The White House, Inc.

6711 Baymeadow Drive
Glen Burnie, Maryland 21060
U.S.A.
Telephone: (410) 487-7747
Fax: (410) 487-4688
Web site: http://www.whiteandblack.com

Wholly Owned Subsidiary of Chico's FAS, Inc.
Founded: 1985
Employees: 693
Sales: $67 million (2003)
NAIC: 448120 Women's Clothing Stores

The White House, Inc. is a women's apparel retailer that operates more than 100 stores under the "White House/Black Market" banner. The company's stores carry only white-colored and black-colored merchandise. Product selection at the stores, which average 1,800 square feet, includes day and evening wear, lingerie, handbags, jewelry, and other accessories. The company's stores are located in 30 states, Puerto Rico, and the Virgin Islands.

A Single Store Opens in 1985

Richard D. Sarmiento spent most of his adult life working in a hotel before his entrepreneurial desires found expression. For 15 years, Sarmiento worked for Hyatt Hotels, serving the last five years of his career with the hotel giant as the general manager of Hyatt Regency Inner Harbor in Baltimore, Maryland. Sarmiento decided to start his own business while he was acting as the Hyatt Regency's general manager, an arrangement that would give him the security of stable employment while he navigated the precarious waters of entrepreneurship. Sarmiento enjoyed immediate success with his new business primarily because of its unique concept, but this concept alone was not the impetus for its creation. Sarmiento was motivated by a location rather than a concept, convinced that a business situated in Baltimore's Harborplace would fare well. At first, he wanted to open a lingerie store in the Gallery, a mall located at Harborplace, but the slated debut of a Victoria's Secret in the mall forced Sarmiento to search for another business idea. For help, he turned to the mall's developer and owner, The Rouse Corporation.

The format underpinning The White House's success was conceived at a meeting between Sarmiento and executives at Rouse. During the meeting, the idea of a women's clothing boutique selling only white apparel was proposed, an idea that Sarmiento viewed with some skepticism. "At first," he said in a July 5, 1991 interview with the Baltimore Business Journal, "I wondered what's going to happen once Labor Day comes? Will everyone stop wearing white?" Sarmiento's initial trepidation was not enough to keep him from moving forward, however. With a $35,000 loan from Sovran Bank, he opened his store in 1985, a 286-square-foot boutique named The White House. On the store's racks and shelves, the only items available were white or in shades of white. Although the store featured modestly priced merchandise, the store catered to an upscale clientele, with sweaters and leather items priced as high as $700.

Sarmiento's store performed extremely well from the start, finding a receptive audience among women in their 30s and 40s. Although the first, small store was successful, Sarmiento had a difficult time convincing others that the store's success was attributable to more than mere novelty. "People were still telling me it wouldn't work," he remarked in a September 2002 interview with Chain Store Age, "but I felt sure I had stumbled across what could be a national chain." Sarmiento's conviction led him to make what he described as one of the most difficult decisions of his life. In 1986, a year after starting out, he decided to give The White House his full attention. He resigned from the Hyatt Regency and funneled his retirement savings and assets into his burgeoning business. By the following year, there were three stores under his control. Together, the stores generated $700,000 in sales for the year.

Sarmiento's financial commitment to his company paid dividends. By 1989, his stores generated nearly $2 million in sales. By the following year, there were stores in Maryland, Washington, D.C., New Jersey, South Carolina, and Florida. Combined, the stores generated $3.1 million in sales. By this point Sarmiento was thoroughly convinced The White House was ready to take a major step forward, the strength of its format having proven to be more than a passing fad. As Sarmiento would later explain, the novelty of the chain was its strength. "We occupy a narrow niche to be sure," he said in his September 2002 interview with Chain Store Age. "But that niche makes us memorable and unique. It gives us a positioning advantage. And in today's competitive climate, any advantage you have is very powerful. People remember our store."

