Two weeks ago, hundreds of public investors, adults of sound mind and judgment, paid good money for stock issued by Jos. A. Bank Clothiers Inc. Their $10 a share on the barrelhead, the ultimate gesture of business faith and confidence, once would have been hard to imagine.
Former Baltimore Orioles owner Eli S. Jacobs and Boston financier John Lakian nearly put Bank on the closeout rack with a botched, debt-sodden 1986 buyout. The venerable Baltimore suit and sportcoat company was near bankruptcy and losing millions by 1989.
But Jos. A. Bank is back, thanks to a prickly, nomadic executive who arrived in 1990 as a hired-gun trouble-shooter and decided to stick around. The 1,900-worker company, now based in Hampstead, has updated its clothes in the past three years, overhauled its balance sheet and propped up sales to pre-buyout levels -- $147.71 million last year.
Now it is rapidly expanding, using more than $15 million in new shareholder cash to double store locations to about 120, mainly east of the Mississippi, by 1997.
Retail analysts don't doubt that Bank is a nice rebound story, heartwarming in a Wall Street kind of way. Timothy F. Finley, 50, the chairman and chief executive who bailed Bank out, prevailed over squabbling lenders and the worst period for apparel sales in years.
He "took a company that was very ill -- had no set purpose -- and rebuilt it into a well-accepted, quality-at-a-price apparel chain," said Peter N. Schaeffer, who follows retail stocks for New York investment firm Dillon Read & Co. Inc.
It's not clear, however, whether Bank is suited for continued success.
Its main customers -- white-collar men -- are tight with a clothing buck. Several other quickly growing chains are chasing the same shoppers. Bank has de-emphasized sportswear and women's apparel -- lines with bigger profit margins and greater national sales.
And men don't dress up for work like they used to.
Every time an insurance company proclaims "casual Friday" or a consultant works from his home instead of the office, they're taking money from suitmakers' cotton-lined, button-flap pockets.
Mr. Finley, speaking softly and precisely in a recent interview, expects Bank to thrive. Its merchandise is far more focused than it was, he said. It knows its customers. Its prices are unbeatable. Executives need places to shop as traditional haberdashers wane. And the blue-jeans-at-work syndrome, Mr. Finley said, is not a big problem.
"Just because you're casual on Friday doesn't mean you're casual on Monday, Tuesday, Wednesday, Thursday," he said. "After all, we survived the Nehru jacket and the leisure suit."
Buyout nearly fatal
Jos. A. Bank almost didn't survive its 1986 buyout. John Lakian, a Boston investment banker who's now running for governor of Massachusetts, led a group including Mr. Jacobs in buying the clothier for $105 million from Quaker Oats Co.
It was a cliche of '80s dealmaking. The debt was high -- 80 percent of the price and deal fees. The bonds were junk. And the investment banker was Drexel Burnham Lambert.
The buyout quickly went bad. Sales fell, loans soured and losses mounted. Bank, descended from a company founded in 1905, edged toward bankruptcy court.
Desperate, Bank's board hired Mr. Finley, a no-nonsense, cut-to-the-quick consultant based in Charlotte, N.C.
Mr. Finley's experience with business mayhem had started early. His father's illness forced him at 22 to go home to Zanesville, Ohio, and run the struggling family meatpacking concern.
The young son's prescription was brutal but effective: He liquidated the company.
He had later jobs at accountants Deloitte & Touche, then called Deloitte, Haskins & Sells, and textile maker Cannon Mills.
In the late 1980s he worked as a freelance crisis consultant -- something akin to getting the wheelchair concession at the bottom of a steep, icy ski trail. As recession set in and buyouts went bad, there was no lack of business.
At Bank, Mr. Finley took over as interim CEO. He made rapid changes, closing bad stores, eliminating more than 200 jobs, getting better computers and saving $800,000 annually by moving managers from their comfortable Owings Mills offices into jerry-built space next to Bank's Hampstead factory.
'Ready, Fire, Aim'
Mr. Finley, who colleagues say sometimes explodes when things go awry, "used to have a motto that said, 'Ready, Fire, Aim,' " said J. William Porter, a Charlotte bankruptcy lawyer who knows him well. "When you're in the crisis management business, that's what you have to do."
Mr. Finley returned Bank's merchandise to its pre-buyout focus on less-than-$400 suits and other "careerwear." Previous managers, he believed, raised prices too much, made stores too fancy and confused customers by increasing sportswear lines.
And he persuaded bondholders to convert to equity, pulling Bank's net worth from minus $40 million into positive territory.
Bank bounced back.
The bottom line went from a $48.1 million loss in 1989 to a profit of $3.8 million last year. Earnings would have been even higher but for $6.7 million in one-time costs related to changes in compensation.
Sales were $147.71 million for the fiscal year ended Jan. 29, up from from $127.09 million four years earlier. The store count went to 61 now from 37 five years ago.
