475 Fifth Avenue
New York, New York 10018
Telephone: (212) 686-5050
Fax: (212) 685-8281
Incorporated: 1947 as Uniroy of Hempstead, Inc.
Sales: $188.1 million (1995)
Stock Exchanges: New York
SICs: 2311 Mens' & Boys' Suits, Coats & Overcoats; 2331 Women's, Misses' & Juniors' Blouses & Shirts; 2339 Women's, Misses' & Juniors' Outerwear, Not Elsewhere Classified; 5136 Men's & Boys' Clothing & Furnishings; 7389 Business Services, Not Elsewhere Classified
During a checkered career the company known in the mid-1990s as Aris Industries, Inc. has occupied a precarious place in the apparel industry. After early success as a retailer named Unishops it fell into bankruptcy, emerging mainly as a manufacturer and importer called the Marcade Group that again went bankrupt. The company was renamed Aris Industries after returning to profitability in 1993.
Incorporated in 1947 as Uniroy of Hempstead, Inc., a retail menswear chain, the company was renamed United Shirt Shops, Inc. in 1953. It gradually evolved into a retailer of men's and boys' clothing in the leased departments of discount stores, specializing in moderate- and low-priced work clothes, shirts, socks, underwear, and sportswear. The number of units grew from seven in 1957, when it opened its first leased department, in Modell's Shoppers World in Lodi, New Jersey, to 19 in 1959 and 91 in 1962. The company was renamed Unishops, Inc. in 1961. Sales grew from about $500,000 in 1957 and $5 million in 1959 to $22.4 million in 1962, and income from $230,000 in 1959 to $890,000 in 1962. Company offices were in Jersey City, with Bernard (Bud) Kessler as president and his brother Daniel as executive vice president.
Rapid Growth in the 1960s
Unishops went public in 1962, offering 275,000 shares at $14 a share. By the end of 1963 there were 104 Unishops units; sales that year came to $27.4 million and income to $1.2 million. Unishops' stock became listed on the American Stock Exchange in 1964, when cash dividends were first paid out. The last conventional Unishops store closed in 1963. By late 1966, when Bud Kessler, now chairman, moved to Los Angeles, there were some 200 Unishops leased departments in stores from coast to coast, making the firm the largest in its field. Its landlords numbered 68, the largest of which was S.S. Kresge Co., operator of K-Mart, where Unishops had 48 units. Net sales reached $46.3 million and income $2.4 million in 1965, with an astonishing 31 percent return on net worth.
Unishops was able to grow rapidly because it cost only $16,000 for the company to open a new leased department, including the costs of fixtures, pre-opening payroll and advertising, and transportation of inventory to the new site. The $60,000 or so allotted to inventory was recoverable at the chain's other stores if a new unit failed. One cost-cutting technique was to use the firm's growing purchasing power to persuade manufacturers to store goods for Unishops until needed in the stores, thereby substantially reducing warehouse costs. Unishops was also rapidly developing its own private brands of merchandise; in 1966, goods sold under its label accounted for 79 percent of sales, compared to 40 percent five years earlier.
About three-fourths of all Unishops stores owned their own fixtures at this time. In most cases store operators provided central check-out services, with the Unishops leased department usually paid weekly, within 10 to 12 days after the sale. Rent was based on a percentage of sales, usually 8 to 11 percent. Unishops departments hired and supervised their own employees. Well over half of these units were unionized.
Unishops began expanding through acquisition as well as internally in 1966, when it purchased Clarkins, Inc., operator of a chain of three Ohio discount department stores. A fourth store in Dayton was added later in the year, and two more were opened in 1967. Between 1968 and 1971 the company also acquired J. Z. Sales Corp., operator of four leased departments selling housewares, hardware, outdoor supplies, and garden furniture; Mikemitch Realty Corp., operator of three Modell's Shoppers World discount department stores in the New York metropolitan area; Nescott, Inc., operator of 22 leased departments and 13 freestanding units selling prescription drugs and beauty aids; Star's Discount Department Stores, operator of three such stores in New York and three in Connecticut; Teril Stationers Inc., operator of leased stationery departments in 11 discount department stores; White Discount Department Stores of Massapequa, New York; Goldfine's Inc. of Duluth, Minnesota; and Perry's Shoes Inc. of New York. All these purchases were made for Unishops stock, enabling the company to avoid long-term debt.
