One on One is a weekly feature offering excerpts of interviews conducted by The Evening Sun with newsworthy business leaders. Timothy L. Finley is the new chief executive of Jos. A. Bank Clothiers Inc., a Baltimore-based clothing manufacturer and retailer that has begun an aggressive marketing campaign developed by W.B. Doner and Co.
Q. Why is it necessary to [Jos. A.] Bank's success to develop a multimillion dollar advertising campaign during a time when the company has to carefully allocate its resources?
A.The purpose of the advertising campaign is to capitalize on top of the mind awareness that Joe Bank presently does not have. In other words, it's my belief that Joseph Banks has a good product, it has a solid, loyal customer base, but in order for it to grow any, or to prosper, it's going to have to create an awareness. So I view advertising . . . in this case as something that's indispensable to the survival of the company.
Q.Doesn't Joe Bank already have an identity? At least, in the Baltimore community?
A.It does in the Baltimore community but it doesn't nationally.
Q.Currently, the company is struggling under $70 million dollars in debt as a result of a leveraged buyout in 1986. How do you expect to retire such financial obligations in this economic climate?
A.I don't. As we speak, we've reached an agreement in principle with our bondholders whereby the debt that is presently on our balance sheet is going to be reflected as preferred stock, which is not debt. So the company in effect is being recapitalized.
Q.So what will be your remaining debt?
A.Simply the bank loan. The bank loan and trade down.
Q.And how much is that?
A.In the neighborhood of about $25 million.
Q.And you find that that is going to be manageable?
A.Oh, absolutely. We've become a healthy company financially.
Q.How did you accomplish such a feat?
A.I'm just smart. Well, I did it because I think the bondholders in this instance saw in the company what we saw in the company . . . I felt very strongly that this company would not succeed in a Chapter 11. Some companies can, but by and large most companies don't. Chapter 11 is not, contrary to popular opinion, a haven for reorganization. It's a haven for litigation. And therefore, by its nature, the administrative costs of a Chapter 11 are devastating and in my judgment, they would have been devastating to this company and it would have paralyzed it. And [we] would have had no damn business going in there. So TC fought that and I had some credibility because I [have] run companies in Chapter 11 and I've been there.
Q.Several retailers that have survived in Baltimore for years recently folded. Why is this recession taking such a toll?
A.For several reasons. The first and the most formidable is that retailing by its nature has too much capacity. Five years ago, there was allegedly enough retail to handle the needs of 500 million people. So what you're seeing for the most part is shake out in the retail industry. And I think the second aspect is, there's a lot of unemployment. It's probably the first white collar recession we ever had. We used to produce goods and services in this country and now we produce services, and as a result of that, it's going to have a greater impact, particularly in our business.
Q.In regard to the company's operation here and elsewhere, how many employees and stores do you have and do you expect to trim or expand your operations?
A.We have 40 stores in, I believe, 27 cities as far west as Denver and as far northeast as Boston, as far south as Houston, Memphis, [Tenn.] Charlotte, [N.C.] and Atlanta. In the next year, our strategy will be to stay put because I think 1991 is going to be tough. It's going to be tough for us and everybody else, I think it's going to be a continual shake up. After that, I think we have to add stores to survive, and I'm looking at 10. And of those 10, I believe, 7 are in new cities.
Q.What region of the country?
A.Interestingly enough, they will be in the Midwest.
A.Right now it's prospering and they're all starting to reflect our styling somewhat. I'll probably add some stores in the southeast, and maybe in Texas again. Those are good markets for us, really good markets.
Q.How many employees do you have?
A.Fourteen hundred and fifty-two.
Q.Are there any plans to close or consolidate stores?
A.Yes, in one particular area. We have a store in the Loop in Chicago and the business is moving to Michigan Avenue, so in those types of situations, we'll close stores or consolidate stores or move stores.
Q.It's not a shutdown completely, but more a shuffling?
A.Yes, we're not doing it for that purpose. It's hard to run a retail company by shutting down stores all the time. That doesn't work.
Q.How do you explain that several retailers, whether they're based here or elsewhere, have been doing just that?
