Warnaco Group, Inc. (Specimen)

Warnaco Group, Inc. (Specimen)
Item# 4286warnaco

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Stock Certificate, specimen
Late 1900's
Security-Columbian / United States Bank Note Company
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Brothers DeVer and Lucien Warner started what would become Warnaco in 1874. Both men had been trained as doctors, but each also had an entrepreneurial bent, as evidenced by their ventures ranging from traveling medical lecture series to snake-oil remedies. Among the latter was "Warner's Safe Kidney and Liver Cure," a bottled formula prescribed for urinary disorders and malaria, among other afflictions. Another of the brothers' projects was a replacement for the corset, which they felt was hazardous to women's health. They had devised a less constricting "waist pattern" in the 1860s, but it did little to shape women's waists. In 1874, though, DeVer invented an improved version that sported shoulder straps. Manufactured samples were met with enthusiasm in New York. The brothers quit their other jobs and, with $2,550 in start-up capital, began selling their "Dr. Warner's Health Corset. Problems were numerous during the start-up phase. A competing manufacturer threatened to sue the Warner's for copying its design, and the brothers were forced to change the original name of their corset (Dr. Warner's Sanitary Corset) because somebody else already owned the name. Understandably, they also suffered from a dearth of pattern-making experience. While DeVer learned the necessary pattern-making skills, Lucien used his contacts in New York City to begin developing distribution channels for their corset. Lucien's wife, Karen, pitched in and the three labored in Lucien's home. Once they got the operation up-and-running, sales were swift. They moved the company out of the Warner residence in 1875, and by 1876 had already outgrown their small manufacturing plant in McGraw, New York.

As word of Warner's comfortable corset spread, sales soared at an astonishing rate. In 1876, the Warner's moved to Bridgeport, where they built a four-story factory. They continued to redesign and improve their corsets with considerable success. They even introduced new products like an innovative folding bustle (used to support the rear of a dress). Particularly successful was the Coraline Corset line, which was manufactured in part with Tampico grass imported from Mexico. In 1883, in fact, Harper's Bazaar identified the four most popular corsets in the U.S. as Warner corsets, three of which were Coralines. The incredible success of the Coraline and other Warner designs made both brothers millionaires by the early 1880s. By the mid-1880s, the Warners employed more than 1,500 workers, most of whom were immigrant women or poor New England farm girls. During the remainder of the late 1880s, Warner Brothers, as the company was called, continued to flourish. The brothers introduced a steady stream of designs, usually based on European fashions, and began importing products from England for resale. Some ideas languished. Failed efforts included wool underwear, a chemical business, a Florida orange grove operation, and an attempt to manufacture baseballs.

With its originators no longer active in the company, Warner Brothers was legally changed from a partnership to a corporation in 1894. DeVer's son, D.H., took control of the company around that time. D.H. differed from his father and uncle in that he had little formal education. He started working at the company in 1887 when he was 19 years old and worked as an apprentice in every department in preparation for his father's departure. Despite his lack of education, D.H. was a savvy businessman with multiple talents and a flair for leadership. As a young man, he had been an amateur boxer, flute player, and yachtsman, among other credits. By the time he took over Warner Brothers, he was also acting as the president or director of several other concerns, including the Bridgeport National Bank, a gas company, and a department store. When he finally focused his intensity on Warner, the company profited handsomely.

Between 1894 and 1913, Warner's sales vaulted more than three-fold to $7 million and profits averaged $700,000 annually. The gains were largely the result of ongoing innovation. Warner introduced rust-proof steel boning as a replacement for more expensive whalebone in corsets, and introduced a successful corset that doubled as a hose supporter. The latter innovation is recognized as an important evolutionary step in the development of the brassiere in the 1910s. Indeed, Mary Phelps Jacob patented the bra in 1915, and shortly thereafter sold the invention to Warner.

The Warners' fortunes began to change, however, after 1920. Corsets quickly fell out of fashion early in the decade and were replaced with the "wraparound." Augmenting the company's downfall was the personal deterioration of D.H. Although an energetic businessman and leader as a young man, D.H. was a dissolute womanizer throughout his adult life. His decline hastened after his wife died in 1931. He continued to spend lavishly and drink to excess before his death in 1934 at the age of 66. D.H.'s son-in-law, John Field, became the new chief executive and L.T. became chairman of the board. A Yale graduate, Field had worked with D.H. and L.T. at Warner for several years. Under Field's control, Warner tightened its belt and revamped its product line during the 1930s, barely escaping bankruptcy. Vital to Warner's survival were inventions like the "Two-Way-One-Way" girdle, an elastic undergarment that wrapped around the body and flattened the hips yet still allowed full body movement.

