Fire Sale?

Apr 01, 2006 10:30 PM  By

While the news that Hillsboro, OR-based Norm Thompson Outfitters was sold on March 13 to Catalog Holdings came as a surprise to many, it didn’t cause jaws to drop. After all, Catalog Holdings, a portfolio company of San Francisco-based Golden Gate Capital, had been snapping up apparel mailers with similar demographics — middle-aged, middle-income women — right and left for more than a year: After starting with Newport News and Spiegel in summer 2004, it had followed up with Draper’s & Damon’s, Appleseed’s, and the Tog Shop in November 2005.

What is a bit of a shocker is that Norm Thompson was in considerable financial trouble and, several insiders say, forced to sell. The approximately $200 million company mails the apparel, footwear, and gifts book Norm Thompson; home and garden title Solutions; and Sahalie (formerly Early Winters), which sells apparel and accessories for the outdoor lifestyle. It mailed 115 million catalogs in 2004, but according to a source familiar with the company (who like several others contacted wished not to be identified), Norm Thompson has not been profitable for at least two years. The company is still trying to recover from marketing missteps dating back to 2003: “Christmas 2003 was disastrous for them,” says the source.

Norm Thompson CEO John Emrick, citing his confidentiality agreement with Golden Gate Capital, would not comment for this story, nor would Golden Gate Capital. But Emrick wrote in a Jan. 6 e-mail to employees that “Sahalie is performing close to plan, while Norm Thompson and Solutions continue to work through their transitions,” according to the Portland Business Journal. The paper also reported that last summer Emrick told workers the company was giving the potential sale of Solutions serious consideration.

Indeed, an e-mail from a company insider sent to Multichannel Merchant in early February alluded to Norm Thompson’s dire financial situation, saying the company was in “imminent bankruptcy” and being shopped to Golden Gate Capital and St. Petersburg, FL-based HSN. When contacted at the time, Emerick did not deny the allegations, nor would he comment on them. But sources who spoke on the condition of anonymity say that Emrick and other senior managers were pouring capital back into the business to keep it afloat until a buyer could be found.

What happened?

Founded in 1949, Norm Thompson started out selling hand-tied fishing flies to sportsmen and later added items such as hand-knit sweaters, accessories, gourmet foods, and gifts. By the 1990s the company was well respected in the mail order community for its commitment to the environment and advocacy of printing on recycled paper.

But in recent years Norm Thompson had stumbled. One source blames the company’s woes on its attempt to attract consumers in their 30s rather than the more-mature buyers it had traditionally marketed to. Many other apparel merchants have tried to make the same change, with lackluster results.

In the late 1990s, for instance, cataloger/retailer The Talbots substituted much of its classic apparel line for trendier fashions in hopes of winning 20- and 30-something women, only to reverse course several years later. Appleseed’s, which caters to women 55 and older, had made a similar mistake, which it also subsequently rectified, around that same time.

In a likely attempt to cater to a more-affluent audience, Norm Thompson bought $3 million Lake Oswego, OR-based gifts cataloger Waterfront Living in early 2001. Norm Thompson had provided fulfillment services for Waterfront Living for nearly two years. But the company stopped mailing the title in 2003, saying it was on hold but not closed.

Perhaps most telling that something was amiss, in May 2004, Norm Thompson began transitioning its Early Winters title to Sahalie by Early Winters; Sahalie refers to a Chinook Indian expression meaning “a high, lofty place.” Early Winters founder Bill Nicolai, now a senior partner with San Rafael, CA-based consultancy Lenser, had sold Early Winters to Norm Thompson in the late 1980s.

Nicolai, for one, was perplexed by the name change. “I thought it was bizarre,” he says. “To me, Norm Thompson let go of all the equity built up in that business. It would be a good sign that the business wasn’t doing well.” The only reason a company might change the title of a long-time brand, he adds, is if its house file was performing worse than its prospecting lists.

Even its merchandising seemed to be misfiring. By 2004 its namesake brand had strayed from its tagline, “Escape from the ordinary.” Instead, sources say, the Norm Thompson catalog was offering products easily found in competiting stores and catalogs.

The decline in fortunes, according to an insider, thrust Emrick, who bought the company with the help of family and friends in 1981, back into the driver’s seat to try to fix it. In 2004, Rebecca “Becky” Jewett relinquished her day-to-day duties as president/chief operating officer and was “kicked upstairs,” some say, to become vice chairman. Emrick, who had hired Jewett seven years earlier, reassumed the day-to-day role of president after nearly 13 years of “semiretirement.” Says one source: “Why else would a 62-year-old man come off the sideline and be involved? I’m sure his rearrival was not part of the plan.”

Company executives said at the time that they planned to renew efforts to track down unique goods and focus on the Web and the catalogs, which together generated about 97% of its sales. As such, Norm Thompson all but exited the retail channel, closing its flagship Portland store this past March when its lease expired. This leaves the company with one store in Portland International Airport and three outlets in the surrounding area. The fact that it was contracting channels when most other marketers were expanding was yet another warning sign.

What’s next?

Under the umbrella of Golden Gate, which has $2.5 billion under management, Norm Thompson will now have access to the resources it needs. But it was unclear at press time what the deal means to the company’s 500 employees.

Post-acquisition, Emrick will remain chairman of Norm Thompson, while Neale Attenborough, the former CEO of Appleseed’s, has been tapped to lead the cadre of catalog titles for Golden Gate. Attenborough is credited with returning Appleseed’s to its former luster after it went downhill in the late 1990s.

Stefan Kaluzny, managing director at Golden Gate Capital, said in a statement, “With the addition of Norm Thompson, Solutions, and Sahalie, we have significantly increased our offerings to this rapidly growing demographic. Furthermore, adding Norm Thompson’s three brands to our five existing titles creates ever greater opportunities for each to benefit from the scale and expertise of the group.”

Not the first sale

While the Portland area is mourning the loss of Norm Thompson’s flagship store, which closed in March, and dealing with the uncertainty that comes when a local business is bought by a large, out-of-state concern, this is not the first time the Hillsboro, OR-based company has changed hands. Founded in 1949, the business had been run by Peter Alport, the son-in-law of founder Norm Thompson Sr., since the early 1950s. Alport sold the business in 1973 to Parker Pens. Longtime Norm Thompson employee John Emrick, with some friends and family, bought the company back in 1981. Though he tried “semiretirement” in the 1990s, Emrick basically ran Norm Thompson until it was acquired by Golden Gate Capital in March.
MDF