The United States Shoe Corporation

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The United States Shoe Corporation

One Eastwood Drive
Cincinnati, Ohio 45227
U.S.A.
(513) 527-7000
Fax: (513) 561-2007

Public Company
Incorporated: 1931
Employees: 49,000
Sales: $2.72 billion
Stock Exchanges: New York Pacific

The United States Shoe Corporation not only manufactures, imports and sells 25 of the most popular brands of shoes in the United States, but also operates 56 Lens Crafters optical stores as well as 1,763 women’s retail clothing stores, among them Casual Corner, Petite Sophisticate, and August Max Woman speciality shops. The company has become the United States’s second-largest operator of women’s specialty retail stores, while Lens Crafters is the largest optical chain in the United States and Canada.

The origins of the multibillion-dollar United States Shoe Corporation lie in Cincinnati, Ohio, in the 1870s, at a time when there were virtually no brand names for shoes, nor any difference between left and right shoe, and all shoes were of the same width. Nonetheless, the shoe business in those days was intensely competitive and concentrated in New England. Cincinnati, however, was a prosperous, booming area that attracted numerous industrious immigrants, among them German immigrants. Their descendants founded the Stern-Auer Shoe Company in 1879 with a small factory in the heart of Cincinnati. In 1896 two other residents of the city, Irwin Krohn and Samuel Fechheimer, founded the Krohn-Fechheimer Shoe Company, which produced Red Cross shoes. Irwin Krohn was a believer in brand names, with which customers could identify and that were easy to advertise. By the mid-1890s the name Red Cross was a well-known brand. It originated with a red-haired merchant named Cross, who christened his tomato ketchup Red Cross. This name caught on rapidly and was soon used on other products.

Red Cross women’s shoes, advertised as the “noiseless” shoe, caught on as quickly as had Red Cross ketchup and brought the firm of Krohn-Fechheimer much prosperity. However, the modest but growing companies of Stern-Auer and Krohn-Fechheimer suffered setbacks in the aftermath of World War I. The boom years of the war quickly gave way to economic recession and inflation, and high-topped women’s shoes, in vogue for generations, had gone out of style. This brought a need for serious adjustments, which were stymied by a six-month strike in the Cincinnati shoe industry in 1921. A local industrialist, Lewis S. Rosenthal, initiated a proposal to merge eight Cincinnati-area shoe firms, including Krohn-Fechheimer, into the United States Shoe Company. The future looked good, as the Red Cross shoe brand was still popular, and the economy had begun to recover.

The new United States Shoe Company foundered, however, the fault lying not in the product as much as in the marketing arena. By 1929 the firm had virtually collapsed and might have expired had not Stern-Auer come to the rescue. In 1913 Joseph S. Stern, Sr., had joined Stern-Auer, and he turned out to have a talent for marketing. Sensing the possibilities of the Krohn-Fechheimer Red Cross shoe brand, Stern-Auer proposed a merger with the United States Shoe Company, but only if Stern-Auer could be in charge of marketing the famous brand. Negotiations dragged on for the formation of the new United States Shoe Corporation, of which Joseph S. Stern, Sr., would become president.

The time for the establishment of a new corporation could not have been less auspicious—the depths of the Great Depression. Critics scoffed when the newly minted United States Shoe Corporation (U.S. Shoe), incorporated in the fall of 1931, announced that henceforth it would produce for $6 retail the same Red Cross shoe that had been selling at $10. Production skyrocketed, however, from 600 pairs per day to 3,000 pairs by 1933. Soon demand exceeded production, and by 1939 the Red Cross shoe had become the most popular brand in the United States. The firm grew, and no employees were laid off during the Depression. Joseph S. Stern, Sr., and soon his son, Joseph S. Stern, Jr., would lead the company to greater growth. Employees benefited from the prosperity—in 1940 a profit-sharing plan was introduced at a time when other industries were barely recovering from economic hard times, and in 1952 an employee pension plan was offered.

Red Cross shoes were doing well at home and abroad, where, in English-speaking countries as distant as South Africa and Australia, they were marketed as Gold Cross shoes. To keep up with demand, two factories were purchased, one in Chillicothe, Ohio, in 1936, and the shoe factory of Plaut-Butler, Inc., in Harrison, Ohio, in 1941. U.S. Shoe bid for and won the right to design the official Women’s Army Corps shoe during World War II, which heightened the company’s prestige. At the onset of the war, the American National Red Cross objected to the commercial use of the name Red Cross, and a ban on the use of the name was proposed by the House Foreign Affairs Committee in 1942. The board of directors of U.S. Shoe voluntarily suspended use of the name; the Federal Trade Commission allowed the resumption of its use in 1948. After the war the demand for shoes, after years of rationing, was so great that another plant was opened—a modern factory in Crothersville, Indiana. Because of a worldwide leather shortage, however, the new plant was forced to shut down temporarily soon after it opened. Finally, production climbed and between 1946 and 1953, four additional factories were added. The Red Cross label was reinstated on the condition that the company publicly disclaim any association with the American National Red Cross, and the energetic Joseph S. Stern, Sr., became chairman of the board in 1947, a post he would hold for the next 18 years. As president and chairman, he would oversee the company’s rapid expansion in the 1950s. In 1953 a record of 435,000 pairs of shoes were manufactured. In 1955, when shoe production reached 100,000 pairs a week, more factories had to be bought. In 1956 the company was listed on the New York Stock Exchange.

