R.G. Barry Corporation

views updated May 17 2018

R.G. Barry Corporation

13405 Yarmouth Road N.W.
Pickerington, Ohio 43147-9257
U.S.A.
Telephone: (614) 864-6400
Toll Free: (800) 848-7560
Fax: (614) 866-9787
Web site: http://www.rgbarry.com

Public Company
Incorporated: 1947
Employees: 2,600
Sales: $149.4 million (2000)
Stock Exchanges: New York
Ticker Symbol: RGB
NAIC: 316212 House Slipper Manufacturing; 31332 Fabric Coating Mills; 316219 Other Footwear Manufacturing

R.G. Barry Corporation operates as the leading manufacturer and marketer of comfort footwear. Controlling nearly 40 percent of the U.S. slipper market, the firm became well known for brands such as Angel Treads—the first foam-cushioned, washable slipper, created in 1949—Barry Comfort, Dearfoams, EZfeet, Madye’s, Mushrooms Slippers, Snug Treds, and Soft Notes. These brands were marketed in department stores, discount stores, warehouse clubs, drug chains, and specialty catalogs, and sold throughout the U.S. and in Mexico, Canada, the United Kingdom, and France. In 2000, over 90 percent of R.G. Barry’s sales stemmed from its comfort footwear businesses—Wal-Mart was the firm’s largest customer, accounting for nearly 20 percent of sales. Through its Vesture subsidiary, R.G. Barry also manufactures thermal retention technology products under the brands Dearfoams, LavaBuns, LavaPac, MICRO-CORE, POWERTECH, Quick Heat, and Vesture. In 1998, the firm sued Domino’s Pizza, Inc. for patent infringement related to its MICROCORE technology—it had received patent rights earlier in the year. In 2000, Domino’s settled the case, agreeing to pay R.G. Barry $5 million. In 2001, the Vesture subsidiary landed contracts with Papa John’s International, Inc. and Donatos Pizzeria Corp. to supply both companies with heated pizza delivery systems. Having endured volatile swings in profitability and undergoing several reorganizations throughout the 1980s and 1990s, R.G. Barry sought to stabilize its financial path in the new millennium by strengthening its domestic operations as well as increasing its global business.

Early Development of R.G. Barry

The R.G. Barry Corporation was founded in 1945 in a Columbus, Ohio area basement. That is when three partners—Aaron Zacks, his wife Florence, and a colleague, Harry Streim—created Shoulda-Moulders Co., a maker of slippers, bathrobes, and pillows. Two years into the endeavor, the partners changed the company name to R.G. Barry Co., a veiled reference to their three sons. The “R” stood for Harry’s son Richard, the “G” for Aaron and Florence’s son Gordon, and Barry referred to his sibling.

Despite his prominence in the company moniker, Barry did not follow his parents into the family business; instead he went on to found the Max & Erma’s restaurant chain. It was Gordon who joined the company upon his 1955 graduation from The Ohio State University’s College of Commerce. Knowing his son’s penchant for learning by doing, Aaron Zacks assigned Gordon to establish a new corporate manufacturing division in New York. Gordon’s operation lost money its first year, while the headstrong entrepreneur became acclimated to the intricacies of manufacturing. This “trial by fire“ would prove vital to the younger Zacks’s professional development. In 1957, Gordon was summoned back to R.G. Barry’s suburban Columbus headquarters when his father’s health began to fail. Aaron Zacks suffered a fatal heart attack in 1965, thrusting his relatively inexperienced 32-year-old son into the company presidency.

After taking a course on corporate management from the American Management Association, Gordon Zacks pared R.G. Barry’s interests to Dearfoam slippers, which had been introduced in 1958. He then sought to boost the company’s business via acquisitions. Over the course of the 1960s, the firm added operations in Puerto Rico, Tennessee, Texas, North Carolina, and New York, and expanded its family of brands to include Bernardo brand ladies’ imported Italian sandals. The firm went public in 1962 to help fund expansion efforts. In 1971, R.G. Barry acquired Maine’s Quoddy Products Inc., retailer of hand-sewn Quoddy moccasins.