A.They're different. A lot of them have stores that don't perform. Our stores tend to perform. I mean, I've done it in other situations. I've shut down a lot of stores in my career, but we just don't have any stores that don't perform.
Q.Speaking of performance, there's a difference between having debt that weighs you down and the performance of a company. Aside from the debt, if you can take that away now, how are your stores doing?
A.Our stores had a good Christmas. In fact, we did well in the fall. They can do better. Some of them are doing extremely well but overall, our stores are doing better than the industry.
Q.What will it take to push Bank beyond the break-even point to record sales again?
A.The company operationally is beyond the breaking point. I mean it operates at a profit. To do record sales again, well that's why I'm doing the advertising. For the large part of it -- that's the only way I can grow it because it's a shrinking industry. So I'm going to have to capture my share of the market.
Q.What is your background? Are you still running your own company?
A.My company in Charlotte. I've had 11 to 12 years of operating experience since I left the accounting world. I still have my own company. It's not the type of company that requires a person to be there all the time. Most of my people are very heavy-duty types of people and they're capable of running companies that are as big or bigger than this one.
Q.What is the name of your company and what does it do?
A.The Finley Group is the name of the company and it manages companies that have financial difficulties. We've run some very, very large companies.
Q.How old is your company?
A.Six years old.
Q.Was it created simply for this turnaround type business?
A.Yes, it was created before it was vogue to do so, actually.
Q.Will there still be a market for it in the future?
A.That's a very good question. I think there will be for the good ones. I mean, a lot of people are jumping into it, but the people who are jumping into it are unemployed or believe they have this talent. They may have, but they don't have track records. And at least we have a track record.
Q.What is unique or what is different about a turnaround artist?
A.They're instinctive. I think that's the main thing. You don't have time to analyze much. You have to go on your instincts, which requires an awful lot of experience, and you've got to be tough.
A.Real tough. You've got to make some decisions that are tough. There are turnaround people that are great cost-cutters but neither this company, nor any other one, will be saved on cost-cutting. I mean, if you're going to turn a company around, it's generally got to be turned around at the top line. That is the sales line, and the margin line and that requires more skills than just cutting costs. I mean you and I could go in together at any company in the world and by edict say, 'Everybody cut 10 percent of their expenses' and they'll do it.
Q.Are you here to stay just through Bank's turnaround or are you a permanent addition to its management team?
A.In this one, I've been asked to stay long-term. Long-term being three years, and I'm willing to do that.
Q.And you think that you can do what is needed to be done in three years?
A.Yes, sure. I think it will either turn in a year or it won't.
Q.What will happen to Bank if you don't succeed?
A.It will liquidate more than likely. It will be sold at some point.
Q.What do you have to tackle and turn it around?
A.We have to tackle certainly the awareness problem. I think we have to improve some of our merchandising practices. I think we're doing that.
Q.Such as what? What do you have in mind?
A.Well, we're going to have to move out a little more in fashion at least on the women's side. We're a little dowdy, I think. No, we are. We know it. We will continue to go after the professional business woman. I think that's our market. It's unrealistic to assume that Joseph Bank can become an Anne Taylor. We can go toward Anne Taylor.
Q.What is your customer base and what do you see as the strengths and weaknesses in Banks' marketing strategy?
A.We cater to the professional man and the professional lady. We are a business uniform type of company that is traditional. What we have going for us is an extraordinary price point for the quality of the product.
Q.This isn't a new concept. At least in the last few years, everyone is sort of moving back toward quality and low prices. How are you to succeed when the others are not being able to do this?
A.Well, for one thing, we're there. I think that's the key to it. I think you're right. Service and quality is apple pie and motherhood. I mean, you know, the American automobile makers that appear on television are going to tell you they have quality products. Well, you know, maybe they do, maybe they don't. On the other hand, for the most part I think our record would indicate that we do. So that's one of the reasons we've approached the advertising. I mean the advertising we're doing is funny. We don't hold up a piece of cloth, and say this cloth is better than this cloth. . . And they're funny. That's the way we ought to do it.