Brooks Bros., ‘Made in America’ Since 1818, May Soon Need a New Calling Card
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June 5, 2020This post was originally published on this site
In late March, Brooks Brothers was showered with praise after announcing it would use its three clothing factories in the United States to make personal protective equipment to help fight Covid-19.
Now those factories may become casualties of the coronavirus, and the future of Brooks Brothers — not to mention its identity as the ultimate “Made in America” brand, one that has dressed presidents and former presidents dating to James Madison — is uncertain.
Brooks Brothers plans to lay off nearly 700 employees this summer at the factories, in Massachusetts, New York and North Carolina. The company is also trying to find buyers for the factories by mid-July, and expects to close them if it can’t.
The plans emerged through filings under the federal WARN Act, which requires companies to give workers at least 60 days’ notice before mass layoffs or plant closings. Shortly after, Gordon Brothers, the expert in retail liquidations, announced it would provide a $20 million secured loan to Brooks Brothers.
Together the decisions left two towns with factories worried about their futures, and raised questions around the core financial health of the company, especially when retail sales have dropped sharply and brands like J. Crew, Neiman Marcus and J.C. Penney have filed for bankruptcy protection.
The potential factory closures “seem like a dramatic move for a brand that has really hung their hat on ‘Made in America,’” said Robert Burke, founder of a namesake luxury consultancy. They suggest, he said, a last-ditch effort to achieve cost savings, given the effect that pulling out of the U.S. could have on the brand’s image.
In an interview, Claudio Del Vecchio, the 63-year-old Italian industrialist who bought Brooks Brothers in 2001 and was responsible for acquiring the factory in Massachusetts, spoke for the first time about the decision to divest from the vertical made-in-America supply chain.
“I feel very bad about this,” Mr. Del Vecchio said. But he added, “The factories never made money for us, and at this moment all resources need to be maintained and saved to make sure we can come out on the other side of the crisis.”
Dependent Towns
The population of Garland, N.C., hovers just above 600. The Brooks Brothers factory there, where oxford shirts are made, is “the only large employer,” said Winifred Hill Murphy, the town’s mayor since 2012.
The company’s layoff notice said the factory employed 146 people, who may lose their jobs on July 20, though a Brooks Brothers video four years ago counted 270 Garland employees.
The departure of Brooks Brothers, which closed an outlet store in Garland in 2018, would be “devastating, not just financially but emotionally as well,” Ms. Murphy said. “You have young people working whose parents worked here and grandparents worked here.”
Brooks Brothers’ biggest U.S. factory is its Southwick facility in Haverhill, Mass., where it makes suits and employs 413 workers. The factory, acquired in 2008, was the town’s biggest employer until a hummus manufacturer recently passed it, Mayor James Fiorentini said.
“We worked on putting together a very generous tax package to get them to move here,” he said, adding that Brooks Brothers was considering going overseas when it bought the factory. “We pitched repeatedly that you want to be able to say, ‘Made in America.’”
The company also has a tie factory in Queens with at least 136 workers. Still, the three sites together make less than 20 percent of the products sold by Brooks Brothers, Mr. Del Vecchio said; the company’s largest category is now sportswear.
“For us to restructure to make the more casual sportswear products we need is too costly,” he said.
“Brooks Brothers was born in the mind of the family not to make products in America but to import the best products from all around the world, so I don’t think we are going away from the original mission,” Mr. Del Vecchio added.
The Fabric of the Country
Few American businesses have as rich and resonant a history as Brooks Brothers, which Henry Sands Brooks founded in Manhattan in 1818 and is the oldest apparel brand in continuous operation in the United States. Ralph Lauren started out as a salesman at Brooks Brothers in New York. It is the official clothier of the Jazz at Lincoln Center Orchestra and has been worn by Clark Gable, Andy Warhol and Stephen Colbert. It has dressed all but four presidents, and its overcoats have been worn for the inaugurations of Abraham Lincoln, Barack Obama and Donald J. Trump, among others. It even made uniforms for soldiers during the Civil War.
Family run until 1946, and always produced in part in the United States, Brooks Brothers changed hands a number of times until Marks & Spencer, the midmarket British firm, acquired it in 1988 and more production began to move offshore. There were complaints about diminished quality, and the brand was generally seen, said Thomas Davis, a salesman at the company for almost 50 years until 2017, as “falling into the abyss.” That was when Mr. Del Vecchio, whose father, Leonardo, is the 46th-richest man in the world, according to the Bloomberg billionaires index, acquired it for $225 million.
