Gymboree Corporation

views updated Jun 08 2018

Gymboree Corporation

700 Airport Boulevard
Burlingame, California 94010-1912
U.S.A.
(415) 579-0600
Fax: (415) 696-7502

Public Company
Incorporated: 1979
Employees: 5,900
Sales: $259.4 million (fiscal year ended January 31, 1996)
Stock Exchanges: NASDAQ
SICs: 2329 Men’s & Boys’ Clothing, Not Elsewhere Classified; 2361 Girls’, Children’s & Infants’ Dresses, Blouses, & Shirts; 2369 Girls’, Children’s & Infants’ Outerwear, Not Elsewhere Classified; 5641 Children’s & Infants’ Wear Stores

Based in Burlingame, California, Gymboree Corporation designs, manufactures, and retails unique, high-quality apparel and accessories for children from birth through seven years of age. In the mid-1990s the company was operating more than 279 retail stores throughout the United States and was planning to expand globally throughout the late 1990s. Gymboree also operates parent-child developmental play programs for children through the age of five years old. In 1995 it had franchised roughly 400 such centers internationally. The company grew rapidly during the late 1980s and into the mid-1990s by focusing on its retail operations.

Gymboree’s children’s recreation and exercise operation represented a relatively meager portion of its income by the 1990s, but it was that business that launched the venture in the 1970s and established a foundation for its future success in the retail industry. The concept of a commercial children’s exercise program was inspired by Joan Barnes. Barnes, in her early 20s, had taught modern dance to children in New York City before organizing a children’s recreation program for the Jewish Community Center in San Rafael, California. She was serving as the recreation administrator at that center when, in 1975, she came up with the notion of offering exercise classes for babies with their parents. The idea stemmed partly from her personal desire to share physical fitness playtime with her own daughter.

The baby exercise classes were an instant hit. Parents lined up to bring their babies and toddlers to Barnes’s exercise sessions. Recognizing the commercial potential of her idea, Barnes left her job with the Jewish Community Center and opened her first commercial children’s workout center in 1976. She had little trouble filling her classes with enthusiastic parents. She knew that she was dealing with a viable business concept, moreover, when some of those parents started asking her about opening their own children’s exercise centers. After polishing her concept, Barnes did start opening other centers in the late 1970s.

Barnes recognized that her expertise was working with parents and children, not in building a sprawling franchise business. To help her take the concept cross-country, she hired franchise specialist Robert Jacob, who was best known for developing the hugely successful Midas International car-service franchise system. Jacob helped Barnes set up a successful licensing program for Gymboree centers that focused on low start-up costs. Franchisees typically paid Barnes a $20,000 start-up fee, which included about $8,000 worth of equipment and enough money to get the center moving. The franchisees also agreed to pay Barnes six percent of their revenue. To help fund the expansion effort, Barnes turned to venture-capital firm Venture Partners, of Menlo, California.

The Gymboree franchise effort was a triumph. By 1984, 125 Gymboree franchises were operating in 20 states and were bringing in more than $1 million in revenue annually. The franchises were typically operated by women, many of whom had training in occupational therapy or education. Classes were usually held in church halls and community buildings, and parents were charged only $4 to $8 per 45-minute session. Classes varied to accommodate children ranging from three months to four years in age, but a typical session included the children hanging from bars to build up arm muscles, popping soap bubbles to develop eye-hand coordination, or walking on inflated logs to improve balance. In addition, the tots could exercise on brightly colored tunnels, slides, and other apparatus, and no class was complete without a visit from a clown-puppet named “Gymbo.”

By 1985 Barnes’s net worth had sailed past $1 million. As important to her as the financial gain, though, was the success of her idea: “It’s a neat feeling to know the same scene is going on in scores of centers at the same time,” she said in the May 1984 Money. “It feels like I’ve given birth to a new experience.” Barnes had, indeed, given birth to a viable concept, as evidenced by Gymboree’s rapid expansion during the mid-1980s. By 1987, in fact, the Gymboree chain had grown to include more than 350 centers throughout the United States and in ten foreign countries. Those units were generating over $10 million in annual sales. Importantly, the Gymboree name had become known and respected by parents.

Barnes decided in 1986 to start capitalizing on the goodwill that Gymboree had accrued since she had opened the first exercise center in 1976. To that end, she opened the first few Gymboree retail stores: “… because we recognized that we have a unique marketing platform,” she said in the November 1987 Chain Store Age Executive. “No one could approach our authenticity, no one could knock off what we do because of the number of children already participating in our Gymboree programs.” The first Gymboree stores piggy-backed off of the original Gymboree concept. Approximately 1,000-square-feet in size, they were designed similar to a children’s gym, incorporated displays that looked like bleachers, had video screens showing tapes of Gymboree exercise classes, and had pictures of Gymbo the clown throughout.

The first Gymboree store, opened in 1986, was a success. With financial backing from Venture Partners, Barnes opened an additional 15 stores by the end of 1987. The initial idea was to open the stores in areas where Gymboree centers were established (although the company eventually determined that the concept could work in areas without an established customer base). The outlets stocked about 60 percent apparel and 40 percent hard goods and targeted a price range that attracted buyers between the upscale and middle-income markets. Gymboree sustained its unique image and increased profit margins by designing and manufacturing many of its own products, which couldn’t be found in other stores.

