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OshKosh B'Gosh, Inc.

 


Address:
112 Otter Avenue
Oshkosh, Wisconsin 54901
U.S.A.

Telephone: (414) 231-8800
Fax: (414) 231-8621


Statistics:
Public Company
Incorporated: 1895 as Grove Manufacturing Company
Employees: 5,904
Sales: $346.2 million
Stock Exchanges: NASDAQ
SICs: 2369 Girls'/Children's Outerwear Nec; 2326 Men's/Boys' Work Clothing; 2339 Women's/Misses' Outerwear Nec


Company History:

OshKosh B'Gosh was founded in 1895 as Grove Manufacturing Company, a maker of "hickory-striped" bib overalls worn by railroad workers and farmers. The company is now the largest maker of overalls in the world, manufacturing sizes to fit everyone from a newborn to an adult male. The company was incorporated as the Grove Manufacturing Company in Wisconsin in 1895. Based in Oshkosh, Wisconsin, a town of 50,000 on the Fox River, the company went through several name changes before assuming its unlikely current name in 1937. Its name was changed in 1897 to Oshkosh Clothing Manufacturing, and in 1911 to Oshkosh Overall Company. Company legend attributes the current name to one of the company's former-owners, William L. Pollock, who heard the phrase in a vaudeville skit while he was on a New York buying trip. The company started labeling its bibs "OshKosh B'Gosh" as early as 1911.

The company has been run by one family since Pollock retired in 1934. That year, Earl W. Wyman bought the company with partner Samuel Pickard and over the next few years they rounded out the company's line with painter's pants, work shirts, and denim jackets. By that time, the company had garnered a reputation for manufacturing durable, dependable products. During World War II and the Korean War, OshKosh B'Gosh produced garments for the military, including pants, jungle suits, and underwear. Wyman remained chairman of the board until he died in 1978. Wyman's son-in law, Charles F. Hyde, ran the company until his son, Douglas W. Hyde, took over as CEO in 1992. At that time, members of the Wyman family still controlled over 50 percent of company shares.

In the late 1960s, after decades of producing heavy duty utility clothing sold in men's and boys' clothing outlets around the Midwest, the company stumbled on a discovery. While it had always made pint-sized bibs as a novelty item for boys to wear in order to look like their working fathers, they were not viewed as a serious commodity. That feeling changed when Miles Kimball Co., an Oshkosh mail order house, included a pair of kids' bibs in its catalog and received over 10,000 requests. The company, according to Forbes, was "on the verge of discontinuing the small-fry line, but thought better of doing so when it saw the catalog response." Then-President Charles Hyde decided to see if there was an additional market to be tapped, and, following Kimball's lead, sent direct mail solicitations to children's stores around the country. Among the seven items included in the solicitation were overalls, coveralls, painter's pants and caps.

The experiment was a success. The line made its big national break in 1971, according to Working Woman, when Bloomingdale's in New York asked to pick up the products. The chain's upscale competitors, including Lord and Taylor, Saks Fifth Avenue, and Nordstrom's, soon followed suit. Despite this initial success, however, Oshkosh did not readily turn its attention from workwear, even though that market was beginning a steady decline. As the major retail chains came like so many suitors to the company's door, offering to pick up the line and requesting a greater range of styles, Charles Hyde was cautious of what could have been a passing fad. As orders for the children's clothes increased throughout the decade, however, the company realized that workwear was a shrinking market and children's overalls would be the company's new source of growth.

At the end of the decade, Hyde increased the company's sales force. And, at the suggestion of then-vice-president Douglas Hyde the company added a little style into its product by dying the overalls bright primary colors and introducing patterns and stripes. As production rose, Charles Hyde made sure that quality--and the company's good name--did not suffer. Through the 1970s, the garments continued to be cut by hand in Oshkosh, Wisconsin.

The year 1979 was a turning point in several respects. Children's clothing then constituted 16 percent of the company's total clothing sales, or $5 million. To accommodate those sales, the company added two new production plants, paid for entirely out of cash flow. In order to raise its profile, the company also launched a national marketing campaign, enlisting the help of Milwaukee advertising agency Frankenberry, Laughlin & Constable. The agency advised them to adopt the tag "The Genuine Article Since 1895," on a blue and yellow patch that would adorn all of the company's products. A few years later, the company took that advice a step further by calling its new group of outlet stores "The Genuine Article" as well. Through the early- to mid-1980s, the company's sales grew exponentially, as the mini-baby boom created a demand for children's products. While children's products amounted for 16 percent of the company's sales in 1979, that percentage better described workwear, the company's former mainstay, by 1988.

In 1981 the company opened a showroom on Seventh Avenue in New York City, the nerve center of the garment business. That same year, OshKosh began to diversify its product offerings, adding infant wear and knit separates. Over the years, the company has expanded its line to include newborn to children's size 14 clothing, and added dresses, activewear, and swimwear. In addition, the company signed licensing agreements with producers of accessories and clothing items, including hosiery, shoes, hats, sleepwear, outerwear, and woven and knit accessories. In 1985 the company introduced a line of maternity wear, including but not limited to bib overalls, which, the company learned, pregnant women had been buying for years in men's sizes.

