NYT | VANESSA FRIEDMAN & SAPNA MAHESHWARI
The clothing brand, which has dressed all but four U.S. presidents, could end up closing its three American factories as it navigates the pandemic.
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In late March, Brooks Brothers was showered with praise after announcing it would use its three clothing factories in the United States to make personal protective equipment to help fight Covid-19.
Now those factories may become casualties of the coronavirus, and the future of Brooks Brothers — not to mention its identity as the ultimate “Made in America” brand, one that has dressed presidents and former presidents dating to James Madison — is uncertain.
Brooks Brothers plans to lay off nearly 700 employees this summer at the factories, in Massachusetts, New York and North Carolina. The company is also trying to find buyers for the factories by mid-July, and expects to close them if it can’t.
The plans emerged through filings under the federal WARN Act, which requires companies to give workers at least 60 days’ notice before mass layoffs or plant closings. Shortly after, Gordon Brothers, the expert in retail liquidations, announced it would provide a $20 million secured loan to Brooks Brothers.
Together the decisions left two towns with factories worried about their futures, and raised questions around the core financial health of the company, especially when retail sales have dropped sharply and brands like J. Crew, Neiman Marcus and J.C. Penney have filed for bankruptcy protection.
The potential factory closures “seem like a dramatic move for a brand that has really hung their hat on ‘Made in America,’” said Robert Burke, founder of a namesake luxury consultancy. They suggest, he said, a last-ditch effort to achieve cost savings, given the effect that pulling out of the U.S. could have on the brand’s image.
Claudio Del Vecchio, the owner of Brooks Brothers, said that “all resources need to be maintained and saved to make sure we can come out on the other side of the crisis.” Karsten Moran for The New York Times
In an interview, Claudio Del Vecchio, the 63-year-old Italian industrialist who bought Brooks Brothers in 2001 and was responsible for acquiring the factory in Massachusetts, spoke for the first time about the decision to divest from the vertical made-in-America supply chain.
“I feel very bad about this,” Mr. Del Vecchio said. But he added, “The factories never made money for us, and at this moment all resources need to be maintained and saved to make sure we can come out on the other side of the crisis.”
Dependent Towns
The population of Garland, N.C., hovers just above 600. The Brooks Brothers factory there, where oxford shirts are made, is “the only large employer,” said Winifred Hill Murphy, the town’s mayor since 2012.
The company’s layoff notice said the factory employed 146 people, who may lose their jobs on July 20, though a Brooks Brothers video four years ago counted 270 Garland employees.
The closing of the factory in Garland, N.C., would be “devastating,” Mayor Winifred Hill Murphy said. Jeremy M. Lange for The New York Times
The departure of Brooks Brothers, which closed an outlet store in Garland in 2018, would be “devastating, not just financially but emotionally as well,” Ms. Murphy said. “You have young people working whose parents worked here and grandparents worked here.”
Brooks Brothers’ biggest U.S. factory is its Southwick facility in Haverhill, Mass., where it makes suits and employs 413 workers. The factory, acquired in 2008, was the town’s biggest employer until a hummus manufacturer recently passed it, Mayor James Fiorentini said.
“We worked on putting together a very generous tax package to get them to move here,” he said, adding that Brooks Brothers was considering going overseas when it bought the factory. “We pitched repeatedly that you want to be able to say, ‘Made in America.’”
The company also has a tie factory in Queens with at least 136 workers. Still, the three sites together make less than 20 percent of the products sold by Brooks Brothers, Mr. Del Vecchio said; the company’s largest category is now sportswear.
“For us to restructure to make the more casual sportswear products we need is too costly,” he said.
“Brooks Brothers was born in the mind of the family not to make products in America but to import the best products from all around the world, so I don’t think we are going away from the original mission,” Mr. Del Vecchio added.
Brooks Brothers, which Mr. Del Vecchio bought in 2001, is the oldest apparel brand in continuous operation in the United States. Jeremy M. Lange for The New York Times
The Fabric of the Country
Few American businesses have as rich and resonant a history as Brooks Brothers, which Henry Sands Brooks founded in Manhattan in 1818 and is the oldest apparel brand in continuous operation in the United States. Ralph Lauren started out as a salesman at Brooks Brothers in New York. It is the official clothier of the Jazz at Lincoln Center Orchestra and has been worn by Clark Gable, Andy Warhol and Stephen Colbert. It has dressed all but four presidents, and its overcoats have been worn for the inaugurations of Abraham Lincoln, Barack Obama and Donald J. Trump, among others. It even made uniforms for soldiers during the Civil War.