Interviewed by the New York Times in 1969, Bernard Kessler said that while Unishops had expanded from selling men's and boys' wear to other specialties including hardware and beauty supplies, it was not trying "to be all things to all consumers." Accordingly, it was leasing out the supermarket food operation at Modell's and at Clarkins. He added that the company had gone upscale, raising both product quality and profit margins. A considerable amount of Unishops' goods were now being sold on credit, it was offering delivery service, and more personnel were being made available in order to assist customers in making their selections. The number of executives and division heads who had stock options was unusually high, according to Kessler, and, in keeping with the company's policy of allowing younger staff to share responsibility, the average age of its managers was 39.
Unishops' string of record sales and profits continued unabated into the early 1970s. It operated 277 leased departments in 35 states and 21 discount department stores in 1970, when net sales came to $183.8 million and net income to nearly $9 million. The dividend was increased for the sixth year in a row. Unishops stock reached as high as $89 a share before a two-for-one split in 1968 and as high as $70.50 before another two-for-one split in 1969. The company began taking over the operation of K-Mart stores, assuming, by the end of the year, the management of about 20 of the 56 units in which it had taken department leases. It also formed the Bobbie Sue division to operate leased ladies' and children's wear departments in 12 discount stores and apparel departments in certain company-owned units. Sales rose to $230 million in 1971, with net income of $7.6 million.
Overexpansion and 1973 Bankruptcy
By this time Bernard Kessler was setting an objective of $1 billion in annual sales by 1980. The company's hectic pace of growth proved, however, to be unsustainable because of lagging consumer demand and increasing competition in discount retailing. In retrospect, moreover, it was found that the company had expanded without sufficient inventory controls, cash budgeting, or management depth. By the time Kessler died in 1972 at the age of only 50--his brother Daniel had died in 1969 at only 43--Unishops was in serious trouble. That year the company maintained 351 leased departments and sales volume reached a record $271 million, but it lost $4.5 million. In 1973 it lost another $13.2 million, much of it due to the lagging Bobbie Sue division. In November 1973, when the company filed for Chapter 11 bankruptcy, there were 39 Unishops discount department stores, 37 specialty stores, and 281 leased departments in stores operated by others. Just prior to the bankruptcy petition, Unishops stock was trading for 50 cents a share.
Unishops responded to its plight with a major cost-cutting program. By January 1974 two-thirds of its freestanding stores and about 150 leased departments had been sold, otherwise disposed of, or were in the process of being eliminated. It sold some of the White and Nescott stores to other discounters in 1974 and disposed of all its Bobbie Sue departments. Star's and Modell's disappeared entirely. Sales fell to $145 million in 1973 and $111 million in 1974. In April 1975 a bankruptcy judge approved a company plan, covering 19 Unishops subsidiaries, which offered creditors about 42 cents on the dollar in cash (spread over five years) plus 34 percent of its stock. In all Unishops paid creditors $50 million on $91 million worth of debt, three-quarters of it in cash.
In mid 1975 Unishops was operating 13 Clarkins and Goldfine's discount department stores and about 200 leased departments. While most of them were confined to selling men's and boys' wear. Unishops also was operating Central Textile domestic goods and fabrics departments and Perry's Shoes departments. The number of employees had fallen from a high of 6,500 to 2,500. These stringent measures enabled the company to make a profit of about $2 million in both fiscal 1975 (ending January 25, 1975) and fiscal 1976. Net income in fiscal 1977 came to $1.5 million on sales of $117.8 million and in fiscal 1978 to $927,000 on sales of $127.3 million.