This strategy of diversification within the footwear industry was very successful; company sales doubled over the course of Gordon’s first five years at R.G. Barry’s helm. However, Gordon Zacks’s early achievement may have endowed him with a bit of vainglory. In a 1985 interview with Business First-Columbus’s Bill Atkinson, he admitted, “When I think I’m right I have great faith and confidence in my own judgment.” While admirable to a certain degree, that egoism would later threaten R.G. Barry’s fiscal health.

Introduction of Mushroom Brand in the 1970s

Emboldened by his success, Zacks directed the development of a new line of women’s comfort shoes. Dubbed Mushrooms, the footwear was five years in the making and was backed by a marketing program that took another three years to fine-tune. Zacks boasted that it was “one of the most successful marketing programs in the history of the shoe industry.” Backed by hundreds of thousands in advertising dollars, R.G. Barry’s sales and earnings “mushroomed” throughout the 1970s, peaking at over $120 million and $3.8 million, respectively, in 1978.

This relatively small central Ohio company’s successful diversification out of its traditional house slipper niche caught the attention of U.S. Shoe Corp., a billion-dollar southern Ohio shoemaker and retailer. U.S. Shoe responded to Barry’s incursion on its market by developing a competing brand, Candie’s, which it supported with a multimillion-dollar advertising campaign. Despite the odds—R.G. Barry had a mere fraction of the financial and market clout of its multifaceted competitor—Zacks struggled to maintain his company’s hard-won position in women’s shoes. As Barry Zacks commented in Atkinson’s 1985 piece, “[Gordon] began to equate success or failure with his own personal success.” By the early 1980s, his firm had 22 Mushrooms stores in California, Florida, Michigan, and Washington, D.C. During this period, R.G. Barry also expanded the Quoddy chain to 43 stores. The company supported its greatly expanded retail activities with the addition of three manufacturing plants and a network of warehouses, but Zacks failed to take into account the vagaries of popular taste. His bold growth plan soon began to look more like a hasty overexpansion, especially in contrast to U.S. Shoe’s ongoing success. Zacks reflected on his skirmish with U.S. Shoe in the 1985 interview with Business First-Columbus, stating, “We were holding our own, but we were bleeding to death.”

After four years of declining earnings and slipping sales, Zacks conceded defeat in 1982. That year, the company took a $12.5 million loss on the sale of its degenerating Mushrooms chain to none other than U.S. Shoe, which converted the retail outlets to its Candie’s format. R.G. Barry incurred an $8.5 million overall loss in 1982. Zacks must have taken some consolation in the fact that his giant rival licensed the Mushroom trademark from his firm for $1 million per year. Barry continued its retreat back to the core Dearfoams slippers with the 1983 spin-off of its Quoddy retail chain to Wolverine World Wide, Inc., manufacturer of Hush Puppies shoes. Two years later, the company sold its Bernardo operations to Jumping-Jacks Shoes, Inc.

Reorganization and Retrenchment in the 1980s

Over the course of the next three years, R.G. Barry worked to pare operating expenses and reinvigorate its neglected slipper line. A 1983 restructuring—one of many to come over the ensuing decade—shuttered three plants and reduced employment by 28 percent, from 3,200 to 2,300. Hoping to take advantage of the lower labor and production costs available overseas, the company launched an import division in 1983 and began moving manufacturing operations from the northeast United States to the Southwest and Mexico. By mid-decade, it had shifted its production ratio from 100 percent domestic to 20 percent domestic and 80 percent foreign.

R.G. Barry also worked to broaden its appeal in the slipper market from a near exclusive emphasis on women to include men and children. A licensing program used the popular Cabbage Patch Kids and Care Bear characters to appeal to children, while Dearfoams developed a line of slippers for men. Other lines with designer names like Oscar de la Renta and Christian Dior commanded higher price points. Barry also redesigned and repackaged its line of women’s Dearfoams with particular focus on the product’s “giftability.” The footwear was such a popular gift that the vast majority, 80 percent, of R.G. Barry’s annual sales were concentrated in the fall holiday shopping season. The company emphasized the luxuriousness of its Dearfoams with its first-ever celebrity advertising campaign featuring Zsa Zsa Gabor. In the latter years of the decade, R.G. Barry broadened its retail distribution from its core in department stores to mass merchandisers like Kmart and Wal-Mart. By the end of the decade, CEO Zacks was able to boast that his company had “fresh and exciting products in every price point.”