By 1989 Gymboree was operating 32 retail stores, mostly in malls, in addition to its base of 350 Gymboree franchises. Sales rose to nearly $17 million, although the company posted a net loss of nearly $1 million. It was clear that Gymboree’s future was in retailing, rather than in children’s fitness. Barnes’s influence in operations had steadily declined in proportion to the amount of money infused by her investment partner, U.S. Venture Partners. U.S. Venture Partners believed that the company was failing to reach its potential, so the investment company began installing a new management team that it hoped would take Gymboree to new heights.

In 1989 U.S. Venture Partners brought in Don Cohn to serve as chairman and chief executive of Gymboree. Cohn was the founder of the successful New England Clothing Co. and had served stints with such venerable retailers as Mervyn’s, Laura Ashley, I. Magnin, and Ross Stores. Among other moves, Cohn adopted an incentive-based approach to sales by allocating work hours to store employees based on a sliding scale influenced by their performance. He also fired several managers and brought in more experienced retail executives. Cohn also received much of the credit for the company’s successful initial public offering in March 1993 that brought $43 million into Gymboree’s coffers.

Partly as a result of Cohn’s efforts, Gymboree’s sales increased to $48.5 million in 1991 and then to a lofty $68 million in 1992 (fiscal year ended January 31, 1993), while net income rose to a healthy $6.9 million. The total number of retail outlets increased to 120 in late 1993, by which time Gymboree was employing more than 2,100 workers. Despite impressive gains, however, Cohn was forced to resign in 1993 to make way for a new chief executive: Nancy Pedot. In fact, it was Pedot, as the manager of Gymboree’s merchandising strategy, who had been largely responsible for the chain’s rapid rise during the early 1990s.

Pedot had been hired by Gymboree in 1989 to serve as a general merchandise manager. Previously, she had worked at Mervyn’s Inc. as a division merchandise manager. She was effectively handed Gymboree’s 32 retail stores and told to fill them with products. She quickly revamped the stores’ entire product line and introduced brightly colored, high-quality jumpers, dresses, pants, and tops for newborns to six-year-olds. The Gymboree-brand apparel was a hit and per-store sales surged. She augmented that effort by reducing the number of toys in the product mix and shifting the focus to high-margin clothing items. The change moved Gymboree into a higher price bracket, which paid off in some of the highest profit margins in the industry.

Pedot’s appointment as the president and chief executive cemented a near matriarchy at Gymboree, where the six vicepresidents for production, real estate, human resources, stores, merchandising, and franchise operations were all women—only the chief financial officer of the company, James Curley, was male. Under the direction of that management team, Gymboree sustained the aggressive growth it had achieved in the early 1990s, opening a stream of new Gymboree retail outlets and pushing both sales and profits to record levels. Indeed, revenues in 1993 rose to $130 million and net income doubled to $14.1 million. By late 1994 the Gymboree chain had grown to more than 200 stores throughout the United States.

Gymboree continued to expand during 1995, adding more than 50 new outlets to its chain. At the same time, management began intensifying efforts to whip the sprawling distribution and inventory operations into line. To that end, new purchasing, planning, and distribution managers were hired, and new information systems were implemented. In addition, the company launched a Gymboree mail-order catalog and introduced larger goods like furniture into many of its stores. After posting an average annual growth rate of 63 percent over five years, Gymboree increased revenues in 1994 (fiscal year ended January 31, 1995) to $ 188 million, about $22.2 million of which was netted as income.

To sustain future growth, in 1995 Gymboree began exploring the possibility of overseas retail expansion—its exercise franchises were already operating in Taiwan, Mexico, and eight other countries. Pedot identified potential areas for expansion in Europe and announced plans to open overseas retail units in late 1995 or 1996. In addition, the company planned to increase the size of new stores in the United States and to add more merchandise, in keeping with the superstore concept sweeping the retail industry in the mid-1990s. Gymboree was also working to develop its own educational toys and products and to extend its targeted age range to seven-year-olds. The company hoped to have as many as 500 Gymboree retail outlets operating by 1998.

Gymboree Corporation

views updated Jun 27 2018

Gymboree Corporation

500 Howard Street
San Francisco, California 94105
U.S.A.
Telephone: (415) 278-7000
Toll Free: (877) 449-6932
Fax: (415) 278-7100
Web site: http://www.gymboree.com

Public Company
Incorporated: 1979
Employees: 9,345
Sales: $578.0 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: GYMB
NAIC: 448130 Children's and Infants' Clothing Stores

Based in San Francisco, California, Gymboree Corporation designs, manufactures, and retails unique, high quality apparel and accessories for children and women. The company has retail businesses under the Gymboree, Janie and Jack, and Janeville names. Gymboree operates more than 600 stores in the United States and Canada as well as an online business. The company also operates parent-child developmental play programs for infants through age five. There are more than 530 play and music centers in the United States and 24 other countries, many of which are franchises.