1977-1981: A Period of Restructuring
Under Herbert Wexler, Kessler's successor as president and chief executive officer, the company not only restored its standing with creditors but used some of its $61 million tax-loss carry-forward for acquisitions. In 1977 it purchased Paul Marshall Products Inc., a California-based importer of wicker and rattan home-furnishing accessories, for $5.5 million. In 1978 it purchased Youth Centre Inc., a New England group of 14 children's apparel stores, for $3 million. It acquired Marlene Industries Corp., a manufacturer of budget women's and infants' clothing, for $42 million in 1979. Unishops also shed some of its holdings during these and subsequent years, disposing of its Goldfine's stores in 1978 and discontinuing its Clarkins and Perry's Shoes stores, as well as the sale of men's and boys' wear, in 1981.
By these transactions Unishops became a completely different business, with Central Textile (which operated 44 leased departments in discount stores owned by others) as its only prior unit. Although the company retained some ties to specialty retailing, its major activities now were manufacturing apparel and importing furniture and giftware, with Marlene Industries accounting for more than three-quarters of Unishops sales and income in fiscal 1981, when it earned $3.4 million on volume of $201 million. Accordingly, the company changed its name to Marcade Group Inc. in 1981. Its long-term debt was $21 million.
Red Ink Again in the 1980s
The restructured and redirected company failed to thrive, however. Hard hit by the severe recession of the early 1980s, Marcade fell into the red in fiscal 1983, losing $8.2 million on sales of $198.3 million. By the end of this period its short-term debt had risen to $29 million, requiring the company to go to its banks for a long-term revolving-loan agreement and short-term credit lines. Marcade lost $8.8 million in fiscal 1984 and $21.9 million on only $71.4 million in sales in fiscal 1985. By September 1985 it had $30 million in long-term debt and negative net worth.
In 1986 an investor group paid $4 million for a 40-percent stake in Marcade, with banks receiving $10 million in cash, notes, preferred stock, and 30 percent of the common stock in exchange for a restructuring of its debt. The investment partners were Charles Ramat, who became president, and Robert Lifton and Howard Weingrow, co-chairmen of the board. Ramat later became chairman as well as president and still held both posts in the mid 1990s. The new management moved corporate headquarters from Jersey City to Manhattan. Two years later, a private investor group headed by Alexander and James Goren acquired about 16.5 percent of the stock for $20 million.
The sharply higher price for Marcade shares reflected an impressive turnaround for the company. Ramat used tax-loss carry-forwards to purchase Booth Bay, Ltd., at the end of 1986 for more than $9 million; Perry Manufacturing Co. and Europe Craft Imports, Inc. in 1987 for $23.8 million and $32.1 million, respectively; and Above The Belt, Inc. and RJMJ, Inc. in 1989 for undisclosed sums. These undervalued companies enabled Marcade in fiscal 1989 to realize net income of $8.4 million on revenues of $286.7 million, and in fiscal 1990 it earned $13.4 million on revenues of $377.7 million. Marcade now was the 13th-largest apparel company in the nation.
More Hard Times in the 1990s
These acquisitions, however, burdened the company with $80 million in debt. One of them, RJMJ, providing financing and servicing to apparel manufacturers, overextended itself and landed Marcade in deep trouble. Sales by Marlene Industries and Booth Bay declined dramatically during 1990, and the company ended the fiscal year losing no less than $66 million (of which restructuring expenses accounted for $42.5 million) on revenues of $365.6 million. In 1991 Marlene Industries, with trade liabilities of about $5.6 million, was liquidated, its creditors to receive 15 percent in cash and the rest over four years. Aris ended that fiscal year with a loss of $2.8 million on sales of $237.8 million.
By August 1992 Marcade had stripped itself of all units except Europe Craft Imports, selling Members Only men's outerwear and sportswear; Perry Manufacturing Co., maker of women's sportswear; and Above The Belt, a manufacturer of apparel for young men phased out the following year. A $52-million loan from its chief creditor, Heller Financial, Inc., was in default, and it was attempting to restructure about $25 million in junk-bond debt it had issued. When Heller declined to further extend a $31-million payment due October 31, 1992, Marcade filed for Chapter 11 bankruptcy. It ended the fiscal year with a loss of $16.6 million on sales of $193.2 million.