Bank's critical same-store sales, comparing figures from stores open at least a year, grew by a healthy 7.4 percent in 1993, when most apparel sellers turned in terrible results.
Bank had a great year. Now, with public investors peering over its shoulder, it must repeat it.
Charles Ronson, publisher of the IPO Value Monitor, a New York investment newsletter, believes Bank is "excellently managed" but worries that its 1993 performance resulted from a one-time spurt of out-of-work customers being rehired -- and might not last.
He's not the only one. Tailored menswear and accessories -- which make up about 80 percent of Bank's business -- are growing in national unit sales by just 1 percent annually, analysts said.
Never obsolete
One problem is the customer.
White-collar men don't splurge on wardrobes. If executives could put their business outfits on the balance sheet and depreciate them like factories and computers, they would. They keep them long enough.
It doesn't help that the clothes are never rendered obsolete by fashion. Exaggerating only slightly, Davenport & Co. retail analyst Kenneth Gassman said: "About the only thing that changes is the width of the necktie. The width of the lapels doesn't even change."
Then there's the crumbling corporate dress code. Business suits' enemies hope suits eventually will be relegated to semi-costume status, like tuxedos.
"More baby boomers are moving into management," said Brad Williams, a marketing specialist for jeanmaker Levi Strauss Associates Inc. -- which is to suitmakers what the Visigoths were to the Romans. "They're looking around and saying, 'Geez, why do we have to wear suits every day?' "
Dressing down
Unbiased retail experts believe that lawyers and bankers and salespeople will be wearing suits for a long time.
Even so, nearly 90 percent of American workers "dress down" for the office at least some of the time, according to a study issued this month by the NPD Group Inc., a Port Washington, N.Y., market research firm.
"Everybody is more and more casual," said Maxwell Sroge, a retail consultant based in Evanston, Ill. "The formality of the business office is being abandoned for a much lighter kind of dress."
Mr. Finley, who signed on last year as Bank's permanent boss, isn't alarmed. "What is casual?" he said. "In some companies it's blue jeans and some companies it's sportcoats and slacks."
Accordingly, Bank has beefed up its sportcoat and blazer offerings. And it made other product changes.
Bank's president and merchandising expert is Henry "Chick" Schwartz, former president of Hartmarx Specialty Stores and a longtime fashion pro. When Mr. Schwartz, 64, arrived in 1990, he said, variety at a Bank store involved choosing between two or three buttons on your jacket.
Mr. Schwartz added double-breasted coats, widened the lapels on some jackets and offered more pleated trousers. The idea is to appeal to younger men, but Bank doesn't want to become too trendy. This is your father's worsted wool suit, still.
"It's what we call 'updated traditional,' " Mr. Schwartz said. "We moved to the right but we didn't go crazy."
Bank continues to manufacture most of its own clothes at plants employing a total of 700 in Hampstead and Baltimore, which offers quality-control and price advantages. No Bank suit is more than $400, and analysts said its garments typically cost 20 percent less than similar clothes elsewhere.
The company is also promoting itself more, holding semiannual sales and advertising on the radio. It set up its own credit card.
But Bank managers know promotions alone won't drive their growth in the static menswear market. They're adding nearly 60 stores -- 7,000 to 10,000 square feet in size -- by 1997, including one in New York City this year.
Bank goes as far west as Denver now, and it's moving into smaller markets such as Portland, Maine, with tiny "catalog stores" that allow customers to see and feel the clothes before they order. Catalog purchases make up 18 percent of sales.
Bank won't have the field to itself. Mom-and-pop haberdashers are less numerous, and many department stores are out of the men's suit trade. But growing companies such as S&K; Famous Brands Inc., a Richmond, Va.-based off-price chain; Brooks Brothers, a division of British retailer Marks & Spencer PLC; and Today's Man Inc., a superstore chain based in Moorestown, N.J., are trying to fill the void.
Apparel stocks down
None is doing especially well, which doesn't bode well for business in general, and men's apparel stocks are down this year. "They've all been struggling," said Guy Ford, a retail analyst with Richmond-based Scott & Stringfellow Inc.
Bank hoped to fetch as much as $15 a share for its stock. That it sold for only $10 is another measure of
Wall Street's esteem for suit sellers. On Friday, the shares closed unchanged at $9.75.
One of Bank's more controversial strategies has been to shrink women's and casual offerings. Sportswear is 6 percent of sales; women's wear, 20 percent.
"If I were Bank, I would be emphasizing the women's end of things," said Mr. Sroge, the retail consultant. "They're the ones who spend money on clothes."
Mr. Finley is unconvinced. He believes Bank's good name and traditional product will carry the day and fend off the competitors.
'90s niche
The company has been known for years, across the country, for well-made, moderately priced men's suits and jackets. That's what will make it successful, he said.
"More than anything, I think our niche in the '90s is value," Mr. Finley said. "The yuppie is no longer ashamed to buy a Pontiac. We happen to be in a pretty good position to capitalize on that."
If they don't, the new shareholders will let them know about it.