Expansion and Merchandise Diversification in the 1990s

At the beginning of the 1990s, Sarmiento began his bid to transform his company into a national chain. In 1991, he signed a contract with National Retail Group, a North Carolina-based consulting firm specializing in helping retailers expand. As part of its services, National Retail helped retailers select markets for expansion, pinpoint sites, and negotiate with developers. When Sarmiento hired National Retail, he had ten stores in operation. Disparately sized, the stores ranged from a 372-square-foot store in the Georgetown neighborhood of Washington, D.C. to a 1,450-square-foot store in Cherry Hill, New Jersey. On average, Sarmiento's stores generated $600 in sales per square foot. As Sarmiento and National Retail plotted The White House's expansion, new stores were expected to measure between 1,000 square feet and 1,200 square feet. In a departure from the chain's original stores, the new stores would focus on selling merchandise that retailed for between $60 and $100, eschewing the expensive $700 sweaters found in the company's stores during the 1980s.

Sarmiento's plans for national expansion were ambitious. To the ten stores in operation in mid-1991, he planned to add seven new locations. By 1996, he anticipated presiding over a chain of 60 stores located in California, Arizona, and Texas, among other new markets. For the first wave of expansion, new store locations were slated for Orlando and Boca Raton, Florida; Charleston, South Carolina; Charlotte and Durham, North Carolina; Menlo Park, New Jersey; and Bethesda, Maryland. "There is always a risk in expanding, but there also are opportunities," Sarmiento said in his July 5, 1991 interview with the Baltimore Business Journal. "We have the opportunity to make some good real estate deals now and get some construction allowances. We are not going to bring in a lot of new capital and you can't get financing. We are taking whatever profits and cash flow we have and putting it back into the company."

Sarmiento followed through with his plans to expand nationally. As he did so, the blossoming chain registered rousing success, attracting customers who were intrigued by the all-white day and evening apparel, lingerie, jewelry, handbags, and other accessories. In 1995, after a decade of selling merchandise exclusively in shades of white, Sarmiento launched a new retail format, dubbing the concept "Black Market." As its name suggested, Black Market dealt exclusively in black-colored merchandise, representing an exact contrast to The White House chain. The same year Sarmiento introduced the new concept, he experimented with housing the two concepts under one roof. Not long after seeing that the experiment worked, the company began converting its existing stores to the White House/Black Market combination concept.

Sarmiento failed to meet his projected goal of 60 units by 1996, but the shortfall did not reflect the chain's waning strength. By the end of the 1990s, there were 50 stores comprising the chain, which generated an estimated $33 million in annual revenue. The company had stores operating in 14 states, with plans calling for a foray into San Juan, Puerto Rico. The entry into Puerto Rico represented one aspect of the company's expansion plans at the end of the decade. For 15 years, Sarmiento had managed to finance expansion without converting to public ownership. Capital had been secured through private investments and by investing profits back into the company, enabling Sarmiento to direct the company as he wished, free from having to please shareholders and analysts. He planned to keep the company private as he looked ahead to the 21st century, but his desire to stay out of the public spotlight did not seem to dilute his ambitions for growth. In mid-1999, aided by a $5.6 million venture capital investment from Invesco and the Philips Smith Specialty Retail Group, Sarmiento announced he intended to double the number of his stores within the ensuing 30 months.

As the 20th century turned to the 21st century, and a weak economic climate shackled commercial growth, Sarmiento's chain expanded robustly. New stores opened in numerous markets, enjoying encouraging success. The chain's format, which by this point constituted primarily the combined White House and Black Market concept, was embraced by legions of customers. The stores offered new merchandise three times a week, opting for variety rather than depth in their inventories. The parade of white and black items appealed to many women, enabling Sarmiento to expand his chain to 100 stores by mid-2002, only slightly behind his projected schedule. Sarmiento achieved his goal without straining the company's resources, but by 2003 he wanted more. The desire to expand persisted, prompting Sarmiento to consider new ways to finance the expansion of his company.

Company Perspectives:

The Company is much more than just about color! We are known for our legendary service and unyielding commitment to satisfy our valued customers. We invite you to come shopping with us and experience the service, ambiance, style, and clothing in only shades of classic white and black of course! When you walk into a store, you immediately feel that you have entered into a very special place. Our stores are filled with an array of beautiful clothing, lingerie, accessories, jewelry, and gifts.

