From the moment the man in the Look magazine ad stepped from the mist wrapped in a Dacron raincoat, an image was born. "Once in a Lifetime," the caption read. Orders for the revolutionary "maincoat" poured in.
Forty-five years after London Fog Industries' trademark coat made its debut, the troubled outerwear manufacturer -- now in bankruptcy -- is pinning hopes for survival on that blue-chip image. But first, officials of the Eldersburg company say, London Fog is poised to radically remake itself.
The Chapter 11 filing is merely a means to an end and doesn't spell the end for London Fog, said William Dragon Jr., chief executive officer since March. He intends to reduce a burdensome debt, cut costs and pour nearly all resources into the wholesale business while drastically reducing an unprofitable retail venture. That will mean shedding 115 of 140 stores nationwide.
"It does not make sense to be competing directly with our retail partners," Dragon said in an interview. "That's not where we ought to be, going forward."
Instead, he said, the company needs to return to its roots of developing and marketing brands, which today include London Fog, Towne and Pacific Trail. Already, said Dragon, the strategy is working, as the company has given more time, money and staff to wooing retailers.
For instance, for the first time in several years, May Department Stores Co. has placed London Fog's women's apparel on its preferred vendor list -- meaning chains such as Hecht Co. and Lord & Taylor will likely carry large assortments of the women's line in the spring. Sales of London Fog lines, which have been sluggish, are improving at chains such as Rich's Department Store Inc.
Dragon said he feels confident that the company can carry out its latest goals -- thanks to $130 million in new financing, and interest from senior bondholders in negotiating a debt-for-equity swap.
"I feel more confident about the growth and potential and performance of this company than I ever have," said Dragon, who would not specify how much he hopes to reduce existing debt of around $125 million. "It's also fortunate that one of our divisions, Pacific Trail, makes a lot of money. It's not like we're dealing from weakness across the board."
Still, the road ahead, while not impossible, will be difficult, retail experts said last week. Most applauded the use of Chapter 11, which will allow the company to restructure debt and more easily get out of leases at unprofitable locations.
But beyond those steps, the company needs to rebuild its brand, develop stronger relationships with wholesale accounts and offer the right mix of style and value, experts said.
"They are in a very tough market, as primarily a department store brand," said Emanuel Weintraub, president and chief executive officer of management consultant Emanuel Weintraub Associates Inc. of New Jersey. "It's not that they're making a dinosaur product; they have done a good job in updating their product. But that message hasn't gotten out. It's still 'London Fog, that's what my mom and dad used to buy.' "
"By clearing away the debt, they will have funds to get their message out. They have to become the absolute destination brand," in the way that Tommy Hilfiger and Polo have done, he said. "And they have to go back into every corner of the business and search every element of cost, all issues that erode profit margins."
It's also important that Dragon meet his goal of emerging from bankruptcy by early next year, said Thomas P. McShane, president and chief executive officer of McShane Group, a Timonium turnaround manager.
The chances of turnaround depend upon "being responsive to customers and single-mindedly focused on their new mission," he said. "It does also depend on their ability to achieve targeted revenues, which is dependent on their customers' accepting this change of strategy. They'll want to go back and sell to retailers they've been in competition with. Retailers will have to be convinced that the company can support its new strategies."
Howard Davidowitz, chairman of New York-based retail consultant Davidowitz & Associates Inc., believes the company has an uphill fight.
"I would say the odds are against them [succeeding] because they are tarnished," he said. "But it is possible, the brand still means something, it still has value."
Last week's bankruptcy filing caps a decade of trouble for London Fog. Debt has been restructured twice since reaching $425 million in 1995. Management turmoil has led to instability and strategy flip-flops. And the company has been battling in an intensively competitive arena, in which apparel sales have been stagnant and manufacturers and retailers have had to fight it out for margin and market share.
Merrill Lynch & Co. Inc. purchased a majority share of London Fog in 1991 and was anxious to see higher returns on its investment, even though the company was making double-digit-percent returns, said Douglas Hillman, president of London Fog from 1993 to 1996 and executive vice president for the previous 12 years.
In 1993, the owner brought in Arnold P. Cohen, then 37 and president of J. Crew Group Inc., as chairman and chief executive officer. Cohen -- who would be fired after one year -- launched a host of new initiatives, including laying off the company's nationwide sales force and hiring new salespeople based in New York; closing factories in the United States, which caused problems with new suppliers; outsourcing information-technology functions; acquiring the Seattle outerwear company Pacific Trail Inc.; moving company headquarters to Connecticut; and changing the way the brand was marketed.
"These are huge, huge undertakings," Hillman said. "It's the Cohen years that terribly disrupted the company."
The company began expanding its retail presence four years ago, when it had between 80 and 100 stores. Before that, London Fog used its outlets solely to sell excess merchandise. But, by 1995, the company was losing floor space in department stores, which were creating designer boutiques and cutting back on categories such as outerwear, and London Fog turned to outlet centers as another channel for the full product lines, said Lynne Y. MacFarlane, an executive vice president.
Robert E. Gregory Jr., chief executive officer through February of this year, said he embarked on an expanded retail strategy at the request of the board of directors and creditors who owned the majority of the company after the debt restructuring.
"It was the direction the creditors/owner wanted, not only the concept, but each store location," said Gregory, a turnaround specialist who in 1995 took over a nearly bankrupt London Fog, with $300 million in losses.
The retail strategy included opening outlet stores and small weather stores at airports, testing a superstore concept and creating Weather Wear Clothing Co., a sportswear line intended to offset the seasonality of London Fog's rainwear. It was seen as a way to begin expanding the company after Gregory returned it to profitability and cut the $425 million debt load by about two-thirds after a second restructuring in 1998.
The company quickly found its superstores, in Ohio and in Upstate New York, competing directly with retailers carrying London Fog products. It began converting them to the Weather Wear Clothing stores, Gregory said.
Ultimately, the chain of outlet stores also alienated retailers and hurt business, MacFarlane said, as relationships became strained and retailers cut back on orders.
Gregory defended the strategy as the right one at the time for London Fog and said the company suffered most from the warm weather that has troubled the outerwear industry for the past two seasons. Constant changes from the top didn't help, said Gregory, who worked with three sets of owners and five boards of directors in five years.
"Every time there was a new set of owners and a new board of directors, they wanted a new direction," Gregory said. "It was immensely complicated. You had three different owners, and each owner has a different perspective based on his financial position and how much debt was owed to him."
"I'm hopeful this will be the last restructuring London Fog has to go through, and they can run their business," he said.
Jon Myers, London Fog's president of the then-Londontown Manufacturing Co. from 1968 to 1981, echoed that sentiment. Myers' father, Israel Myers, bought the company, founded in 1922 as Makover-Rhoten, in the 1930s. Later, working with DuPont, Israel Myers invented the "maincoat."
"It's a wonderful brand name and still has tremendous acceptance," Myers said. "I'm hopeful they'll continue to revitalize the company by looking at some things that were successful in the past and utilizing some of those techniques and ideas. I'm hoping management can do that, because it's a magical name."
Sun staff writer Kristine Henry contributed to this article.