Origins

Gymboree's children's recreation and exercise operation represented a relatively meager portion of its income by the 1990s, but it was that business that launched the venture in the 1970s and established a foundation for its future success in the retail industry. The concept of a commercial children's exercise program was inspired by Joan Barnes. Barnes, in her early 20s, had taught modern dance to children in New York City before organizing a children's recreation program for the Jewish Community Center in San Rafael, California. She was serving as the recreation administrator at that center when, in 1975, she came up with the notion of offering exercise classes for babies with their parents. The idea stemmed partly from her personal desire to share physical fitness playtime with her own daughter.

The baby exercise classes were an instant hit. Parents lined up to bring their babies and toddlers to Barnes's exercise sessions. Recognizing the commercial potential of her idea, Barnes left her job with the Jewish Community Center and opened her first commercial children's workout center in 1976. She had little trouble filling her classes with enthusiastic parents. She knew that she was dealing with a viable business concept, moreover, when some of those parents started asking her about opening their own children's exercise centers. After polishing her concept, Barnes did start opening other centers in the late 1970s.

Barnes recognized that her expertise was working with parents and children, not in building a sprawling franchise business. To help her take the concept cross-country, she hired franchise specialist Robert Jacob, who was best known for developing the hugely successful Midas International car-service franchise system. Jacob helped Barnes set up a successful licensing program for Gymboree centers that focused on low start-up costs. Franchisees typically paid Barnes a $20,000 start-up fee, which included about $8,000 worth of equipment and enough money to get the center moving. The franchisees also agreed to pay Barnes 6 percent of their revenue. To help fund the expansion effort, Barnes turned to venture-capital firm Venture Partners, of Menlo, California.

The Gymboree franchise effort was a triumph. By 1984, 125 Gymboree franchises were operating in 20 states and were bringing in more than $1 million in revenue annually. The franchises were typically operated by women, many of whom had training in occupational therapy or education. Classes were usually held in church halls and community buildings, and parents were charged only $4 to $8 per 45-minute session. Classes varied to accommodate children ranging from three months to four years in age, but a typical session included the children hanging from bars to build up arm muscles, popping soap bubbles to develop eye-hand coordination, or walking on inflated logs to improve balance. In addition, the tots could exercise on brightly colored tunnels, slides, and other apparatus, and no class was complete without a visit from a clown-puppet named "Gymbo."

By 1985 Barnes's net worth had sailed past $1 million. As important to her as the financial gain, though, was the success of her idea: "It's a neat feeling to know the same scene is going on in scores of centers at the same time," she said in the May 1984 Money. "It feels like I've given birth to a new experience." Barnes had, indeed, given birth to a viable concept, as evidenced by Gymboree's rapid expansion during the mid-1980s. By 1987, in fact, the Gymboree chain had grown to include more than 350 centers throughout the United States and in ten foreign countries. Those units were generating over $10 million in annual sales. Importantly, the Gymboree name had become known and respected by parents.

Barnes decided in 1986 to start capitalizing on the goodwill that Gymboree had accrued since she had opened the first exercise center in 1976. To that end, she opened the first few Gymboree retail stores: "… because we recognized that we have a unique marketing platform," she said in the November 1987 Chain Store Age Executive. "No one could approach our authenticity, no one could knock off what we do because of the number of children already participating in our Gymboree programs." The first Gymboree stores piggy-backed off of the original Gymboree concept. Approximately 1,000-square-feet in size, they were designed similar to a children's gym, incorporated displays that looked like bleachers, had video screens showing tapes of Gymboree exercise classes, and had pictures of Gymbo the clown throughout.

The first Gymboree store, opened in 1986, was a success. With financial backing from Venture Partners, Barnes opened an additional 15 stores by the end of 1987. The initial idea was to open the stores in areas where Gymboree centers were established (although the company eventually determined that the concept could work in areas without an established customer base). The outlets stocked about 60 percent apparel and 40 percent hard goods and targeted a price range that attracted buyers between the upscale and middle-income markets. Gymboree sustained its unique image and increased profit margins by designing and manufacturing many of its own products, which could not be found in other stores.

New Management: 1989

By 1989 Gymboree was operating 32 retail stores, mostly in malls, in addition to its base of 350 Gymboree franchises. Sales rose to nearly $17 million, although the company posted a net loss of nearly $1 million. It was clear that Gymboree's future was in retailing, rather than in children's fitness. Barnes's influence in operations had steadily declined in proportion to the amount of money infused by her investment partner, U.S. Venture Partners. U.S. Venture Partners believed that the company was failing to reach its potential, so the investment company began installing a new management team that it hoped would take Gymboree to new heights.

In 1989 U.S. Venture Partners brought in Don Cohn to serve as chairman and chief executive of Gymboree. Cohn was the founder of the successful New England Clothing Co. and had served stints with such venerable retailers as Mervyn's, Laura Ashley, I. Magnin, and Ross Stores. Among other moves, Cohn adopted an incentive-based approach to sales by allocating work hours to store employees based on a sliding scale influenced by their performance. He also fired several managers and brought in more experienced retail executives. Cohn also received much of the credit for the company's successful initial public offering in March 1993 that brought $43 million into Gymboree's coffers.