These strategies appeared successful. Although sales declined from $141.1 million in 1981 to $86 million in 1986, the company recovered from its loss position to effect a $4.3 million profit in the latter year. Barry’s sales increased steadily to $122.8 million by 1989, but its net income fluctuated erratically throughout the latter years of the decade, from a low of only $23,000 in 1988 to $3.7 million in 1989.

Company Perspectives:

R.G. Barry Corporation is driven by a consistent vision to become a great company through global excellence in products which serve the comfort and convenience needs of people. These products include our many brands and styles of comfort footwear for at-and-around the home and our thermal retention technology products.

Under pressure from increased foreign and domestic competition, the company slid into the red the following year, incurring total losses of $8.3 million in 1990 and 1991. Zacks mandated two “major restructurings” in the span of two months in late 1990 and early 1991. The company reduced its inventory, reorganized its sales force, installed an integrated database system, cut its administrative support staff and laid off 370 U.S. employees. Zacks estimated that this “right-sizing” would save the company $6 million to $7 million in operating costs each year. In one of its most surprising moves, R.G. Barry shareholders elected U.S. Shoe Chairman Philip G. Barach to a seat on the board of directors in 1991.

New Products, Global Expansion Pace Mid-1990s Growth

In the midst of these operational shifts, the company also laid the groundwork for the launch of a whole new class of products. In cooperation with Columbus’s Battelle Memorial Institute, R.G. Barry developed a flexible, microwaveable pouch that could retain its heat for up to eight hours. Dubbed “ThermaStor,” the product won a spot on R&D magazine’s listing of 1994’s top inventions. These units were used in cold-weather accessories like scarves, gloves, and vests as well as household and leisure articles like breadbaskets and stadium seats. The products were offered under the “Heat to Go” brand at mass merchandisers and under the venerable Dearfoams label in department stores. Barry boosted its manufacturing capacity in this segment with the 1994 acquisition of Vesture Corp., whose “MICROCORE” was similar to Barry’s own ThermaStor, but utilized a different technology.

Analyst Bart Blout told Business First-Columbus’s Carrie Shook that “this technology has far-reaching applications and hundreds of products will be created with it—from shoes to toys.” Not only did this open up a completely new and unique segment of the consumer market to R.G. Barry, but it also held great potential for the development of products for the medical, industrial, commercial, and military segments. In 1995, Barry and Battelle formed a joint venture known as ThermaStor Technologies, Ltd. to explore these opportunities. That same year, the company was first listed on the New York Stock Exchange. Barry also focused on the development of international markets in the mid-1990s, establishing operations in Europe, Asia, Canada, and Mexico.

R.G. Barry’s financial performance improved dramatically in the mid-1990s. Sales increased from $101.8 million in 1992 to $136.6 million in 1995; profits grew to a record-breaking $6.3 million in the latter year. In 1996, management assumed that the financial difficulties were in the past and began beefing up manufacturing capacity. Confident that it would continue to secure positive results, the firm began spending to create a strong infrastructure to support the anticipated growth. In 1997, while the firm celebrated its 50th anniversary, R.G. Barry recorded the most favorable financial results in its history.

Further Financial Struggles and Restructuring

The celebration was short-lived however. While 1998 proved to be another successful year, it was followed by one of the worst in the firm’s history. In 1999, Sears, J.C. Penney, and Mervyn’s began selling private label brand slippers, spelling out disaster for the Dearfoam brand. That year, R.G. Barry lost $8 million in sales related to the department store shift to private label brands. The company also estimated that it lost nearly $6 million in sales due to retail store closings and consolidation in the industry. Management cited several internal factors as culprits in the drastic slide in performance. These included lackluster products, late delivery on holiday slipper styles, manufacturing problems, and weak consumer reception of the company’s new Soluna Spa-At-Home collection. Overall, R.G. Barry posted a $13.8 million loss that year.

