June 17, 2009 The story of Eddie Bauer today can be summarized in one phrase: good company, great brand, bad balance sheet. We are in the...
June 17, 2009
The story of Eddie Bauer today can be summarized in one phrase: good company, great brand, bad balance sheet.
We are in the process of turning around this classic iconic American brand and have demonstrated tangible progress. In the recession year of 2008, we generated $52.7 million in EBITDA excluding non-recurring and non-operational items — $10.8 million higher than the year before. Our comparable store sales outpaced most of the specialty retail sector and our competitors by a substantial margin. We took $48 million out of the operating cost structure of the business last year, with another $15 million coming out in 2009. We generated cash, with $60 million of cash on our balance sheet at the end of the year and a $15 million excess cash flow prepayment made to the Term Loan holders in April 2009. Thus far, we have delivered on what we said we would do.
Unfortunately, a crushing debt burden left from the Spiegel bankruptcy combined with the severe, prolonged recession have left us with no choice but to look for ways to restructure the company’s balance sheet. We have made every effort possible to do this out of court, but have been unsuccessful in getting the various and diverse parties in our capital structure to agree to either a process or a plan. Rumors, speculation, and misinformation have put additional pressure on the company and made it necessary for us to take decisive action.
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We are already fixing this business. We are restoring a great American brand. We have made progress and know what remains to be done. But we need some help.
I came to Eddie Bauer in July of 2007 after running the successful turnaround of Bath and Body Works for four years. Having spent the better part of a 20 year career working on building consumer and retail brands, I was attracted by the enormous potential that could be realized by bringing Eddie Bauer back to its roots. I used to be a customer. I used to love the brand. In fact, I bought one of the first Eddie Bauer Ford Explorers. But like many, I drifted away over the years as the company went through a number of leadership changes and confusing diversions from the core Eddie Bauer brand equity. As I contemplated the move to the company, I was deeply impressed and swayed by a book that was given to me: The Legend of Eddie Bauer.
Heritage brands always have comeback potential — and few have a heritage as rich and compelling as Eddie Bauer’s. There is no other brand that embodies both the spirit of the American Sportsman and the spirit of the American Explorer/Adventurer. The values and the aspirations personified therein are as timeless as they are universal. Eddie built product around the things that he loved to do outdoors, often in collaboration with experts in the field. He invented and later patented the first quilted down jacket in America after almost freezing to death on a winter fishing trip. He outfitted U.S. Army Air Corps pilots in World War II with the famous B-9 down parka and A-8 flight pants. He developed outerwear and gear for the major triumphs in the golden age of American Mountaineering. He became a champion breeder of black labs, always his faithful companion in the field.
But our heritage isn’t just interesting lore. It’s the guide for everything we do, a wellspring of inspiration for new products, innovation, and commercial ideas. We have, for example, launched First Ascent, our new premium outerwear and gear line built in partnership with some of the best mountaineers in the world. First Ascent brings back our heritage as America’s premier expedition outfitter and the many renowned First Ascents accomplished with the help of Eddie Bauer gear. Jim Whittaker, the first American to summit Mt Everest, expressed the standard against which we are rebuilding this brand: “Without exception, every article of down equipment we used carried the Bauer label … and it was superb.”
First Ascent is now the official product line of Rainier Mountaineering (RMI), America’s largest and most respected mountain guide service. More than 60 RMI guides around the world live in our gear. Their safety and security, and that of their clients, depends on our gear. Our “dream team” of mountaineers tested the First Ascent product line at every stage of its development on mountains like Rainier, McKinley, Cotopaxi (Ecuador), and Aconcagua (Argentina) — culminating in Eddie Bauer’s return to the Everest Summit this May. It’s what Eddie would have done if he was still running the company.
First Ascent has been enthusiastically received and strong early selling is ahead of expectations. It will roll out to 180 stores this fall, merchandised in a First Ascent “shop” within the store featuring a 65 inch plasma TV playing highlights of our expeditions. It will re-establish our credibility in the outerwear category while adding excitement and emotion to the store experience. A few minutes of our video dispatches from Everest will bring this to life.
Also coming this fall is our heritage collection, built in the tradition of Eddie Bauer field and stream. By October, consumers will see a revitalized Eddie Bauer store with field and stream inspired merchandise in the front of the store, expedition inspired product in the back. The “old” Eddie Bauer will be back, but with fresh, innovative, exciting new product and marketing. Taking an old idea and making it new again — it’s a formula that works over and over in retail brands.
We are confident in this direction. Everything we have done in the past two years that goes back to our heritage has worked. We have validated our strategy with early wins. Now, we are prepared and ready for a powerful set of launches that we believe will cut through the clutter and put Eddie Bauer back on the map of exciting brands.
Nobody thought this turnaround was going to be easy. We’ve been working on our five part turnaround agenda for nearly two years. And we have results to show for it. We weathered the recession better than many because we got ahead of it. At the same time, we kept pushing forward with “offense,” new products and new ideas that will generate sales growth and elevate the brand. Without a heavy debt burden, we will be successful.
To us, this is more than a company. It’s a mission. There is a level of passion and dedication at Eddie Bauer that I have seldom seen in companies. We bleed Eddie Bauer green. Our 8,600 employees take pride in what we have accomplished so far, but know that much remains to be done. Most importantly, we know we can do it if given a fair chance and a better balance sheet.