Partly as a result of Cohn's efforts, Gymboree's sales increased to $48.5 million in 1991 and then to a lofty $68 million in 1992 (fiscal year ended January 31, 1993), while net income rose to a healthy $6.9 million. The total number of retail outlets increased to 120 in late 1993, by which time Gymboree was employing more than 2,100 workers. Despite impressive gains, however, Cohn was forced to resign in 1993 to make way for new chief executive Nancy Pedot. In fact, it was Pedot, as the manager of Gymboree's merchandising strategy, who had been largely responsible for the chain's rapid rise during the early 1990s.

Pedot had been hired by Gymboree in 1989 to serve as a general merchandise manager. Previously, she had worked at Mervyn's Inc. as a division merchandise manager. She was effectively handed Gymboree's 32 retail stores and told to fill them with products. She quickly revamped the stores' entire product line and introduced brightly colored, high-quality jumpers, dresses, pants, and tops for newborns to six-year-olds. The Gymboree-brand apparel was a hit and per-store sales surged. She augmented that effort by reducing the number of toys in the product mix and shifting the focus to high-margin clothing items. The change moved Gymboree into a higher price bracket, which paid off in some of the highest profit margins in the industry.

Pedot's appointment as the president and chief executive cemented a near matriarchy at Gymboree, where the six vice-presidents for production, real estate, human resources, stores, merchandising, and franchise operations were all women. Only the chief financial officer of the company, James Curley, was male. Under the direction of that management team, Gymboree sustained the aggressive growth it had achieved in the early 1990s, opening a stream of new Gymboree retail outlets and pushing both sales and profits to record levels. Indeed, revenues in 1993 rose to $130 million and net income doubled to $14.1 million. By late 1994 the Gymboree chain had grown to more than 200 stores throughout the United States.

Company Perspectives:

The Gymboree Corporation is a family of specialty retail brands that provide unique, high-quality products. Each of these brands has an important thing in common: they are focused on pleasing every individual customer. Gymboree clothing is designed with colorful, versatile fabrics, whimsical graphics and detailed touches. Coordinating accessories complete every outfit, making Gymboree kids unique from head to toe.

Gymboree continued to expand during 1995, adding more than 50 new outlets to its chain. At the same time, management began intensifying efforts to whip the sprawling distribution and inventory operations into line. To that end, new purchasing, planning, and distribution managers were hired, and new information systems were implemented. In addition, the company launched a Gymboree mail-order catalog and introduced larger goods including furniture into many of its stores. After posting an average annual growth rate of 63 percent over five years, Gymboree increased revenues in 1994 (fiscal year ended January 31, 1995) to $188 million, about $22.2 million of which was netted as income.

To sustain future growth, in 1995 Gymboree began exploring the possibility of overseas retail expansion. Its exercise franchises were already operating in Taiwan, Mexico, and eight other countries. Pedot identified potential areas for expansion in Europe and announced plans to open overseas retail units in late 1995 or 1996. In addition, the company planned to increase the size of new stores in the United States and to add more merchandise, in keeping with the superstore concept sweeping the retail industry in the mid-1990s. Gymboree was also working to develop its own educational toys and products and to extend its targeted age range to seven year olds. The company hoped to have as many as 500 Gymboree retail outlets operating by 1998.

Facing Challenges: Late 1990s

The late 1990s were turbulent years for retailers in the clothing sector and Gymboree posted a rollercoasteresque earnings chart that led to high turnover rates among corporate leaders.

In 1997 Nancy Pedot was replaced as CEO and president by Gary White, who had been the former COO. Shortly thereafter, James P. Curley stepped down as senior vice-president and CFO. Curley had also served on the board of directors. Under White, the company initiated a stockholder rights plan in March that was meant as protection against hostile takeover. Stock share prices had been on a decline and Gymboree began a $30 million stock buyback in November. The buyback was designed to boost company share prices. White reported that the board's decision to buy back some of its stock, "is consistent with our objectives of enhancing shareholder value and reflects its continuing confidence in Gymboree's business and prospects."

It had become apparent to management that some restructuring of the company was in order and in January 1998, with a new year underway and some lagging holiday sales, Gymboree added four top management positions. The positions were chief information officer, senior vice-president in sourcing and logistics, vice-president–logistics, and a managing directorship based in Hong Kong for sourcing and production. New sales figures in March showed a significant increase, with sales up 20 percent from the prior quarter.

Gymboree entered the Japanese market by adding a new concept store for older children called Kid Cool in the spring of 1998. It remained to be seen whether the concept would prove successful in the Asian market. That summer Gymboree also relocated its distribution center to Dixon, California. The 285,000-square-foot facility was opened in June.

In January 1999 Director of Design and Merchandising Lisa Harper was named vice-president, design. Harper was largely responsible for the creative designs that brought the company record sales. Harper later continued her success at Gymboree and eventually went on to become the company's CEO.

Plagued by erratic sales performance, Gymboree continued to replace its leadership. In February 1999 the company hired Melanie Cox, who had a marketing background, as president. Gary White continued in his post as CEO. Cox began a remerchandising effort in an attempt to boost the chain's image. Changes were made to the interior of the company's retail spaces, and Gymboree closed 12 poorly performing stores. The most notable change was in following style trends in children's apparel rather than relying on Gymboree signature bright color separates.

