Beverly, MA is an unlikely setting for the center of the catalog industry. Thirty miles northeast of Boston, it’s a sleepy town with old New England houses and country roads. But Beverly is home to Orchard Brands, a $1.1 billion holding company, and to Appleseed’s, a women’s apparel catalog, and that’s why I’m here on this September morning. I’m about to interview T. Neale Attenborough, the chairman/CEO of Orchard Brands, who in two years has overseen a massive acquisition program.
How big? “I’ve never seen anything like it in this industry,” says Craig Battle, managing director at investment bank Tucker Alexander. It started with Appleseed’s purchase of The Tog Shop in August 2005. Then Appleseed’s itself was acquired a month later by private equity firm Golden Gate Capital, which bought fellow women’s apparel mailer Draper’s & Damon’s on the same day. Then there were buyouts of Haband, Blair Corp., and Norm Thompson Outfitters. Norm Thompson included home and garden title Solutions and apparel and accessories mailer Sahalie.
And last month, it acquired Gold Violin, a catalog of gifts and products for healthy living. What do they all have in common? That they serve mature consumers.
Golden Gate created Orchard Brands (formerly Appleseed’s Topco) as a portfolio company. But Orchard Brands is only part of the Golden Gate network. Also included are Spiegel Brands, the umbrella for general merchant Spiegel and fashion apparel books Newport News, A.B. Lambdin, and Carabella, and Venus, a standalone swimwear catalog.
Golden Gate is so hungry for deals, in fact, it’s even making them with itself — Orchard Brands purchased Wintersilks from Venus on the same day that it bought Gold Violin.
So who is Neale Attenborough and how did he come to run this catalog empire?
On this morning Attenborough arrives at work a few minutes past 8 a.m. From the lobby, I spy him briefly chatting with the gardener tending to the flowerbeds before he enters the building.
A tall, professorial type, Attenborough exudes charm even while being a reluctant interview subject. And that may be one of his strengths. “He’s a calming influence and that’s why he’s a skilled executive — he puts people at ease,” says Battle.
He certainly looks relaxed for someone with his travel schedule. The firm has facilities everywhere from Erie, PA, to Portland, OR, and Attenborough visits all of them.
The first question is an easy one: How did a Harvard MBA with experience at Procter & Gamble get into the business?
As Attenborough tells it, he started his catalog career in 2001. He had been running Westways Ventures, a venture partnership focused on the consumer and health care sectors for private equity player Halpern Denny.
But Halpern Denny had just joined with Housatonic Partners to acquire Appleseed’s from the Swiss giant Jemoli. And it asked Attenborough to run it.
He was a good choice. The catalog had tried, unsuccessfully, to offer trendy merchandise to a younger audience, but it was now back to focusing on mature women. And Attenborough saw the strength of the market.
“It became clear to me that this is a distinct customer base,” Attenborough says. “We have a great reason for being.”
What Attenborough didn’t know then was that another private equity player also shared that view.
“In the middle of that sale process for Draper’s and Damon’s, our guys at Halpern Denny said there’s another guy out there who has the same kind of vision, so they put the business for sale,” Attenborough says.
That turned out to be Stefan Kaluzny, the managing director of Golden Gate. Golden Gate acquired Appleseed’s and Draper’s and Damon’s, and set up Orchard Brands to purchase even more companies.
The goal? To have someone say 20 years from now, “Wow, that was a great company,” Attenborough says.
They’re well on the way.
The courting stage
Though it isn’t the largest private equity group to buy catalog titles, Golden Gate is becoming perhaps the most well-known. And Attenborough’s temperment has help facilitate the deal-making process.
How? Private equity money can provide a cataloger with stability and money to get to the next level. But the owner gives something up in exchange for those things: control of the business. And this can cause tension.
That’s where Attenborough comes in. He’s said to be especially good during the wooing stage. “Neale takes over in a calm and measured way and reassures the entrepreneur that [giving up control of his business] is a good thing,” Battle says.
Attenborough is also a “great match” with Kaluzny, Battle adds. “Kaluzny’s is a smart and aggressive guy,” he says. “But everyone just wants to talk to Neale.”
And what happens after the wooing is over? “If I was to describe the Orchard Brands’ style, it’s that we learn as much from the companies we acquire as we bring to the table. It’s an intellectually curious and democratic process,” Attenborough says. To that end, it retains the management in most cases.
When Golden Gate acquired Draper’s & Damon’s, for example, it kept Brad Farmer, grandnephew of founder Virginia Draper, as CEO. “The people who are driving the results that we have today are people who have been with these companies for years and years,” Attenborough notes.
Attenborough also understands the need for institutional memory. “A lot of times the knowledge gets suppressed when a company is acquired,” he says. “That’s a mistake. Our whole thing is to have ideas get the light of day and have great ideas surface.”
But that’s not the only advantage provided by Orchard Brands.
Another is that the companies share a common prospecting database, although they also rent outside lists. And the sheer size of the parent gives them a purchasing power they wouldn’t have on their own.
The firm now now has 22.5 million names in its database — more than two-thirds of the 55-plus market. “Now they have to prove they can make it all work,” Battle says. And that’s no easy task.
For starters, some of the businesses are in need of tweaking. Blair, acquired last January, has to get a handle on providing merchandise that resonates with its audience. It also has to improve customer service.
“It’s got a great balance sheet,” Battle says. And with annual sales of $420 million, “Blair has the biggest potential for Orchard Brands.”
Low-end clothing marketer Haband has another challenge: declining sales due to a change in the audience. But “it has good cash flow” and $100 million in sales, Battle says. Both Haband and Blair have attempted to move into higher-margin hard goods.
“The apparel market is difficult because of higher number of SKUs, obsolescence, and fashion risk,” says David Solomon, co-CEO at investment bank Goldsmith Agio Helms/Lazard Middle Market. What’s more, both firms cater to the demanding lower-income demographic. “The economics are thin and require very efficient operations,” he says.
Attenborough maintains that his company has the know-how to fix ailing brands. And he offers Draper’s & Damon’s and Norm Thompson Outfitters as Exhibits A and B. “Norm Thompson has put a great focus being the right size for having a nice profitable business,” he says. “They’ve really turned it around. In my view, some companies get into trouble for chasing growth for growth’s sake.”
Then there’s the ongoing challenges inherent in the 55-plus market — declining income levels and attrition due to death.
“There was a lot of competition in the mature business in the ’90s,” says Michael Tiernan, CEO of Boston Proper, and a former owner of the Charles Keath and Mark, Fore, & Strike apparel catalogs. “There were all the catalogs that Orchard Brands owns now, as well as Coldwater Creek, J. Jill, Chico’s, and all of their stores. So I made the strategic decision to sell.” (Mark, Fore & Strike was sold in 2003 to upper management and Charles Keath was acquired a year later by Direct Marketing Services Inc.)
But Orchard Brands is most definitely in buy-mode. “Money is always an object, but there is nothing that we can’t do if it makes strategic and economic sense for our business,” Attenborough says. “We’re not going to be silly and overpay for a business — we are more disciplined than that.”
One thing’s for sure: The next deals will probably be with hard goods catalogers like Solutions. “And that’s probably where we’ll focus for now,” Attenborough continues. “We started in apparel and bought a lot of them in the last 24 months. But now we’re focused on hard goods.”
He adds: “That’s not to say that we won’t still buy apparel companies, because we probably will.”