Another shake-up hits London Fog

January 04, 1995|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

London Fog Corp. replaced its two top officials with veteran apparel executives yesterday, in the second management shake-up at the company since August.

The appointments of Robert E. Gregory Jr. and C. William Crain -- a pair whose last assignment was the de facto liquidation of the Gitano Group Inc. -- raised questions about the direction of the financially troubled company, which plans to reopen its Baltimore plant at the end of this month.

"We don't know if they are the undertakers or will salvage the ship," said Alan G. Millstein, editor and publisher of Fashion Network Report in New York, who noted the pair's drastic job cuts as they pared down Gitano. "It must be sending a shudder of fear through the employees."

But company officials say the transition is a handoff from an interim management team to a more experienced group.

Mr. Gregory, who is the new chairman and chief executive officer of the the Darien, Conn.-based maker of raincoats, replaces James Milligan, 55, who had been chief executive officer, and John Varvatos, 40, who was chairman. Mr. Crain was named president and chief operating officer.

The men recently oversaw the dismemberment of the scandal-plagued Gitano Group, known for its designer jeans. Before that, Mr. Gregory and Mr. Crain worked at VF Corp., one of the nation's leading apparel manufacturers, well known for its Lee jeans.

Mr. Milligan and Mr. Varvatos had held their positions since Aug. 23, when Arnold P. Cohen was ousted after a year of changes that led to the closing of most of the company's domestic manufacturing facilities.

The last remaining plant, at the Park Circle Business Park in Northwest Baltimore, is set to reopen Jan. 31 after a three-month, $2.1 million renovation effort.

Both Mr. Varvatos and Mr. Milligan said they don't expect the plans to change. "We have an agreement with the union," Mr. Varvatos said.

The two departing executives said they had intended from the beginning to be temporary officers.

"This is something that we were both talking about with our partners since October," Mr. Varvatos said. "And actually back in August, when I was asked by the board to become chairman, it was not something that I necessarily wanted to do. I was brought in and my goal was to be in the creative end of the business."

Mr. Milligan, reached at his Colorado ranch, said his appointment in August was on an emergency basis. "I certainly approached it with an interim attitude," he said. Of the new executives, he said: "I think we needed the industry leadership."

Mr. Milligan will remain on the board, and Mr. Varvatos said he plans to start a design firm and may do some consulting for

London Fog.

Retail consultant Howard Davidowitz agreed that yesterday's announcement was a natural move for the company.

"My instinct is from the beginning they were looking for somebody who could walk in and on day one, everyone knows that this is the right guy," said Mr. Davidowitz, chairman of Davidowitz & Associates Inc. That person is Mr. Gregory, he said.

"I think he really distinguished himself, frankly, on every assignment he has been on," Mr. Davidowitz said.

Mr. Davidowitz also doubts that Mr. Gregory and Mr. Crain will bury London Fog, as they did Gitano. "When Gregory got to Gitano, it was a cadaver," he said. "He's coming into a situation that has a franchise."

Mr. Gregory and Mr. Crain, who were not available for comment yesterday, will have their work cut out for them.

The company, with about $400 million in annual revenues, is buffeted by falling sales and mounting debt. An effort to recapitalize the country's premier raincoat maker, which has $425 million in debt, is still in progress, Mr. Milligan said. The company, owned by Merrill Lynch Capital Partners and GKH Partners, moved its headquarters from Eldersburg to Darien last year, although it kept a 500-employee administrative center in Carroll County.

The two men have already faced tough assignments together.

They worked closely together at Gitano Group, where they arrived in 1993 after a series of mistakes and misdeeds by prior management that culminated in a guilty plea to customs fraud.

But they arrived too late to save the company as an operating business, especially since the guilty plea led Gitano's biggest customer, Wal-Mart Stores Inc., to refuse to do business with Gitano unless the company was put up for sale.

Instead of turning Gitano around, Mr. Gregory and Mr. Crain expanded and executed the earlier management's plan to sell off the company's operations. Gitano closed or sold its manufacturing operations and its Gloria Vanderbilt label, among other assets, stripping itself until nothing was left of a 3,000-employee corporation but a 145-person shop that claimed royalties from licenses of the Gitano name and designed clothing lines for retailers whom they put in touch with offshore factories that could make the goods.

The pared-down company was sold last spring to Fruit of the Loom Inc. for $100 million after Gitano Group filed March 1 for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Mr. Millstein, the industry newsletter publisher, said the two men "waved a magic wand" at Gitano, but did so "at a great cost in jobs."

The way Mr. Gregory and Mr. Crain worked out Gitano's scenario makes Mr. Millstein uncertain about what may be in store for London Fog. Those questions are further complicated by the fact that the two executives' experience is almost entirely in jeans and similar products.

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