Despite its recurrent woes, Gymboree was named one of the most family friendly companies by Working Mother magazine. Ken Meyers, vice-president of human resources, commented on the award by saying, "Our policies foster an environment which provides challenge, fun and flexibility in the workplace."

The end of the 1990s also saw company expansion of play and music programs worldwide. Master franchisees were opened in the United Kingdom, Puerto Rico, and Ireland. The company had already established a presence in Australia, Canada, Colombia, France, Indonesia, South Korea, Mexico, Singapore, and Taiwan. In addition, Gymboree had play and music programs pending in Central America, the Middle East, and the Philippines.

Renewed Focus: 2000s

In January 2001 Gymboree sold its Zutopia store chain to the retail outlet The Wet Seal, Inc. The company cited its focus on building shareholder value and expanding its Gymboree brand as the reason for unloading Zutopia.

After a tumultuous series of corporation leaders, the company named Lisa Harper, a longtime Gymboree employee, its CEO and vice-chair. Sales began to rise by November 2001. Other retailers that quarter were not as fortunate and this was noted and rewarded with Gymboree shares gaining on the NASDAQ.

Key Dates:

1976:: Joan Barnes opens her first commercial children's workout center.
1984:: Some 125 Gymboree franchises are operating in 20 states.
1993:: Company goes public.
Mid-1990s:: CEO Nancy Pedot and CFO James P. Curley oversee expansion of the chain.
1997:: Curley and Pedot announce their departure.
1998:: Company adds four new senior management positions; new distribution center opens in Dixon, California.
1999:: Lisa Harper is named head of design.
2001:: Gymboree sells Zutopia.
2002:: Lisa Harper is made chairman.
2003:: Corporate offices shift to San Francisco.
2004:: Gymboree opens Janeville stores.

The company had been based in Burlingame, California, since 1980 but considered a move in November 2003. The following spring the company chose a 160,000-square-foot facility on Howard Street in San Francisco as its new home.

Gymboree took a departure from its kidware and considered catering to the mother instead in 2004 when it launched its Janeville concept stores. The stores focused on women in their late 30s. The stores featured a cottage-like atmosphere reminiscent of the Hamptons or Sonoma, California. The company opened ten stores its first year with more to follow at upscale shopping complexes.

Sales at moderate to higher end retail establishments were stagnant during the recession of the early 2000s and Gymboree posted its share of flat sales. Nonetheless, the public demand for quality baby clothes remained, and with further expansion of its other store concepts in Janie and Jack, and Janeville, Gymboree seemed poised for renewed growth in the coming years.

Principal Divisions

Janie and Jack, Inc.; Janeville Stores, Inc.; Gymboree and Play and Music.

Principal Competitors

The Gap, Inc.; Target Corporation; The Children's Place Retail Stores, Inc.; Hanna Anderson Corp.

Gymboree Corporation

views updated Jun 27 2018

Gymboree Corporation

founded: 1976

Contact Information:

headquarters: 700 airport blvd., suite 200
burlingame, ca 94010 phone: (650)579-0600 fax: (650)696-2920 email: investor_relations@gymboree.com url: http://www.gymboree.com

OVERVIEW

The Gymboree Corporation is a multi-national company that provides products and services designed primarily for children. The Gymboree Corporation operates in two distinct sectors, each with a focus on children. One division offers interactive play programs for parents and children. The other is a vertically integrated operation that designs, manufactures, and sells children's clothing and accessories in retail outlets. The initial business concept created a parent-child music and play program that promoted fitness activities. As the classes grew in popularity, the company offered franchise licenses to increase its visibility. Management developed retail stores as a natural progression of the company's goal to promote a healthy and fit lifestyle for children. The store's product lines include children's clothing, accessories, and videotapes.

The corporate structure is comprised of five divisions operating in four countries. The retail clothing sector accounts for the majority of operations and includes: The Gymboree Corp. (U.S. retail), Gymboree Inc. (Canada retail), Gymboree U.K., Ltd. (U.K. retail) and Gymboree of Ireland (Ireland retail). These divisions focus on producing high quality apparel and accessories for children. Products include sweaters, pants, overalls, dresses, socks, hats, underwear, and shoes. The launch of the online retail store, www.gymboree.com, provides a global presence for the company. The Gymboree Play & Music Programs offer interactive classes for infants, toddlers, and preschool age children. Approximately 420 corporate operated or franchised centers are located in 17 different countries.

COMPANY FINANCES

Gymboree earned a profit in the first quarter of 2002 after struggling with two years of losses. Revenues for the fiscal year ending in January of 2002 were roughly $505 million—an increase from $448 million in 2001 and $437 million in 2000. The stock price doubled in the final six months of 2001. Thomson Financial/First Call forecasts that profits will triple in the year 2003.

ANALYSTS' OPINIONS

The improved financial performance of Gymboree in 2001 caught the attention of Wall Street analysts. In April 2002 a Piper Jaffray analyst, Jeff Klinefelter, recommended Gymboree as a retail stock to own. He said, "Gymboree has been struggling for several years to regain traction with consumers and differentiation within the mall. Today, the new management team has demonstrated that they can deliver a product that is different and appealing to the consumer. The brand remains vibrant and has been bucking competitive trends and winning." Russell Jones, retail analyst for Cap Gemini Ernst & Young, offered his insight on Gymboree during a broadcast of "CNN Money Morning." He noted that the company had made improvements in its stores and increased efficiency, but it was not clear whether or not the company had actually developed a marketing and brand strategy that would attract new customers.

