London Fog's boss alienated retailers

August 25, 1994|By Jay Hancock and Ross Hetrick | Jay Hancock and Ross Hetrick,Sun Staff Writers

London Fog Corp. boss Arnold P. Cohen was already vehemently disliked by his employees. Closing factories, laying off hundreds, overhauling sacred-cow business strategies and moving a headquarters 200 miles has that effect on people.

But it was when he started angering the customers that he really got into trouble.

The aggressive Mr. Cohen, who seemingly jammed a decade's worth of controversy into his year as London Fog's chairman and chief executive, unexpectedly left the job two days ago at least in part because he had alienated major department stores that ** buy the company's famous raincoats, retailers and fashion experts said yesterday.

A zealot for change in a company under severe financial pressure, Mr. Cohen had already burned up sizable amounts of good will inside London Fog, even among other managers, said people who are familiar with the company.

His insistence this summer that retailers limit discounts on his company's premier London Fog raincoat brand resulted in lower orders for the coming fall and winter seasons, sources said -- something that did not sit well with the company's Wall Street owners.

"He was operating the brand assuming the retailers couldn't live without him," said Alan Millstein, a New York retail analyst. "They retaliated, I am sure, by increasing their purchases of private-label raincoats" and cutting London Fog orders.

Mr. Cohen couldn't be reached for comment yesterday. Representatives of Merrill Lynch Capital Partners and GKH Partners, London Fog's owners, did not return phone calls.

But store operators and retail analysts said that Mr. Cohen had been trying to make the London Fog brand into a high-priced Cadillac of raincoats in a business where discounts and promotions, not labels, have been driving sales lately.

When a store presents customers with a rack of marked-down raincoats and a rack at full price, "they'll go to the ones on sale" no matter what the brand, said a coat buyer for a major New York-based department store chain.

Mr. Cohen, however, threatened to cut off stores that put London Fog on sale too soon in the selling season. "I'm sure that there were people at the highest levels that were tired of his cavalier attitude of, 'If you don't play my game, I'm not going to ship,' " said the buyer, who asked that his company not be identified.

Other retailers agreed.

"If I want to, say, hold an October anniversary sale, and everything is 20 percent off, they say I can't do it," said Jack Gottlieb, president of Shuttler's Apparel Inc., a small-store operator in Cleveland. "I want to be able to run my business the way it needs to be run."

The internal friction Mr. Cohen generated at privately held London Fog may also have helped to cause his exit.

"They're celebrating in Eldersburg, that's for sure," said Mark Millman, head of Millman Search Group, a national retail executive placement firm that is based in Baltimore. Eldersburg, in Carroll County, is the site of London Fog's distribution center, which employs more than 600.

Mr. Cohen "is a visionary guy, but he has problems with execution," Mr. Millman said. "His people are very relieved he's going."

Even so, London Fog won't reverse its decision to close three Maryland plants employing 700 by the end of October and shift production to overseas contractors, the company has said. The management change has given government and union officials new hope that they'll be able to find a solution, however.

The plant-closing announcement, made in July, was only the latest in a series of traumatic changes initiated by Mr. Cohen, 38, since he arrived at London Fog last August. He closed three other factories, employing 575. He moved London Fog's

headquarters from Eldersburg to Darien, Conn., where he lives.

He cleaned house among middle managers. He merged with Pacific Trail Inc., a Seattle-based maker of ski jackets and other outerwear. He refocused the merchandise, aiming parts of it at younger, more cost-conscious buyers. He shrank the sales staff.

It's true that the pressure for change was great.

The subject of a leveraged buyout several years ago, London Fog was burdened by long-term debt of $163 million, equal to 70 percent of its assets, as of February 1993. It was meeting interest payments, but wasn't nearly profitable enough to sell stock to the public -- the way LBO artists usually make their money.

Mr. Cohen's job was to put London Fog, which generates about $300 million in annual revenue, in shape for a public offering or other sale.

He wasn't averse to spending lavishly at the pinched company, however. He refurbished the executive offices in Eldersburg, a big expense, and soon afterward moved the headquarters to Connecticut -- another pricey decision. He was known for chartering jets with several other managers to visit stores around the country.

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