As such, R.G. Barry entered the new millennium intent on regaining financial stability. The firm announced restructuring efforts in 2000 that included 240 job cuts, a factory shutdown in China as well as North Carolina, closure of its Columbus, Ohio, sample-making plant, and a reduction in manufacturing capacity to adjust with product demand. The firm also focused efforts on reviving its current brands. Ed Bucciarelli, R.G. Barry’s comfort division president, stated in a Footwear News article, “In restructuring, we’ve really redefined the needs of the business and responded to those needs. We want to position the brands so that we speak to a more updated consumer as well, a consumer who is more trend oriented. We think by segmenting our line to appeal to these different lifestyles, we’ll reach a broader audience and really expand.”

Key Dates:

1945:: Shoulda-Moulders Co. is established.
1947:: The company officially adopts the name R.G. Barry Corporation.
1949:: Angel Treads, the first foam-cushioned washable slipper is introduced.
1958:: The company launches the Dearfoam brand slipper.
1962:: R.G. Barry goes public.
1971:: Quoddy Products Inc. is acquired.
1982:: The firm is forced to sell its Mushrooms brand to competitor U.S. Shoe Corp.
1983:: After posting a $8.5 million loss in the previous year, the company begins restructuring efforts.
1991:: R.G. Barry restructures once again due to losses related to increased competition.
1994:: Vesture Corp. is purchased.
1995:: The firm lists on the New York Stock Exchange; ThermaStor Technologies Ltd. is created as part of a joint venture with Battelle Memorial Institute.
1998:: Vesture receives a patent for its MICROCORE pizza/hot food delivery systems; the subsidiary files a lawsuit against Domino’s Pizza, Inc. for patent infringement.
1999:: Fargeot et Compagnie SA is acquired; the company records its worst year in its history.
2000:: The company begins restructuring efforts once again and secures licensing rights for the Liz Claiborne brand name.
2001:: R.G. Barry lands contracts with Papa John’s International Inc. and Donatos Pizzeria Corp. to supply heat pizza delivery systems to the pizzamakers.

Financial results improved in 2000. Sales increased to $149.4 million from $140.1 million recorded in 1999. During that year, the firm secured a licensing contract with Liz Claiborne Inc., allowing the firm to manufacture and sell slippers under the trendy Liz Claiborne brand label. Building upon its 1999 purchase of French-based Fargeot et Compagnie SA, the firm bolstered European operations in 2000 by forming an alliance with the British firm GBR Ltd. The pair formed Barry GBR Ltd. to sell comfort footwear in the UK as well as Ireland.

In 2001, Bill Lenich was named president, chief operating officer, and director of R.G. Barry. Hired to aid the company in a three-year strategic plan, Lenich faced the difficult task of restoring the firm to profitability. The plan, expected to reach completion in 2003, included the following actions: aligning consumer demand with manufacturing capacity, increasing the percentage of products supplied by outside contractors, implementing speed-to-market and cost effective strategies, improving product design and development, and maintaining a firm grasp on expenses. While the entire retail industry was undergoing a decline due to a weakening American economy, Lenich, along with R.G. Barry management, felt confident that the firm would remain a leader among casual footwear manufacturers.

Principal Subsidiaries

Barry de Acuna S.A. de C.V.; Barry de la Republica Dominicana S.A.; Barry de Mexico S.A. de C.V.; Fargeot et Compagnie S.A.; R.G. Barry France Holdings Inc.; R.G. Barry Holdings Inc.; R.G.B. Inc.; R.G. Barry International Inc.; R.G. Barry Texas LP; Vesture Corp.; ThermaStor Technologies, Ltd.

Principal Competitors

Daniel Green Company; Danskin, Inc.; Wolverine Worldwide, Inc.

R.G. Barry Corp.

views updated May 29 2018

R.G. Barry Corp.