HISTORY

In 1976 Joan Barnes searched for an interactive class featuring fitness activities for her four-year-old daughter. She was unable to find one that she liked and concluded that other parents were equally frustrated with the lack of options. Her instincts were right on target. She created her own class and rented space at a local youth center in San Mateo, California. The launch of Gymboree was a huge success. Expansion began in earnest in 1979 when the first franchises were awarded. In 1984 Gymboree ventured into the global market, overseeing the start up of foreign franchises. By 1987 more than 50,000 children attended Gymboree classes. Barnes' small project had grown into the largest parent-child program in the country for children ages three months to four years. Three hundred and fifty centers operated nationwide and revenues exceeded $10 million.

Backed by U.S. Venture Partners, the same group that had financed the play centers, the company received an additional $300,000 in 1986 to enter the retail arena. Retail stores were considered a logical extension of the play programs. Designed to resemble gymnasiums, the stores featured play equipment, hardwood floors, bleachers and kiosks that played videotapes of actual Gymboree classes. The stores were all company owned and stocked with merchandise produced in house. The products included clothing for infants and children, toys, and videos. Sixty percent of each store's inventory was dedicated to apparel and the remaining 40 percent was comprised of toys and other accessories.

The company capitalized on its reputation as a child-friendly organization. Management drew upon the experiences and knowledge gained from parents in the play programs to differentiate itself from its competitors. The original strategy sent a simple message to the public: Gymboree understands the needs of children and families. To illustrate this point, the company introduced a new sizing scheme for its outfits. Rather than using the traditional system, which labeled garments to match a child's age (six weeks, three months, 9 months or one year), outfits were designated as small, medium, or large. The appeal of this innovation was not in the labeling of the garments, but in their design. Each item was constructed so that it could be easily altered without sewing a stitch; this was accomplished by design features incorporated into the construction of the garments. Expandable waist bands and rolled cuffs for the ankles and wrists made it possible to adjust the pieces as the child grew larger. Size was not the only element of design used to maximize the life span of each item. Outfits were crafted in unisex styles and colors ensuring that they could be worn by future siblings regardless of gender.

By 1989 there were 32 retail stores operating, but they were not performing up to investor expectations, and the company brought in outside help. Nancy Pedot joined the Gymboree team as a general merchandise manager with nearly a decade of experience at Mervyn's department stores. She surveyed the situation and decided that the product lines were not appealing or distinctive. A design team was hired, and Gymboree began creating its own designs. Pedot shifted the emphasis from the unisex sweat suit style outfits to a line of colorful, durable play clothes. The line still favored the basic approach to children's dress but with a little more style and versatility in the designs, fabric, and stitching. Sales skyrocketed and Gymboree was back on track.

In 1990, in the midst of this period of revenues growth and expansion, Joan Barnes left the company she had founded nearly fifteen years earlier. The company achieved brand recognition in the market and continued to make great strides despite the loss of its leader. By 1993 the number of retail stores had grown from 32 to 170. Encouraged by its prosperity, Gymboree elevated Pedot to the position of president and decided to go public. On March 31, 1993, the stock made its debut on the NASDAQ Stock Exchange. The initial public offering (IPO) consisted of 2.1 million shares that opened at an impressive $20 per share, well above the $13 to $15 predicted by analysts. At the end of its first day as a publicly owned company, the stock price had risen a phenomenal 60 percent and closed at $31.50.

Pedot assumed the role of Chief Operating Officer in 1993 and began to evaluate the play center division. While the retail side of the business was posting consistently positive results, the play programs, which had once been the cornerstone of the company, were failing. In 1993 there were a total of 800 centers offering Gymboree play and music programs. The company owned slightly more than half of the centers, and the remainder were franchised units. In January 1994 Pedot made the decision to halt expansion and discontinue openings of any new play centers until the financial profile of this sector improved. The centers accounted for only 5 percent of Gymboree's total revenues and were not strategic to the long term success of the organization.

During its first several years as a public company, Gymboree posted impressive earnings figures, and the stock price rose for almost eight consecutive quarters. In 1995 the company experienced its first setback. Merchandise sales in the retail stores slumped. The decline was attributed to a miscalculation in the clothing design and poor color choices for new clothing lines. The vertically integrated structure of the company introduced by Pedot added to the firm's inability to contain the losses. (A vertically integrated corporation controls every aspect of operations from product design to sales.) Since Gymboree designs, manufactures, and sells its own products, it must absorb the expense of a mistake in any phase of operations. Unlike other companies in the clothing industry that can attempt to return inventory to the original vendor to minimize losses, Gymboree was forced to keep the merchandise in its stores. Entire product lines were subject to huge price markdowns to clear the shelves. The problems were corrected, and the company returned to profitability the following year.

FAST FACTS: About Gymboree Corporation

Ownership: Gymboree Corporation is a publicly traded company on the NASDAQ Stock Exchange.

