discharge claims of $64.8 million in principal of some bonds due in 1995 and gave Apollo Apparel 43.8 percent ownership of Salant. Salants financial position in 1994 led Financial World to use it as an example of a potential winner, noting that Salant had more than halved its debt.

As Salant emerged from its second bankruptcy, it concentrated on its largest business, menswear. Salants purchase of Manhattan Industries, which lead in part to its second bankruptcy filing, turned into one of the companys smartest decisions. Manhattan Industries brought a large international sourcing business to Salant and, more importantly, a license agreement with Perry Ellis. The Perry Ellis business was so strong it continued to thrive despite Salant Corp.s 1990 bankruptcy filing, according to Crains New York Business. The Daily News Record reported that in 1993 the Perry Ellis name was three times as strong as when Salant assumed control in 1988. By 1994, it accounted for 26 percent of Salants net sales, compared with Salants Manhattan trademark, which accounted for 12 percent, the John Henry trademark (nine percent, and the Thomson trademark (eight percent of net sales). No other of Salants more than a dozen trademarks made up more than five percent of Salants 1994 sales.

Salants acquisition of Manhattan significantly increased its international business. Before the 1970s, Salant owned a Canadian subsidiary that designed, manufactured, and sold slacks, jeans, utility pants, and shirts in Canada, and in 1972, Salant built its first of several production facilities in Mexico. But by the 1990s, over half of the companys products were produced abroad. Though the company continued to operate its Mexican plants and a Canadian subsidiary (the first was sold and another purchased in the meantime), much of the companys imported products and materials came from Manhattans extensive international sourcing business. In 1994, Salants facilities accounted for 84 percent of its domesticmade products and 28 percent of its foreignmade products.

As it did after its first bankruptcy, Salant sought to improve its competitive strength by buying a better product mix. The second time, however, Salant kept a keener eye on its balance sheet. With its limited resources, Salant acquired Canadianbased JJ. Farmer Clothing Inc. in June of 1994. The acquisition was notable, however, because it left Salants financial position almost unchanged. Salant retained its financial flexibility by making the acquisition on an earnout basis, which links the purchase price of JJ. Fanner to its performance over a certain (as yet unspecified) period of time. JJ. Farmer quickly helped boost Salants sales, accounting for approximately onethird of Salants $13.6 million net sales increase in the third quarter of 1994.

In addition to its acquisition, Salant added to its dress shirt business through a license agreement with Crystal Brands, Inc. in 1994. Salant agreed to produce dress shirts and furnishings under the Salty Dog and Gant trademarks. Salant president Nicholas P. DiPaolo noted the strong consumer following enjoyed by the Gant brand and remarked, with our marketing and manufacturing expertise we will be able to build on an already solid base. The addition of the Gant and Salty Dog brands to our existing wellknown labels insures our continued growth and leadership role in the dress shirt and furnishings categories.

Salants focus on menswear in the 1990s was on track with trends in the apparel industry. Mens clothing, which accounted for 36 percent of all apparel sales, outperformed all other apparel categories in 1992, according to Standard & Poors Industry Surveys. The sale of mens sportswear benefitted from wrinkleresistant textiles, which followed a trend toward more casual attire in the office. Though Salants startup costs for entering the wrinkleresistant shirt business lowered operating earnings in 1994, the company was encouraged by sales of Perry Ellis sportswear and wrinkle resistant dress shirts and slacks, according to the Daily News Record.

Salants corporate operations have remained centered in its New York headquarters. But by the 1990s the companys production had become dispersed, mainly throughout the South. In 1994, Salant owned six U.S. manufacturing facilities located in Alabama, Georgia, New York, Tennessee, and Texas, three manufacturing facilities in Mexico, and five distribution centers located in Georgia, New York, South Carolina, and Texas. The company also leased space for 57 factory outlet stores and one retail store.

Salant looked toward a solid future in 1994. Despite a declining dress shirt market, Salant had increased its sales and market share in that category to benefit from any improvement in market conditions, according to the company. The companys Manhattan label had become the WalMart chains bestselling brand of dress shirt while both the Perry Ellis and John Henry brands enjoyed increased sales in department and specialty stores. As Salant took steps to maintain the strength of its position in mens dress wear, it planned to expand into the fastest growing area of menswear, casual apparel. Supported by its profitable Childrens Apparel Group, which makes sleepwear under brands including Dr. Dentón, Barney, Disney characters, and Osh Kosh BGosh, and sales of it womens wear brands, including Vera and Made in the Shade, Salants menswear business seemed capable of maintaining its solid and prosperous position in the 1990s market.

Further Reading

Furman, Phyllis, Without Its Founder, Perry Ellis Thrives, Crains New York Business, October 26, 1992, p. 3.

Hart, Elena, Perry Ellis Mens Stronger Than Ever, Daily News Record, February 19, 1993, p. 5.

Light, Larry, Trouble Outfits that Turn into TwoTime Losers, Business Week, April 26, 1993, pp. 8182.

Salant Acquires JJ. Farmer, Canadian Sportswear Maker, Daily News Record, June 16, 1994.

Salant Operating Earnings Plummet 62% in Second Period, Daily News Record, August 9, 1994, p. 7.

Schifrin, Matthew, and Riva Atlas, HocusPocus, Forbes, March 14, 1994, pp. 8183.

Taub, Stephen, Market Watch: DoubleDippers, Bankruptcy Style, Financial World, March 29, 1994, p. 14.

Sara Pendergast

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