Four years ago, Port Washington-based Allen Edmonds Shoe Corp. was on death’s door.
But with investment banker Paul Grangaard as the new chief executive at the high-end men’s footwear maker, the 90-year-old company restructured its debt and returned to the basics that had made it a nationally respected brand.
“We had some real problems in 2008,” said Grangaard, speaking at an In Business Magazine “Icons” breakfast at Madison’s Concourse Hotel.
“We’d lost touch with loyal customers, some of whom were leaving. We also had a growing reputation for quality mishaps, but most important, we had more debt than we could handle. We couldn’t pay the interest, let alone pay down the principal.”
With the debt restructured and a $10 million investment by new owners, the privately held company didn’t have to go through Chapter 11 bankruptcy.
“That would have been terrible PR, so to speak,” he said wryly.
The company is now owned by the Minneapolis-based private equity investment firm Goldner Hawn Johnson & Morrison Inc.
With refinancing out the way, Grangaard “surgically” cut costs and staff following a dismal last half of 2008 when the company lost money. Then he set about rebuilding the company’s reputation, adding retail outlets on top of its traditional wholesale emphasis, creating a casual line and e-commerce sales to bolster the business.
Within a year, the company was again profitable. It now has 570 employees, up from 365 in 2008. (Roughly 260 of them work in in Wisconsin). Shoe production in 2011 surpassed 500,000 pairs, up from 350,000 in 2010.
Revenue this year should top $120 million, an increase of $20 million over last year.
And the company soon will be opening a store in Shanghai, selling “Made In Wisconsin” shoes with American styling, he said proudly.
“There are 2.6 billion feet in China,” he quipped. “And that’s an awful lot of feet that need good shoes.”
To become successful again, he said Allen Edmonds “had to go back to the fundamentals, like a baseball team in spring training.”
That meant putting customers first.
“That’s just common sense, but it isn’t how most of American business behaves,” he said. “You don’t want to piss off your customers.”
Next comes employees and then suppliers and community in a tie, he added.
“Customers and employees are so much more important than anyone else,” he said. “If you do great by them, shareholders will come out fine. Customers care about quality, not the cost structure of the company.”
Though Grangaard could have trimmed more employees, he said he kept some he could have fired because he was confident the shoe maker would turn around.
When that happened, Allen Edmonds was able to ramp up production faster than if it would have had to hire new workers.
Grangaard also ripped former General Electric CEO Jack Welch, who infamously dismissed the bottom-performing 10 percent of his workers annually during the nearly 20 years he ran GE.
“He did a great disservice to American business,” Grangaard said. “People need to enjoy their work to be productive and creative. Not live in fear of being fired.”
Grangaard said Allen Edmonds designers have added new casual shoes, boots and other items – even a Jack Nicklaus golf line – to the company’s offerings.
“We’ve gone after the casual business with gusto,” he said, noting that young, college-age men are wearing dressy shoes with blue jeans, and that their fathers in their 50s are also paying more attention to their footwear.
“Our goal is to be the great American shoe company,” he said. “And we’re going above and beyond the call of duty to do that.”
— By Brian E. Clark