13405 Yarmouth Road, N.W.
Pickerington, Ohio 43147-9257
U.S.A.
(614) 864-6400
Fax: (614) 866-9787

Public Company
Incorporated: 1947
Employees: 3,000
Sales: $136.6 million
Stock Exchanges: New York
SICs: 3142 House Slippers

Best known for its Dearfoams brand slippers, R.G. Barry Corp. ranks among the world’s leading manufacturers of washable house slippers. Offered under the Angel Treads, Madye’s, and Snug Treds trademarks, Barry’s comfort footwear is distributed through mass merchandisers, department stores, and women’s specialty stores. The company also exports its products throughout North America and Europe. In the mid-1990s, approximately 20 percent of R.G. Barry’s equity continued to be held by members of the founding Zacks family. The company was guided at that time by Gordon Zacks, who had served as president and chief executive officer of the company since the mid-1960s.

Having endured volatile swings in profitability and undergone several reorganizations throughout the 1980s and early 1990s, R.G. Barry sought stable sales and earnings growth through new product introductions in the mid-1990s. In 1993, the firm launched a line of “heat-to-go” products that incorporated a heat-retaining, microwaveable insert. These items included the Lava Buns stadium seat, ear muffs, a back warmer, scarf, and tabletop bread warmer. Company officials and industry analysts expected R.G. Barry to continue to record sales and income increases in the mid- to late-1990s in part by applying this proprietary technology to products for the medical, industrial, and military markets.

Post-World War II Creation and Early Development

The business was founded in 1945 in a Columbus, Ohio-area basement. That is when three partners—Aaron Zacks, his wife Florence, and a colleague, Harry Streim—created Shoulda-Moulders Co., a maker of slippers, bathrobes and pillows. Two years into the endeavor, the partners changed the company name to R.G. Barry Co., a veiled reference to their three sons. The “R” stood for Harry’ s son Richard, the “G” for Aaron and Florence’s son Gordon, and Barry referred to his sibling.

Despite his prominence in the company moniker, Barry did not follow his parents into the family business, instead he went on to found the Max & Erma’s restaurant chain. It was Gordon who joined the company upon his 1955 graduation from Ohio State University’s College of Commerce. Knowing his son’s penchant for learning by doing, Aaron Zacks assigned Gordon to establish a new corporate manufacturing division in New York. Gordon’s operation lost money its first year, while the headstrong entrepreneur became acclimated to the intricacies of manufacturing. This “trial by fire” would prove vital to the younger Zacks’s professional development. In 1957, Gordon was summoned back to R.G. Barry’s suburban Columbus headquarters when his father’s health began to fail. Aaron Zacks suffered a fatal heart attack in 1965, thrusting his relatively inexperienced 32-year-old son into the company presidency.

After taking a course on corporate management from the American Management Association, Gordon Zacks pared R.G. Barry’s interests to Dearfoam slippers, then sought to boost its business via acquisitions. Over the course of the 1960s, the firm added operations in Puerto Rico, Tennessee, Texas, North Carolina, and New York, and expanded its family of brands to include Bernardo brand ladies’ imported Italian sandals. In 1971, R.G. Barry acquired Maine’s Quoddy Products Inc., retailer of hand-sewn Quoddy moccasins.

This strategy of diversification within the footwear industry was very successful; company sales doubled over the course of Gordon’s first five years at R.G. Barry’s helm. However, Gordon Zacks’s early achievement may have endowed him with a bit of vainglory. In a 1985 interview with Business First-Columbus’s Bill Atkinson, he admitted that “When I think I’m right I have great faith and confidence in my own judgment.” While admirable to a certain degree, that egoism would later threaten R.G. Barry’s fiscal health.

