London Fog turns to one who 'makes things happen' Eldersburg firm tries to revive its fortunes

August 29, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK — New York--After 14 years in the clothing business, Arnie Cohen is taking his first long vacation -- sort of.

He's sitting in a plush office on the 48th floor of a Manhattan high-rise, cramming appointments into a 12-hour workday. As usual, he won't drive back to his Westport, Conn., home until evening.

To be fair, the 37-year-old Boston native has made good on part of that long-promised month off with his wife and three sons. Earlier this month, the family sailed along the Connecticut coast to Newport, R.I., on his 45-foot yacht.

But who wants to take time off when you've been handed your dream job?

After working hard so others could shine at Bloomingdale's, Gucci and J. Crew, Mr. Cohen will take the top job next week at Eldersburg-based London Fog Corp., maker of the ubiquitous trench coat that generations of workers have worn over suits and dresses. As part of the deal, he'll get an equity stake in the privately held company.

"I'm still holding myself back," Mr. Cohen said. "I think that two weeks ago, if I could have jumped in immediately, I would have. I've got so many ideas."

Those ideas -- like creating upscale London Fog boutiques, selling more-expensive rainwear and buying other companies -- should come in handy when he joins London Fog on Sept. 7. The company enjoys a 60 percent market share in the men's raincoat business, but it has suffered from the recession, changing sales patterns and a heavy debt load.

In the 1992-1993 fiscal year, for example, London Fog's revenue grew 6.4 percent, to $317 million, but it lost $262,000 after paying interest costs of $24 million and watching its key department-store sales lie flat.

The need to push the company forward may explain the management shake-up that saw two top executives leave this year, making room for Mr. Cohen.

Business colleagues say that London Fog's owner, the New York financial services company Merrill Lynch Capital Partners, picked the right guy to revitalize the company.

"He's a workaholic -- very, very energetic, very, very enthusiastic," said Ray Altanasia, head of J. Crew's general merchandising. "He makes things happen."

Although London Fog boasts outstanding name recognition, it typifies

the challenges facing clothing manufacturers and retailers, as well as highly indebted companies.

Once part of Interco Inc., a St. Louis conglomerate that made Converse sneakers, Ethan Allen furniture and Florsheim shoes, London Fog was bought by a group of 40 managers in 1988 to pre-empt a hostile takeover. That move saved the company from being carved up and sold off but left it with more than $100 million in high-interest debt.

That debt, which Mr. Cohen hopes to refinance in this era of low interest rates, still hurts the company. In its most recent fiscal year, London Fog paid $24 million in interest costs, according to figures provided to holders of senior subordinated notes. That was down from the previous year's $26.3 million but was still high enough for Standard & Poor's, a debt-rating agency, to call the company's "highly leveraged balance sheet" its primary problem.

Interest costs helped push the company into the red, after a razor-thin profit of $713,000 in the 1991-1992 fiscal year.

Last year, the company also took a $5.9 million charge to cover payments to its outgoing chief executive officer, Mark H. Lieberman, and chief financial officer, Zachary Goldman, the two top executives who led the 1988 buyout.

Another problem: the company's reliance on wholesaling its rainwear to department stores, which consumers have been forsaking for discounters and mail-order catalogs.

London Fog sells 70 percent of its clothing through department stores, but sales there increased only 1.6 percent last year, company figures show. And because department store sales are slow, the company must discount more heavily, shaving its profit margin and undermining London Fog's reputation as a top-line raincoat manufacturer, Mr. Cohen said.

By contrast, London Fog's chain of 110 outlet stores saw sales increase by 18.2 percent, which points to the need for a bolder move to cut reliance on department stores. And profit margins are much healthier in company-owned stores.

The company also faces a manufacturing challenge: how to boost efficiency without moving all production overseas.

London Fog employs 3,500, including 600 at its Eldersburg headquarters and 1,400 in other parts of Maryland. Although many clothing manufacturers have moved production overseas -- and some employees in Maryland fear that Mr. Cohen will cut the ::TC domestic work force to boost profits -- Mr. Cohen said one attraction of working for London Fog is its domestic manufacturing.

Still, he said, London Fog must become more efficient -- even though he won't reveal his plans.

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