Warner continued to prosper during the 1950s by selling its popular Warner brand lines of bras, girdles, and "corselettes." Sales rocketed to more than $25 million by 1956, growing at more than three times the industry average. Beginning in the mid-1950s, though, Warner Brothers lost focus and became too unwieldy. New managers worked to whip Warner Brothers into shape during the late 1950s. In addition to restructuring, they grew the company at a rapid rate by diversifying, acquiring other companies, and expanding distribution channels. Specifically, Warner broadened its product lines to include menswear and accessories, and both men's and women's sportswear. It expanded distribution by selling through large chain stores like Sears and J.C. Penney, and by opening production facilities in Europe and South America. Importantly, Warner purchased C.F. Hathaway Company, America's oldest shirt manufacturer, and Lady Hathaway, a well-known women's sportswear division. That buyout instantly made Warner a major player in those respective industries. Warner went public in 1961, and by the early 1960s was generating annual revenues in the $100 million range.

During the 1960s, the company changes its name to Warnaco and continued to grow through acquisition and merger. It purchased the popular Puritan and Thane brands in 1964, and then bought out White Stag, a casual sportswear maker.

Brands accumulated in the 1970s included Speedo, Playmore, Rosanna, Jerry Silverman, and High Tide. Warner also branched into retail stores and launched a more aggressive international agenda.

Int he early 1980ís the company once again struggled and Warnaco's board brought in two outside managers--Philip Lamoureux and James Walker to assume leadership of the company. Walker and Lamoureux jettisoned several of Warnaco's non-performing units, restructured management, and labored to improve the profitability of its successful core apparel lines. Profits soon recovered to record levels during the late 1970s. Even during the recession of the early 1980s, Warnaco's sales and profits boomed.

Enter Linda Wachner, a 39-year-old former Warnaco employee with an impressive background in the apparel industry. Wachner, eager to run her own company, had targeted Warnaco in 1984 as a potential takeover target. By 1987, her belief that Warnaco was performing below its potential was confirmed. She joined forces with Los Angeles investor Andrew Galef in a month-long battle for control of the company. Wachner and Galef, through their newly-formed W. Acquisition Corp., won the bid and Wachner stepped in as chief executive in April of 1987, with Galef as chairman. Wachner quickly replaced Warnaco management with her own team and reorganized the company. Her strategy was to streamline the corporation, pay down the debt incurred as a result of the leveraged buyout, and build Warnaco into a dominant force in its key market niches. Warnaco Group, Inc. was a troubled apparel company in the 1990s, but it grew into an industry powerhouse under the leadership of Linda Wachner. Wachner assumed an aggressive stance at Warnaco. She pared the company's 15 divisions down to two main categories: intimate apparel and menswear. She dumped other units, including the large women's apparel and sportswear businesses, and initiated widespread cost-cutting programs. She brought a new customer and cash-flow focus to Warnaco that resulted in significant gains. In addition, she broadened Warnaco's core product lines with new ventures, such as a deal to supply the popular Victoria's Secret retail chain. In 1990, she organized a separate company, Authentic Fitness, to acquire the Speedo swimwear brand from Warnaco for $85 million plus debt, then took on the additional role as CEO of this separate company. She began to build a national chain of Speedo stores, funded by taking Authentic Fitness public in 1992. In 1994 Warnaco purchased the rights to produce Calvin Klein men's underwear, following by Calvin Klein's women's underwear a year later, and North American rights for Calvin Klein jeans in 1998. To widen its channels of distribution, the company also acquired well-known labels for sale to the discount chains. In the early 1990s, Warnaco launched a line of bras under the Fruit of the Loom label for such mass merchants as Kmart and Wal-Mart, followed by a distribution agreement with Avon Products. In 1994, Warnaco acquired the Van Raalte label for apparel sold to Sears Roebuck.

By 2001 however, Warnaco was in deep financial trouble. Despite generating revenues of nearly $2.25 billion in 2000, the company lost $344.2 million. As a result, the price of the company's stock began to plummet. By June 2001, Warnaco was forced to declare bankruptcy, and was soon forced to restate its number for the previous three years. The company entered the autumn of 2001 under the cloud of an SEC investigation and a stock price that continued to drop until it was worth just pennies, resulting in Warnaco being removed from the ranks of the Fortune 500 and ultimately delisted from the New York Stock Exchange.

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