Posted on 01/24/2009 7:31:20 PM PST by 2ndDivisionVet
Barack Obama may be wearing a Hart Schaffner Marx suit when he takes the oath of office Tuesday, but the presidential connection is looking like a hollow triumph for suitmaker Hartmarx Corp.
Chicago-based Hartmarx is facing the most serious crisis in its 120-year history as the recession smothers sales of $1,500 suits like the wool-cashmere blend Mr. Obama favors. Revenue is falling, cash is running short and the stock has nose-dived to 30 cents. Trading was exiled recently from the New York Stock Exchange — where Hartmarx had been listed since just after World War II — to the over-the-counter Pink Sheets market and to the Chicago Stock Exchange.
The collapsing economy has hit Hartmarx's primary clientele, the conservative-suited bankers and brokers along Wall Street and other money centers, and exacerbated the long-term decline in suit-wearing among businessmen.
"This recession strikes at the very gut of our customer," CEO Homi Patel says.
Hartmarx's revenue fell 9% to $374.5 million in the nine months ended Aug. 31, leading to a loss of $7.4 million, or 21 cents per diluted share, vs. a profit of $2.5 million, or 7 cents a share, in the year-earlier period. Management has projected that fourth-quarter sales will fall as low as $115 million, a 24% drop.
Negative cash flow from operations ate up $13.2 million in the first nine months of 2008, leaving $4.8 million in reserves. With just $11 million remaining under its revolving credit facility and $150 million in debt coming due next year, Hartmarx is swearing off acquisitions and scrapping projects like a boutique store planned for the Loop.
"For now, everything is on hold," Mr. Patel says. "In the next six months, we'll be watching our liquidity and our cash."
More drastic action is needed, says Michael Corbett, chief investment officer at Perritt Capital Management Inc. in Chicago, which owns nearly 700,000 Hartmarx shares. He figures the company's tangible net worth, including factory equipment, is $60 million, well above its stock market value of about $10 million. "Management could just liquidate the company and sell off the assets and do shareholders a favor," Mr. Corbett says.
Mr. Patel says the company is "willing to look at all viable options" but has no plans for an ownership change or bankruptcy filing.
Meantime, the brand is losing appeal. Ollie Galam, owner of Executive Clothiers in Prospect Heights, says that when he opened his store 15 years ago, Hartmarx labels represented half his sales. Now they account for 10%. "The quality is still very good," Mr. Galam says. "But younger shoppers today want designer Italian suits."
The Obama connection is a boost, but Mr. Patel has no plan to take advantage of it. "We gain the confidence of presidents and congressmen precisely because we don't exploit them," he says.
Mr. Obama, for his part, may not want to fix too much attention on his wardrobe. The last two presidents to wear Hartmarx labels were Jimmy Carter and the first George Bush, the only one-term presidents in the past 40 years.
I hear the gun shops have been doing excellent business, though.
Any where that jerk who is our president wants to go and guess what? Who gets to pay? Us of course. I bet the suit maker doesn’t care about that huh?
a lot more than that is going to be unraveling.
no, i don’t.
like apple computer folks, i wear jeans and shorts.
Oh hell!
Let’s bail that company out.
We don’t seem to discriminate and besides it YOUR money not their money that is paying for all these bail outs.
I wear my American-made suits and American-made shoes (by Alden and Allen-Edmonds) to special occasions such as christenings, weddings and funerals as well as to job interviews. Weather permitting, I wear them to the theater or symphony, too.
Stop the presses ! Obama’s bailout will be going to clothiers but we get to pay directly the bailout money by a mandate that companies reinstate business formal dress codes. Companies will be required to abolish casual dress which covers business casual as well.
To work. To go out to nice places. To church. I see many men in suits every single day. They are all over the place.
Buggy-whip maker alert.
“Business casual” has become the defacto standard for business today. Suit makers that didn’t expand out into that area have seen their market shrink.
30 years ago, a salesman at a convention would certainly have worn a suit and tie. Today he is probably wearing a polo shirt and khakis.
Even churches are moving away from suits and dress clothing in an attempt to make themselves more friendly to the upcomming generation (I attend a church where even the pastor doesn’t wear a suit. The church looks laid back from the way people dress, but I can tell you that from a doctrinal perspective it is very conservative/fundamentalist.)
Unless you wear a suit everyday, it is hard to justify spending $1,500 on one. That’s why high end suit makers are having a hard time. Their market is shrinking.
Just like buggy-whip makers started to make leather seats for automobiles (since they already knew how to tool the leather.) Hartmarx needs to expand into the new buisness clothing area.
Suitmakers to the Empty Suit. Now that’s an endorsement!
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