While still the largest manufacturer of women’s shoes in the country, U.S. Shoe began to plan ahead, its directors realizing that untrammeled growth based on one shoe brand would be impossible in the long run. Europe was recovering from the ravages of World War II, and Spanish as well as Italian shoes were beginning to compete in the United States. Broadening into other marketing areas, starting with other shoe brands, was in order.

U.S. Shoe began its diversification in 1955 with the acquisition of Joyce Inc., which produced a popular brand of women’s shoe under the Joyce name. In 1957 U.S. Shoe acquired rights to the brand name Selby. The company also introduced other brands, such as Cobbies and Socialites. In 1961 the company entered the lucrative children’s shoe market with the purchase of Vaisey-Bristol Shoe Company, maker of Jumping-Jacks and other children’s brands. These acquisitions and accompanying expansions brought the number of factories to 12, no longer confined to Ohio but located across the Midwest and in Puerto Rico. Also in 1961 U.S. Shoe formed Imperial Adhesives, Inc., to enable the company to develop its own shoe-manufacturing materials and depend less on outside suppliers.

U.S. Shoe entered the shoe retailing business in the 1960s, acquiring Wm. Hahn & Co. in 1963, and Cutter-Karcher Shoe Company in 1964. Responding to the popularity of foreign-made shoes, in 1962 U.S. Shoe acquired Marx & Newman Company, a leading importer based in New York. In 1970 U.S. Shoe opened its Europa division with the establishment of a European liaison office in Florence, Italy, followed by the establishment of an office in Alicante, Spain, and in 1978, one in Taiwan.

In 1965 Joseph S. Stern, Sr., stepped down as chairman, to be succeeded by Nathan Stix, who had been president since 1961. Joseph S. Stern, Jr., took over as president. In 1967 U.S. Shoe was the fourth-largest manufacturer of shoes in the United States and by then was also manufacturing boots, after having acquired Texas Boot Manufacturing Company in 1965. While U.S. Shoe continued acquiring other shoe companies, in the next few years it diversified into women’s and men’s apparel. In 1969 U.S. Shoe purchased Casual Corner, followed in 1970 by the formation of J. Riggings, a group of specialty men’s stores. This was followed by the acquisition in 1981 of a discount women’s apparel retailer, T.H. Mandy.

In 1980 a new office park and complex for U.S. Shoe was dedicated in Cincinnati. It would house a corporate office building, raw materials warehouse, and a finished goods distribution center. By then Philip G. Barach was president of the company and chairman of the board. The 1980s would pose the greatest challenges to the company, which had to confront the major competition of cheap Asian and South American imports.

By the late 1980s, half of the company’s income was derived from women’s apparel retailing operations, whose stores numbered in the 1,800 range. In fact, the clothing division of U.S. Shoe by 1989 was the second-largest group of women’s apparel stores in the United States, almost all of them located in shopping malls. The largest number of stores belonged to Casual Corner, a highly successful national retail chain; the runner-up was Petite Sophisticate, purchased in 1983 and one of the first major U.S. chains geared to petite women. Sales of Petite Sophisticate soared from $6 million in 1983 to a $168 million in 1989. Trailing the two leading chains were Ups ’N’ Downs, geared to the shrinking teen market, and August Max Woman, earmarked for larger-sized women. In 1991 U.S. Shoe decided to sell Ups ’N’ Downs.

By far the biggest success for U.S. Shoe in the 1980s was the performance of its optical chain, Lens Crafters. From 1988 to 1989, sales of Lens Crafters grew 28%. The largest optical store chain in the United States and Canada, Lens Crafters was the only national chain offering one-hour service. By the early 1990s, Lens Crafters numbered more than 400 stores, located not only in malls but in strategic business locations in remote areas, with plans to open 100 more. During the recession of the early 1990s, sales of Lens Crafters stores plummeted for the first time, alarming investors, although U.S. Shoe management predicted a strong comeback. Expansion into England and other European countries, where there were no optical superstores, was expected to increase sales.

Footwear accounted for only one third of U.S. Shoe’s sales by the late 1980s. Despite the presence of offices in Europe, Asia, and Brazil, sales in the foreign shoe division declined throughout the 1980s. The same held true for domestic shoe sales. In 1989 U.S. Shoe attempted to sell the entire shoe division to an investor group led by Merrill Lynch Capital Partners, which later backed out for reasons not made public. The outlook however, was far from bleak. U.S. Shoe’s Easy Spirit line, women’s dress shoes with support and comfort features, has grown rapidly and become the largest unit in the shoe division. In the early 1990s, U.S. Shoe was considering expanding Easy Spirit into the men’s and children’s shoe areas.

Still, some problems in the shoe division remained. Accounting irregularities in the company’s Marx & Newman subsidiary caused much concern among investors in 1990; U.S. Shoe took a $7.4 million charge against its earnings and initiated management and policy changes in the unit. The once popular shoe brands, Joyce and Cobbie, suffered from poor style designs. A new chief executive officer, Bannus B. Hudson, elected in 1990, met with skepticism from industry observers because of his inexperience in shoe and women’s apparel retailing. U.S. Shoe’s knack for inventiveness and adaptability however, will most likely carry the company through these problems.

Principal Subsidiaries

Marx & Newman; Lens Crafters; Women’s Specialty Retailing; Cincinnati Shoe; Hahn Shoes; Banister Factory Outlet Stores; Cobbie Shop; Joyce/Selby Shoe; Shop for Pappagallo.