Sales in the United States were increasing, but the company began to devote more resources to sales in the southern and southwestern United States. Prior to that, most of their sales were concentrated in the midwest and along the two coasts. The company entered the global marketplace in 1985 by incorporating OshKosh B'Gosh International Sales as its first wholly-owned subsidiary. Through 1985 and 1986, international sales still accounted for only about one percent of the company's total, but the OshKosh name was gaining recognition. In 1986 U.S. News and World Report noted that the company was making a splash in London's upscale boutiques. Among the company's satisfied customers were Britain's royal infants, Princes Harry and William, the children of the Prince and Princess of Wales.

In early 1987, Charles Hyde wrote to the company's shareholders that OshKosh was "monitoring very closely major changes taking place in the retail marketplace, changes which seem to be accelerating. Mergers, acquisitions and leveraged buyouts have changed retailers' sourcing strategies and presented us with challenges that we are positioning our marketing forces to meet. In the confused and competitive retail scene--with no consensus on promoting branded or private label apparel, with retailers doing manufacturing and manufacturers doing retailing--the long term outlook must remain unclear." Hyde's comments were prescient, for in the following year, the company itself became a victim both of this uncertainty and of its own runaway growth: from 1977 to 1987, sales increased almost ninefold, to $226 million.

By the late 1980s, according to Forbes, "the company was sweating as it struggled to keep up with the growing demands of its retailers and customers. New stores such as Kids 'R' Us, started by Toys 'R' Us in 1984, wanted more product to fill their shelves and were looking for OshKosh supplies." In late 1987 and early 1988, orders for two consecutive seasons strained the company's production and distribution capacities to the limit, and orders arrived late. According to Forbes, retailers reported receiving shipments where the tops of matched separates arrived without bottoms. "We were unable to respond quickly enough to take advantage of stronger than anticipated demand for specific styles," CEO Charles Hyde wrote to his shareholders in April, 1988. "External contractors proved harder to line up than usual and the larger design content our Holiday 1987 and Spring 1988 lines caused hitches in our own production that led to some late deliveries and increased production costs. We encountered these combined difficulties at the very moment that the October stock market decline undermined retailers confidence and prompted a few of our customers to cut back or cancel their orders." These problems continued through the remainder of 1988 and early 1989, so while the company's overall sales figures continued to grow, unit shipments were sluggish and the company's stock valuation fell by half between 1987 and 1988.

"It was at that point," Forbes observed, "that Hyde showed his true mettle. Many businessmen would have shrunk from the problems and cut back their businesses." However, using a strategy the magazine called "investing one's way out of trouble," the company moved quickly to remedy the causes of the distribution problems by upgrading and expanding manufacturing facilities. Four new plants were opened, and in the company's OshKosh plant, woven fabric cutting was computerized. The company also opened a new centralized distribution and finishing center in Tennessee. These expanded facilities cut down the company's dependence on outside contractors--which had caused so much of the trouble&mdashø about 80 percent of total sales in 1990, down from 34 percent in 1988.

In view of all of these new challenges, the company also invested in its future growth by retaining an outside management consultant. Based on the consultant's report, in 1990 the company added three new executive positions: president and chief operating officer; vice-president of human resources; and vice-president of management information systems. Under the change, Harry Krogh, formerly president of Interco Inc., became president, Charles F. Hyde's title changed to chairman and chief executive officer and Thomas R. Wyman was promoted to vice chairman. "Both of us have been freed up from the daily operations of the business to concentrate on long-range planning to meet the challenges of a new decade. At the same time a clear and comfortable succession plan is now in place," Hyde wrote of himself and Wyman in March of 1990.

Also in 1989, the company began to turn its attention towards diversification, both geographically and in terms of product offerings for both older and younger consumers. Toward the end of the year, the company started a joint venture with Poron Diffusion, a publicly held company with $130 million in revenues based in Troyes, France. The resulting venture, designed to market both companies' childrens wear throughout Europe, was christened OshKosh B'Gosh Europe, with majority ownership going to OshKosh. "The accord," the Wall Street Journal observed at the time, "will position OshKosh to take advantage of the breakdown in trade barriers among European countries in 1992." Through the agreement, OshKosh also acquired its second wholly owned subsidiary, the U.S. operations of the company, which made baby and infant clothing under the well-known Absorba label.

In 1990, the company further advanced its diversification campaign. In April, the company acquired its third subsidiary, Essex Outfitters Inc., which held a long-term licensing agreement to use the Boston Trader brand name for children's clothing. The Boston Trader label is known in adult clothing for its classic casual style, and the children's line--fitting kids age six and older--has a similar look and is sold in higher-end retail outlets. A few weeks later, the company reached an agreement to sell some pieces of the OshKosh B'Gosh children's line in J.C. Penney and Sears Roebuck stores.