New Ownership in the 21st Century

Sarmiento wanted more stores and a bigger distribution center. To fulfill his desire, Sarmiento decided the best option was to convert to public ownership. By May 2003, the company had announced it intended to complete an initial public offering (IPO) of stock, hoping to raise as much as $50 million to fuel its growth. With the anticipated proceeds from the stock offering, Sarmiento planned to open 22 stores in 2003 and between 25 and 30 stores in 2004. The proposed public offering excited the retail sector, which had not seen an IPO completed by a retailer in more than a year. As onlookers waited and watched, pegging the health of retail, to a certain extent, on investors' reaction to The White House's IPO, their vigilance turned out to be in vain. Sarmiento did not complete his company's IPO, but he did cede ultimate control of his firm to others.

The White House came close to completing its IPO in July 2003 when an interested suitor made its proposal. Fort Myers, Florida-based Chico's FAS Inc., an apparel retailer with 415 stores, had considered acquiring The White House several times before Sarmiento filed with the Securities and Exchange Commission (SEC) for an IPO. Chico's board of directors shied from acquiring Sarmiento's business because it felt the timing was bad, but when The White House filed for its IPO, Chico's board realized that time was running out. Furthermore, the details revealed in The White House's regulatory papers filed with the SEC gave Chico's management a clear look at Sarmiento's operations. "The IPO filing really led to increased exposure for The White House within the potential buyer stratosphere that included Chico's," an industry observer noted in the September 15, 2003 issue of Investment Dealers' Digest.

In the late summer of 2003, Chico's made Sarmiento a tantalizing offer. The $531 million-in-sales Florida company offered $90 million for Sarmiento's $67 million-in-sales chain. In the August 1, 2003 issue of Knight Ridder/Tribune Business News, Scott Edmonds, Chico's president and chief operating officer, remarked, "It is clear to us The White House has a proven store model and we are convinced that there should be a tremendous fit with our organization from a strategic, financial, cultural, and operational viewpoint." Sarmiento was enthused as well, declaring in the August 1, 2003 issue of the Daily Record, "This is just a great marriage of two companies. The merger will help The White House on the marketing side and get us where we want to go faster." The transaction was concluded in September 2003.

As the White House plotted its future course, its merger with Chico's promised a continuation of the chain's expansion. For Chico's, the corporate marriage helped it broaden its customer base because its typical customer was 15 years older than the typical customer at Sarmiento's chain. For The White House, the union promised a spate of new store openings. Initial plans called for the opening of eight White House/Black Market stores by the end of 2003 and 25 to 30 new stores in 2004. Edmonds saw the potential for between 400 and 500 stores. As The White House prepared for its 20th anniversary and the years beyond, further expansion promised to extend the company's unique merchandising mix to a bevy of new markets. Sarmiento remained in charge after the merger, managing the company as a separate division of Chico's. Although The White House was a distinct entity, the presence of its parent company provided the marketing sophistication and the financial resources to transform Sarmiento's entrepreneurial creation into one of the nation's largest apparel retailers.

Key Dates:

1985:: Richard Sarmiento opens his first store in Baltimore, Maryland.
1991:: The White House begins to expand nationally.
1995:: Black Market, a new retail concept launched by Sarmiento, is created.
1997:: The White House and Black Market concepts are combined in the same stores.
2003:: Chico's FAS acquires The White House.

Principal Competitors

Ann Taylor Stores Corporation; Donna Karan International Inc.; Liz Claiborne, Inc.

The White House, Inc.

views updated

The White House, Inc.

6711 Baymeadow Drive
Glen Burnie, Maryland 21060
U.S.A.
Telephone: (410) 487-7747
Fax: (410) 487-4688
Web site: http://www.whiteandblack.com

Wholly Owned Subsidiary of Chico's FAS, Inc.
Founded: 1985
Employees: 693
Sales: $67 million (2003)
NAIC: 448120 Women's Clothing Stores

A Single Store Opens in 1985

Expansion and Merchandise Diversification in the 1990s

Company Perspectives:

New Ownership in the 21st Century

Key Dates:

1985:: Richard Sarmiento opens his first store in Baltimore, Maryland.
1991:: The White House begins to expand nationally.
1995:: Black Market, a new retail concept launched by Sarmiento, is created.
1997:: The White House and Black Market concepts are combined in the same stores.
2003:: Chico's FAS acquires The White House.