Ticker Symbol: GYMB

Officers: Stuart G. Moldaw, Chmn.; Lisa M. Harper, Vice Chmn. and CEO, 41; Myles McCormick, CFO

Employees: 7,200

Principal Subsidiary Companies: Gymboree Corporation sold its subsidiary venture, Zutopia, to Wet Seal Inc. in 1999.

Chief Competitors: Gymboree Corporation's major competitors include OshKosh B'Gosh, The Gap, The Children's Place, and Toys "R" Us.

In 1996 Gymboree launched its first mail order catalog. The marketing plan proposed a series of catalogs that would be issued on a quarterly basis. Catalog sales were weak, and the mail order division was closed after only a few years. This experience did not dampen the overall plans for expansion. Pedot left the company, and Gary White assumed the role of CEO. In 1999 Gymboree launched a second chain of retail clothing stores, Zutopia, targeted at older children. The international markets continued to be an attractive growth opportunity as well. By the year 2000, the company had lost its focus and sales began to falter. Gary White and Melanie Cox, two high level officers, left the company. The company also cancelled plans to relocate to a pricey office park in the San Francisco area.

In early 2000 Lisa Harper joined the struggling firm as a general merchandiser. She overhauled the clothing lines, which had become too trendy and hip for small children. She brought back the notion of mix and match outfits that had been lost, dubbing the concept "Match-matics." Harper's idea took off along with the stock price. Harper continued to make improvements in operations and was named CEO in 2002.

STRATEGY

Gymboree has developed a multi-faceted strategy for managing operations of its retail stores. The highlights of this plan include: production of high quality apparel, a recognizable brand name, integrated operations, exclusive distribution of merchandise, and superior customer service. Early in the company's history, management realized the importance of maximizing the life span of children's clothes. Designing and manufacturing durable, timeless, and fashionable pieces were identified as critical elements in the process. By integrating operations, the company is able to maintain control over every aspect of manufacture and presentation of its products. This assures high quality control and improved brand name image. Perhaps the most important element in the Gymboree strategy is its commitment to customer service. In the fast paced world of children's retailing, an organization that is not responsive to the changing needs of its customer base may never recover its position in the market.

INFLUENCES

In an attempt to attract new customers, Gymboree implemented a new merchandising strategy in 1999. Instead of manufacturing and displaying coordinated play sets and outfits, a mix and match model was adopted. Coordinated items were no longer presented together in a cluster. Departments were organized and identified by category: girls' sweaters, boys' pants, dresses, or accessories. In theory this would increase sales of certain items that might not have been purchased by customers who did not wish to buy an entire outfit. Ideally, shoppers who wanted an entire ensemble would move from department to department and match coordinates, while others might just pick up a sweater. The plan did not achieve the desired results and was deemed a failure. The company suffered serious financial losses and returned to its initial concept of coordinated outfits.

CURRENT TRENDS

Although Gymboree reinstated its historical marketing strategy in regard to its design and selection of merchandise, it did recognize the value of updating the company image. A nation-wide store renovation plan was launched with a scheduled completion date of 2002. The signage and store fronts will undergo a facelift as part of this plan. The traditional front that features wooden children's blocks and arches will be replaced with a sleeker more modern look, and the signage will reflect the updated design. As part of a brand name recognition program, packaging, tags, and labels will all be altered to feature the new lettering and logo.

CHRONOLOGY: Key Dates for The Gymboree Corporation

1976:: Gymboree Play & Music Programs founded by Joan Barnes in San Mateo, California
1979:: First U.S. franchises were opened
1984:: First international franchises opened in Canada
1986:: Gymboree entered the retail industry opening children's clothing stores
1990:: Gymboree founder Joan Barnes leaves the company
1993:: The company becomes a publicly traded corporation in a successful IPO
1996:: Gymboree publishes mail order catalog
1999:: The company launches chain of Zutopia clothing stores for older children
2001:: Zutopia is sold to Wet Seal Inc.
2002:: Lisa Harper is named CEO

PRODUCTS

Gymboree Corporation operates infant and children's clothing stores and play centers. The play centers offer interactive fitness programs for infants and children from newborn to four years. Classes are designed for different developmental stages in a toddler's life. GymBabies caters to infants under six months old and focuses on sensory activities. GymCrawlers helps develop stability and coordination for babies aged 6 to 12 months. GymWalkers, GymRunners, GymExplorers, and Gym-Kids teach motor skills, socialization, and coordination in a non-competitive environment.

Gymboree retail stores sell attractive, quality children's clothing and accessories. Clothes are designed to be comfortable and stylish without being trendy. The timelessness of design allows the pieces to be shared and handed down to younger siblings or friends. Coordinated outfits include pants, shorts, sweaters, shirts, dresses, stockings, hats, and shoes. Clothes are premiered by collections, which rotate on a seasonal basis, and contain separates that can be mixed and matched.

CORPORATE CITIZENSHIP

Gymboree is all about children. The company mission statement says, "The heart of our business is the celebration of childhood. Our aim is to enrich the lives of children with quality products and services and to learn and grow with them." The company contributes to children's charities whenever possible. One of the more colorful outings is the annual "Cincinnati Flying Pig Marathon." Gymboree sponsors family and children's activities in conjunction with the event, including a "Diaper Dash" for children less than one year of age. The length of the race has been shortened from the traditional 26 miles to a challenging 18 feet. Participants are allowed to walk or crawl, on Gymboree mats, to the finish line.