“Claudio loved factories and knew it was a source of differentiation for us,” said Jeff Blee, a former executive in merchandising at Brooks Brothers. “As America’s oldest clothing brand, being able to connect the dots from a sourcing, design, manufacturing standpoint — it helped bolster that story.”
Mr. Del Vecchio opened elaborate flagship stores in global capitals, and hired well-known American designers such as Thom Browne and Zac Posen to create high-end collections that could be shown during New York Fashion Week, with mixed results.
Steep growth in the first seven years was halted by the financial crisis. Later, the social movement toward casual Fridays, the rise of the dressed-down tech uniform and the shift toward online retail all began to chip away at the Brooks Brothers market, and it struggled to adapt.
Annual sales from 2017 through 2019 were effectively flat, at around $1 billion, Mr. Del Vecchio said. The company is also carrying debt of “less than” $300 million, he said.
In 2019, Mr. Del Vecchio hired the investment banking firm PJ Solomon to explore “options” such as a sale or further investment. Before the pandemic, a restructuring plan was created. This year, a group of potential investors valued the company between $300 million and $350 million.
However, Mr. Del Vecchio said he hadn’t felt that any of the discussions underway “matched the needs we saw.” Then the pandemic hit, ushering in an era of remote work, postponed weddings and bar mitzvahs, and job interviews on Zoom.
Frequently Asked Questions and Advice
Updated June 2, 2020
Will protests set off a second viral wave of coronavirus?
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
How do we start exercising again without hurting ourselves after months of lockdown?
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
My state is reopening. Is it safe to go out?
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
What’s the risk of catching coronavirus from a surface?
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
What are the symptoms of coronavirus?
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
How can I protect myself while flying?
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
How many people have lost their jobs due to coronavirus in the U.S.?
More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.
How do I take my temperature?
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
Should I wear a mask?
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
What should I do if I feel sick?
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
How do I get tested?
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
The company furloughed about 80 percent of its employees, including all retail personnel, and has been renegotiating rents. (Brooks Brothers does not own any of its real estate other than its office in Connecticut and the factories in Massachusetts and North Carolina; Mr. Del Vecchio owns the Madison Avenue flagship store through a separate entity.)
Mr. Del Vecchio acknowledged that current forecasts expect revenues to be down 30 percent after stores reopen. “And obviously, we will be down more if you look at the entire year,” he said, given the store closures in March through June.
Documents that detail the company’s “Transformation” proposal, seen by The New York Times, also reveal a negative EBITDA — earnings before interest, taxes, depreciation and amortization — of $69 million for the year, with no return to profit expected until 2022. (Brooks Brothers disputes these figures.)
“We need as much cash as possible,” Mr. Del Vecchio said. Hence the loan from Gordon Brothers, which has specialized in retail liquidation and recently pivoted to acquiring the intellectual property and archives of brands such as Laura Ashley. Like Authentic Brands Group, which bought the Barneys brand in November and then liquidated its stores, Gordon Brothers is focused on resonant names that can exist in a wholesale or digital landscape on their own.
“These are not people that create or position brands,” Mr. Burke, the luxury consultant, said.
Though Mr. Del Vecchio said he was not “eager” to even consider a Chapter 11 bankruptcy filing, he also would not rule it out. “We have to be realistic,” he said.
Mr. Del Vecchio was resigned to having to close the factories, though he didn’t think it would have a major effect on the brand’s image.
“There are a very small percentage of our customers who told us they really care about ‘Made in America,’” he said. “The vast majority of customers care more about quality and service than where a product is made. When we look at the sales, we really don’t see a lot of reason to believe we would be penalized. I think we — I — am more sorry about closing the factories than the customers will be.”
Though Brooks Brothers sells some products that are made in America by outside manufacturers, and may continue to do so when the company no longer has its own factories, Mr. Del Vecchio added, “I can’t promise we will maintain products made in America, because honestly I don’t know of any factories in America right now that make products of the quality we made.”
Lucie Greene, a trend forecaster and former worldwide director of the Innovation Group and J. Walter Thompson, said that while country of origin might not have mattered too much to buyers before the pandemic, she believed that now “people will have a long memory in terms of brand ethics.”
“Consumers will want to invest in brands that have been supportive of their country,” she said.
The factory employees and their towns are alternating between fearing for their future and believing that Brooks Brothers can be persuaded to stay.
Mr. Fiorentini said he hoped that another apparel maker would buy the factory in Haverhill. “I can’t say we’re hopeful or cautiously optimistic, but we’re definitely not giving up the ship,” he said.
“If we don’t have a replacement factory or Brooks Brothers does leave, then what will Garland look like 40 years from now?” Ms. Murphy asked. “I do hope there is something that can be done. This will impact Garland forever.”