Introduction of Mushrooms in 1970s

This relatively small, central Ohio company’s successful diversification out of its traditional house slipper niche caught the attention of U.S. Shoe Corp., a billion-dollar southern Ohio shoemaker and retailer. U.S. Shoe responded to Barry’s incursion on its market by developing a competing brand, Candie’s, which it supported with a multimillion-dollar advertising campaign. Despite the odds—R.G. Barry had a mere fraction of the financial and market clout of its multifaceted competitor—Zacks struggled to maintain his company’s hard-won position in women’s shoes. As Barry Zacks commented in Atkinson’s 1985 piece, “[Gordon] began to equate success or failure with his own personal success.” By the early 1980s, his firm had 22 Mushrooms stores in California, Florida, Michigan, and Washington, D.C. During this period, R.G. Barry also expanded the Quoddy chain to 43 stores. The company supported its greatly expanded retail activities with the addition of three manufacturing plants and a network of warehouses, but Zacks failed to take into account the vagaries of popular taste. His bold growth plan soon began to look more like a hasty overexpansion, especially in contrast to U.S. Shoe’s ongoing success. Zacks reflected on his skirmish with U.S. Shoe in the 1985 interview with Business First-Columbus: “We were holding our own, but we were bleeding to death.”

After four years of declining earnings and slipping sales, Zacks conceded defeat in 1982. That year, the company took a $12.5 million loss on the sale of its degenerating Mushrooms chain to none other than U.S. Shoe, which converted the retail outlets to its Candie’s format. R.G. Barry incurred an $8.5 million loss in 1982. Zacks must have taken some consolation in the fact that his giant rival licensed the Mushroom trademark from his firm for $1 million per year. Barry continued its retreat back to the core Dearfoams slippers with the 1983 spin-off of its Quoddy retail chain to Wolverine World Wide, Inc., manufacturer of Hush Puppies shoes. Two years later, the company sold its Bernardo operations to Jumping-Jacks Shoes, Inc.

Reorganization and Retrenchment in 1980s

R.G. Barry also worked to broaden its appeal in the slipper market from a near exclusive emphasis on women to include men and children. A licensing program used the popular Cabbage Patch Kids and Care Bear characters to appeal to children, while Dearfoams developed a line of slippers for men. Other lines with designer names like Oscar de la Renta and Christian Dior commanded higher price points. Barry also redesigned and repackaged its line of women’s Dearfoams with particular focus on the product’s “giftability.” The footwear was such a popular gift that the vast majority, 80 percent, of R.G. Barry’s annual sales were concentrated in the fall holiday shopping season. The company emphasized the luxuriousness of its Dearfoams with its first-ever celebrity advertising campaign featuring Zsa Zsa Gabor. In the latter years of the decade, R.G. Barry broadened its retail distribution from its core in department stores to mass merchandisers like K-Mart and Wal-Mart. By the end of the decade, CEO Zacks was able to boast that his company had “fresh and exciting products in every price point.”

New Products, Global Expansion Pace Mid-1990s Growth

In the midst of these operational shifts, the company also laid the groundwork for the launch of a whole new class of products. In cooperation with Columbus’s Battelle Memorial Institute, R.G. Barry developed a flexible, microwaveable pouch that could retain its heat for up to eight hours. Dubbed “ThermaStor,” the product won a spot on R&D magazine’s listing of 1994’s top inventions. These units were used in cold-weather accessories like scarves, gloves, and vests as well as household and leisure articles like breadbaskets and stadium seats. The products were offered under the “Heat to Go” brand at mass merchandisers and under the venerable Dearfoams label in department stores. Barry boosted its manufacturing capacity in this segment with the 1994 acquisition of Vesture Corp., whose “microcore” was similar to Barry’s own ThermaStor, but utilized a different technology.

Analyst Bart Blout told Business First-Columbus’s Carrie Shook that “This technology has far-reaching applications and hundreds of products will be created with it—from shoes to toys.” Not only did this open up a completely new and unique segment of the consumer market to R.G. Barry, but it also held great potential for the development of products for the medical, industrial, commercial, and military segments. In 1995, Barry and Battelle formed a joint venture known as ThermaStor Technologies, Ltd. to explore these opportunities. Barry also focused on the development of international markets in the mid-1990s, establishing operations in Europe, Asia, Canada, and Mexico.

R.G. Barry’s financial performance improved dramatically in the 1990s. Sales increased from $101.8 million in 1992 to $136.6 million in 1995; profits grew to a record-breaking $6.3 million in the latter year.