GLOBAL PRESENCE

Gymboree's corporate headquarters are located in Burlingame, California, and Leicester, England. The company owns 29 Play and Music Program Centers in the state of California. The remaining 410 centers are located across the United States and throughout the world. Program centers are located in Australia, Canada, France, Korea, Mexico, Taiwan, and other regions. The company operates more than 500 Gymboree stores in the United States, Canada, the Republic of Ireland, and the United Kingdom. Clothing is shipped to the retail outlets from distribution centers in Dixon, California, and Shannon, Ireland.

Most of Gymboree's products are manufactured outside of the United States. The company contracts with more than 200 independent vendors who are located in China, Indonesia, Thailand, Taiwan, Mexico, and South and Central America. Global accountability is important to the management of Gymboree, and they require vendors to be in compliance with local laws. In addition, they forbid the use of child or forced labor by any vendor, even if it is permitted by local law. Despite these efforts Gymboree was one of the retailers named in the 1999 Saipan lawsuits alleging human rights violations against factory workers. The company denied these claims, but they settled the lawsuit by agreeing to a system of third party monitoring in its manufacturing facilities.

TRUTH IN ADVERTISING

The Gymboree Corporation takes pride in its commitment to bettering the lives of children and families. As a result of a 1999 lawsuit that charged Gymboree (and a host of other companies) with human and civil rights violations in its overseas factories, the company has secured the services of an independent monitoring firm. Verite, a nonprofit organization that offers research in regard to global sourcing issues, has been retained to provide its services to vendors supplying goods to the Gymboree Corporation. Although Gymboree had processes in place to review plant operations, the company stated, "While we are comfortable with the processes we had in place, we are pleased to support the greater safeguards embodied in this agreement." The company has been applauded by human rights organizations for setting a standard of responsibility.

EMPLOYMENT

Gymboree was founded by a mother, and employment at the company places great emphasis on the importance of family. This is evidenced by the benefits package offered to employees: parental leave, adoption assistance, pager programs for expectant parents, and team member discounts at stores and play centers. Two perks you don't see very often at large corporations are also included: snack time and recess! Gymboree isn't only for parents. The company values diversity and works to create a team atmosphere in all of its locations. Employees are encouraged to learn and grow as team members. Educational assistance programs are available for continuing education, and staff members are encouraged to contribute new ideas and concepts.

SOURCES OF INFORMATION

Bibliography

carlsen, clifford. "gymboree heads abroad." san francisco business times, 17 may 1996.

eng, sherri. "market share of california's gymboree rises on merchandising strategy." san jose mercury news, 14 february 1994.

"gymboree is more than just child's play." chain store age executive with shopping center age", november 1987.

macintosh, jeanne. "firms go public." children's business, may 1993.

rhine, jon. "gymboree pulls plug on relocation to east bay." san francisco business times, 17 march 2000.

rieger, nancy. "enter the public domain; ipos raise capital for kids' firms willing to be tested by wall st.'s quarterly exams." children's business, december 1994.

For an annual report:

on the internet at: http:\www.gymboree.com/our_company

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. gymboree corporation's primary sics are:

5641 childrens' & infants' wear stores

6794 patent owners & lessors

also investigate companies by their north american industry classification system codes, also known as naics codes. gymboree corporation's primary naics codes are:

448130 children's & infants' clothing stores

533110 owners and lessors of other non-financial assets

Company Profiles for Students

Gymboree Corporation

Gymboree Corporation

Further Reading

Gymboree Corporation

Gymboree Corporation

Origins

New Management: 1989

Company Perspectives:

Facing Challenges: Late 1990s

Renewed Focus: 2000s

Key Dates:

Principal Divisions

Principal Competitors

Further Reading

Gymboree Corporation

Gymboree Corporation

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

FAST FACTS: About Gymboree Corporation

STRATEGY

INFLUENCES

CURRENT TRENDS

CHRONOLOGY: Key Dates for The Gymboree Corporation

PRODUCTS

CORPORATE CITIZENSHIP

GLOBAL PRESENCE

TRUTH IN ADVERTISING

EMPLOYMENT

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

More From encyclopedia.com

About this article

Gymboree Corp

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NEARBY TERMS

Gymboree Corporation

Gymboree Corporation

Further Reading

Gymboree Corporation

Gymboree Corporation

Origins

New Management: 1989

Company Perspectives:

Facing Challenges: Late 1990s

Renewed Focus: 2000s

Key Dates:

Principal Divisions

Principal Competitors

Further Reading

Gymboree Corporation

Gymboree Corporation

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

FAST FACTS: About Gymboree Corporation

STRATEGY

INFLUENCES

CURRENT TRENDS

CHRONOLOGY: Key Dates for The Gymboree Corporation

PRODUCTS

CORPORATE CITIZENSHIP

GLOBAL PRESENCE

TRUTH IN ADVERTISING

EMPLOYMENT

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

More From encyclopedia.com

About this article

Gymboree Corp

Related Topics

You Might Also Like

NEARBY TERMS