Family run until 1946, and always produced in part in the United States, Brooks Brothers changed hands a number of times until Marks & Spencer, the midmarket British firm, acquired it in 1988 and more production began to move offshore. There were complaints about diminished quality, and the brand was generally seen, said Thomas Davis, a salesman at the company for almost 50 years until 2017, as “falling into the abyss.” That was when Mr. Del Vecchio, whose father, Leonardo, is the 46th-richest man in the world, according to the Bloomberg billionaires index, acquired it for $225 million.
“Claudio loved factories and knew it was a source of differentiation for us,” said Jeff Blee, a former executive in merchandising at Brooks Brothers. “As America’s oldest clothing brand, being able to connect the dots from a sourcing, design, manufacturing standpoint — it helped bolster that story.”
Mr. Del Vecchio opened elaborate flagship stores in global capitals, and hired well-known American designers such as Thom Browne and Zac Posen to create high-end collections that could be shown during New York Fashion Week, with mixed results.
Steep growth in the first seven years was halted by the financial crisis. Later, the social movement toward casual Fridays, the rise of the dressed-down tech uniform and the shift toward online retail all began to chip away at the Brooks Brothers market, and it struggled to adapt.
Annual sales from 2017 through 2019 were effectively flat, at around $1 billion, Mr. Del Vecchio said. The company is also carrying debt of “less than” $300 million, he said.
An outlet in Smithfield, N.C. Brooks Brothers has furloughed about 80 percent of its workers during the pandemic. Jeremy M. Lange for The New York Times
In 2019, Mr. Del Vecchio hired the investment banking firm PJ Solomon to explore “options” such as a sale or further investment. Before the pandemic, a restructuring plan was created. This year, a group of potential investors valued the company between $300 million and $350 million.
However, Mr. Del Vecchio said he hadn’t felt that any of the discussions underway “matched the needs we saw.” Then the pandemic hit, ushering in an era of remote work, postponed weddings and bar mitzvahs, and job interviews on Zoom.
The company furloughed about 80 percent of its employees, including all retail personnel, and has been renegotiating rents. (Brooks Brothers does not own any of its real estate other than its office in Connecticut and the factories in Massachusetts and North Carolina; Mr. Del Vecchio owns the Madison Avenue flagship store through a separate entity.)
President Trump and his predecessor Barack Obama are among those who have worn Brooks Brothers at their inaugurations. Ruth Fremson/The New York Times
Mr. Del Vecchio acknowledged that current forecasts expect revenues to be down 30 percent after stores reopen. “And obviously, we will be down more if you look at the entire year,” he said, given the store closures in March through June.
Documents that detail the company’s “Transformation” proposal, seen by The New York Times, also reveal a negative EBITDA — earnings before interest, taxes, depreciation and amortization — of $69 million for the year, with no return to profit expected until 2022. (Brooks Brothers disputes these figures.)
“We need as much cash as possible,” Mr. Del Vecchio said. Hence the loan from Gordon Brothers, which has specialized in retail liquidation and recently pivoted to acquiring the intellectual property and archives of brands such as Laura Ashley. Like Authentic Brands Group, which bought the Barneys brand in November and then liquidated its stores, Gordon Brothers is focused on resonant names that can exist in a wholesale or digital landscape on their own.
“These are not people that create or position brands,” Mr. Burke, the luxury consultant, said.
Though Mr. Del Vecchio said he was not “eager” to even consider a Chapter 11 bankruptcy filing, he also would not rule it out. “We have to be realistic,” he said.
Mr. Del Vecchio was resigned to having to close the factories, though he didn’t think it would have a major effect on the brand’s image.
“There are a very small percentage of our customers who told us they really care about ‘Made in America,’” he said. “The vast majority of customers care more about quality and service than where a product is made. When we look at the sales, we really don’t see a lot of reason to believe we would be penalized. I think we — I — am more sorry about closing the factories than the customers will be.”
Though Brooks Brothers sells some products that are made in America by outside manufacturers, and may continue to do so when the company no longer has its own factories, Mr. Del Vecchio added, “I can’t promise we will maintain products made in America, because honestly I don’t know of any factories in America right now that make products of the quality we made.”
Lucie Greene, a trend forecaster and former worldwide director of the Innovation Group and J. Walter Thompson, said that while country of origin might not have mattered too much to buyers before the pandemic, she believed that now “people will have a long memory in terms of brand ethics.”
“Consumers will want to invest in brands that have been supportive of their country,” she said.
The factory employees and their towns are alternating between fearing for their future and believing that Brooks Brothers can be persuaded to stay.
Mr. Fiorentini said he hoped that another apparel maker would buy the factory in Haverhill. “I can’t say we’re hopeful or cautiously optimistic, but we’re definitely not giving up the ship,” he said.
“If we don’t have a replacement factory or Brooks Brothers does leave, then what will Garland look like 40 years from now?” Ms. Murphy asked. “I do hope there is something that can be done. This will impact Garland forever.”