The latter agreement constituted more of a change for the company than the former. Throughout the 1980s, the company's children's products were regarded in the same class as Volvos and pricey mineral water: for the consumption of upscale customers. In 1991, Business Week noted that when the legendary jeans maker Levi Strauss & Co. began distributing to Sears and Penney's, "R.H. Macy & Co. discontinued its Levi's jeans because it felt their image had been cheapened." Having studied Levi's experience, OshKosh decided to go ahead with the deal for several reasons. First, as Hyde and Krogh told their shareholders in 1991, "the heavy debt loads being carried by some of our major customers [including, according to Business Week, the bankruptcy proceedings of Federated Department Stores], as well as Sears' and Penney's repositioning in the retail market" indicated the wisdom of their decision. Second, the company said it would reserve some high-end specialty items for the likes of Saks Fifth Avenue and Bloomingdale's.

In 1991, the company put its succession plan into effect, moving Charles F. Hyde to the position of chairman and his son Douglas W. Hyde, who had been in charge of merchandising for 12 years, to the position of president and chief executive officer. Michael Wachtel became chief operating officer and executive vice-president. Also in that year, the company continued its foreign expansion by beginning operations at a manufacturing facility it had purchased in Choloma, Honduras, the year before, its first plant outside of the United States. Foreign business, including sales through OshKosh B'Gosh Europe, export sales to overseas distributors, and sales by foreign licensees totaled approximately $23 million, an 83 percent increase from the previous year. In addition, the company was moving into new markets in Argentina, Brazil, Chile, Mexico, Taiwan, and Thailand. The company's Essex Outfitters also proved a good investment, with its retail stores and sales to other outlets outperforming expectations.

Overall earnings dropped during 1991 due to a number of factors. The largest burden turned out to be the Absorba line, which the company had purchased only the year before. And, in view of what were seen as weak long-term prospects for the subsidiary, the company decided to take a loss and phase out the label. However, both Essex and Absorba added to the company's administrative expenses. Continued trouble for retail stores also gave sales of men's and women's wear rather mixed results.

The company experienced financial loss in 1992 as well. The nationwide recession reduced overall consumer demand, particularly in the company's largest markets, California and the Northeast. The recession, plus the continued expenses of the Absorba phase-out contributed to a drop in sales figures from the year before. Faced with these problems, the company went to work to improve its main trouble spot, the domestic wholesale business, which continued to be plagued by late deliveries and cost overruns. "Our customers and the marketplace sent a clear message that business as usual could not continue," Douglas Hyde informed shareholders in March, 1993. Responding to the challenge, the company began implementing plans to streamline manufacturing and improve flexibility. The company revamped its central children's wear line by adding a new line of coordinated separates with simple styling which met consumer desire for clothing that was easy to mix and match. They also formed a special design team to make the products of the menswear division more appealing.

The bright part of 1992 was that the company increased its penetration into foreign markets. In September of 1992, it completed the purchase of Poron, S. A.'s share of OshKosh B'Gosh Europe, making it a wholly owned subsidiary of the company. In addition, the company signed an agreement with Berleca Ltd., a Japanese company which would oversee marketing of OshKosh's products in that country. At the end of the year, the company was in the process of forming a new subsidiary, OshKosh B'Gosh Asia/Pacific Ltd., to provide sales and marketing support in that region. Despite its difficulties through the late 1980s and early 1990s, the company has remained on solid financial footing, fortified by its age, its reputation for quality, and its ability to change and adapt to new circumstances.

Principal Subsidiaries: Essex Outfitters, Inc.; OshKosh B'Gosh Europe, S.A.; OshKosh B'Gosh Asia/Pacific, Ltd.





Further Reading:


Abelson, Reed, "Investing One's Way Out of Trouble," Forbes, June 11, 1990.
Byrne, Harlan S., "OshKosh B'Gosh Inc.: It's on the Mend After a Costly Distribution Snarl," Barron's, June 19, 1989.
Girone, J.A., "OshKosh: Getting Back on Track," Earnshaw's, April 1993.
Harris, William, "Fashion Is Fickle," Forbes, June 22, 1981.
Jakubovics, Jerry, "OshKosh's Upward Climb," Management Review, September, 1987.
Patner, Andrew, "At OshKosh B'Gosh, Childhood's Magic Days Are Past: Clothier for Tots Makes Plans for a Future in which Kids Are Grown," Wall Street Journal, March 9, 1989.
Perlick, Gail, "B'Gosh, It's OshKosh: How Humor and Nostalgia Overhauled the Overall," Working Woman, August 1987.
Schellhardt, Timothy D., "OshKosh B'Gosh Sets European Venture Through Accord with Poron of France," Wall Street Journal, November 8, 1989.
Siler, Julia Flynn, "OshKosh B'Gosh May be Risking Its Upscale Image," Business Week, July 15, 1991.

Source: International Directory of Company Histories, Vol. 9. St. James Press, 1994.




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