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Issue Date: March 15, 2006 issue, Posted On: 3/16/2006


Homi Patel

Well suited for the job

Hartmarx CEO tailors company turnaround


By Naomi Grossman

 

Company: Hartmarx Corp.

Position: Chairman and chief executive officer

Education: Bachelor’s degree in economics and statistics from the Kishinchand Chellaram College of Arts and Sciences in Mumbai; master’s degree in business administration from Columbia University.

Age: 57

CHICAGO, Ill. — As Homi Patel, chief executive officer of Hartmarx Corp., likes to say, his company has seen a lot of history. Indeed, throughout its 118-years, the publicly traded clothing company has weathered not only two World Wars and the Great Depression but also the vagaries of the notoriously capricious apparel industry.

It is those vagaries that have marked Patel's nearly 27-year tenure with Hartmarx and nearly brought the company — one of the country's largest clothing manufacturers with over 35 brands it owns or licenses like Burberry, Perry Ellis, Austin Reed and DKNY Donna Karan New York — to its knees five years ago with losses of about $20 million in 2001. But it was then that Patel stepped in as CEO and engineered a turnaround that involved a tandem shift in focus on more casual dress, as well as high end labels; a restructuring of the company's debt; and, an increased focus on overseas production.

Today, Hartmarx is alive and kicking with a $40 million profit in 2005 on $600 million in business. The one time formal suit company now gets nearly 50 percent of its business from sportswear and the company is in high acquisition mode.

"[Homi] was able to see the changes that were coming," said Taras Proczko, a senior vice president and general counsel for Hartmarx. "He was able to have the company change its infrastructure to remain competitive."

Foresight, instinct and seizing an opportunity seem to be the hallmarks of Patel's career, which spans over three decades in the clothing industry. He came to the United States in 1972 to attend the Columbia University Business School's graduate business administration program after receiving an undergraduate degree in economics and statistics from the Kishinchand Chellaram College of Arts and Sciences in Mumbai.

"When I came I knew I would stay," said Patel. "Opportunities lay outside India."

Patel, who is now 57, said he didn't want to get into the clothing industry "at all" and when he graduated from Columbia he did so with an offer in hand from pharmaceutical giant Pfizer International. But, said Patel, the dean of the business school, for whom Patel had done a lot of research work for, told him, "I have the job for you." The dean was on the board of a small clothing company in New York City called Corbin Clothing and he convinced Patel that he had a future there. "He told me they're good people, they're right for you," said Patel. "He asked me what I was making [at Pfizer] and they offered me more."

It took Patel a while to get the image of himself working at a large company out of his head but once he did Patel realized he liked the "entrepreneurial spirit" of a small business. Also, said Patel, "they said come in, we'll teach you a lot." According to Patel, they did.

So much so that when a head hunter contacted Patel for Hartmarx four years later at the age of 30, he was offered a general manager position to run its airline uniform division. "I wanted to run a business and this was an opportunity," said Patel.

The opportunity turned out to be one of a lifetime. Patel moved quickly up Hartmarx's corporate ladder, getting promoted every two to three years, until 1992, when he was appointed president and chief operating officer.

It was here that the process of bringing Hartmarx into the modern era actually began. Two years prior, the company had begun thinking about closing down its mammoth retail division — of 500 stores — to focus solely on its wholesale business. "The situation was untenable," Patel said of the difficulty in dealing with both divisions. "We couldn't carry water on both shoulders and we were competing with ourselves."

Over the next two years, the decision was made to close the stores as well as move nearly two-thirds of the company's production overseas. "The world was changing," said Patel. "To increase efficiency [we needed to] move production offshore." Currently, seven — of the original 35 — facilities remain in the United States.

For Patel, one of the most important steps he took in turning Hartmarx around was reducing its debt. Cutting inventory and reducing the inflow of goods enabled the company to cut its debt by approximately $50 million a year and allowed it to refinance its remaining debt at a lower rate.

But Patel knew Hartmarx's biggest challenge, for a company that made its name in dress suits, was keeping up with the country's trend towards increasingly casual dress. "Our biggest production, the men's suit market, was declining five to seven percent a year," said Patel. "The American people were going casual."

Several lower-priced suit labels were sold off and the company discontinued its private label business. The business grew with labels like Hickey Freeman, Tommy Hilfiger, Claiborne and Kenneth Cole. Patel also lowered overhead and cut expenses and the extra cash allowed the company to make acquisitions of companies like Misook, a women's designer brand, and Christopher Blue, a women's jeans company. "We're going high end," said Patel.

Also, all the company's acquisitions were non-suit companies.

"We changed the mix," said Patel. "At one time we were a suit company. Now its only 50 percent and the rest is sportswear. Its much more balanced."

Patel said his approach to Hartmarx is rooted in his unrelenting focus on the bottom line coupled with an emphasis on what he calls "principled ethical leadership."

Paulette Garafolo, president of Hartmarx's luxury group, said that Patel is "highly regarded in our industry for honesty and integrity. He is smart, unassuming, un-intimidating and above average [with] no arrogance. But he is very strategic and always wins. " 

So far, that seems to be the case. But in the clothing business, no one gets to rest on their laurels. There are always factors that threaten to continue to transform the industry. One of those, said Patel, are the suppliers, who are gaining increasing clout. And it is now China and India who have become the dominant global players in that aspect of the industry.

Consolidation also continues unabated, said Patel. "Federated bought Mays, Kmart bought Sears. It puts pressure on people like us. We have to get bigger to compete. We're a large firm [but] we have to position ourselves to continue with acquisitions to grow. We are constantly looking [for companies to buy]," said Patel. "I spend a lot of my time on that."

But according to Garafolo, Patel could be spending his time in the wrong pursuit. "He missed his calling," she said. "He's a real teacher. He shares his knowledge at every level and his patience is outstanding." But it is exactly those traits that make him an effective leader of the company. "He can set the strategic path and his team gets there together," she said. "He's done a great job at Hartmarx."









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