Under a plan approved in June 1993, Marcade emerged from bankruptcy. Affiliates of Apollo Advisors L.P. acquired 48.8 percent of the company, which assumed the new name of Aris Industries Inc. It returned to profitability, earning $2 million on revenues of $192.6 million in fiscal 1994. After a special credit for debt forgiveness, the profits soared to $31.2 million. For fiscal 1995 Aris had net income of $2.2 million on sales of $188.1 million. For the first half of fiscal 1996, however, the company lost $2.7 million on net sales of $75.9 million. Long-term debt was $64.2 million in July 1995.
At the end of 1994 Aris Industries was engaged in the design, manufacture, import, and distribution of men's and young men's sportswear and outerwear and ladies' sportswear and other apparel. Perry Manufacturing was manufacturing and distributing moderately priced misses', women's, junior, and petite sportswear in knit and woven fabrics. It was a large supplier of private-label goods to national chain stores, including Hunt Club and Worthington for J.C. Penney and the Jaclyn Smith sportswear line for K-Mart. In addition, it was manufacturing goods for such large customers as Liz Clairborne and Lands End.
Europe Craft was importing and distributing men's outerwear, including cloth and leather jackets, and sportswear, including knit shirts, under the "Members Only" name. It had been granted licenses to manufacture and distribute men's outerwear and raincoats under the "Perry Ellis" name and was also designing, developing, sourcing and importing men's and boys' outerwear and sportswear product lines as an agent for various national store chains selling such products under the Europe Craft name or a private label. In addition, Europe Craft had granted licenses to licensees for men's dress and woven sport shirts, men's related active wear, boys' outerwear and sportswear, men's tailored suits and sports coats, and men's lounge and sleepwear. It also had granted exclusive distributorships in Canada, Mexico, and Central America. Europe Craft's products were being marketed nationally in department stores, specialty stores, and national retail chains. It also operated three stores located in factory outlet malls in Ohio, Virginia, and Tennessee.
Perry owned five manufacturing plants in Virginia and North Carolina, three in El Salvador, and one in Costa Rica. It also leased manufacturing and warehousing space in North Carolina, El Salvador, and Honduras. These facilities were producing the majority of the apparel it sold. The balance of its apparel was being produced by independent factories and contractors in the United States and Latin America. Perry was leasing sales offices in New York, Chicago, Dallas, and Miami.
Europe Craft's products were being manufactured overseas by independent factories, mostly in Hong Kong, South Korea, China, India, the Philippines, Bangladesh, Sri Lanka, Indonesia, and the United Arab Emirates. It was leasing a showroom in New York and offices in New York and New Jersey. Marlene Industries owned one remaining facility in Tennessee.
Principal Subsidiaries: Europe Craft Imports, Inc.; Perry Manufacturing Co.
Barmash, Isadore, "Chapter XI--The Story of Unishops' Recovery," New York Times, October 12, 1975, Sec. III, p. 16.
Furman, Phyllis, "Marcade Slips, Making One Deal Too Many," Crain's New York Business, December 10, 1990, p. 3.
"Marcade Files Chapter 11: Members Only Excluded," Daily News Record, November 4, 1992, p. 11.
"Marcade: Not Only a New Name, But a Total Overhaul of Unishops," Business Week, September 21, 1981, pp. 83, 87, 90.
Schifrin, Matthew, "Can't Get No Respect," Forbes, September 4, 1989, pp. 316-317.
"Unishops Asks for Protection under Chapter 11," Wall Street Journal, December 3, 1973, p. 3.
"Unishops Chain's Formula Puts 'People Idea' First," New York Times, August 24, 1969, Sec. III, p. 11.
"Unishops Comes Up Smiling with Brand New Stores," Discount Merchandiser, October 1976, pp. 29-32.
"Unishops--Growth Issue," Financial World, November 30, 1966, p. 11.
"Unishops--Higher Profits in Store," Financial World, February 7, 1971, p. 7.
"Unishops Moves Ahead," Financial World, March 5, 1969, pp. 13-14.
"Unishops Set to Rack Up New Peaks in Sales, Net," Barron's, April 10, 1967, p. 30.
Source: International Directory of Company Histories, Vol. 16. St. James Press, 1997.