Big Patagonia Thinking Small : Outdoor clothing: Ventura’s largest manufacturer trims staff, cuts expenses and reduces the size of its catalogue to offset glum outlook for 1992.
For years, environmentalist Yvon Chouinard campaigned for slow growth--everywhere, it seems, except at Patagonia Inc., the high-flying outdoor clothing company he founded two decades ago in a former meatpacking plant near downtown Ventura.
While Chouinard, pronounced “sheh-nard,” was contributing heavily to political candidates and causes battling urban sprawl and other perceived excesses, his own firm grew like wildflowers after a spring rain. Sales of Patagonia’s pricey garments--the latest catalogue lists $88 pullovers and $225 foul-weather jackets--rose an astonishing 2,400% during the 1980s.
To be sure, the huge percentage rise can be explained partly by a low base--sales amounted to only $3.1 million at the start of the ‘80s, and reached $116 million in the year that ended April 30.
But the latest figures fell far short of expectations, and, with no sales gain at all expected this year, Patagonia has laid off 20% of its 600 employees, shrunk the size and frequency of its widely praised catalogue and drastically reduced its clothing line.
“I want this company to be here 100 years from now,” declared Chouinard, who, like many others at the offices of Patagonia and its parent, Lost Arrow Corp., was wearing a Patagonia sport shirt. “To assure that, we’ve got to stay small. From now on, I don’t want our overhead, including our staff, to expand a bit, except, maybe, to keep pace with inflation.”
Such words seem surprisingly determined from the head of a company where a third of the Ventura headquarters floor space is devoted to an employees’ child-care center, where people are encouraged to break up the day by surfing or playing volleyball, and where the boss has neither a title nor an office.
But Patagonia, Ventura’s largest manufacturing concern, is battling its way out of a crisis--and the struggle is being watched closely both inside and outside the company.
One close observer of the company, Mic Mead, chief executive officer of Adventure 16, a chain of outdoor and travel clothing stores based in San Diego, believes that Patagonia’s lenders nudged the company toward its small-is-beautiful theme.
“My guess is that they outgrew their financing,” said Mead, whose chain buys more from Patagonia than from any other supplier. “Then, when problems arose, the banks said, ‘This can’t continue. You’re going to have to make some changes.’ ”
Mead noted that Chouinard, who at 54 is still an expert rock climber, skier, surfer and fisherman, likes to spend several months a year in the wild, leaving day-to-day operations to others. “I think he got a little too far away from things in the last year or two. I think he realizes that now.”
Despite its problems, however, Patagonia has continued to deliver orders to him on time, Mead said. “They’ve maintained their high quality standards, and demand for the products is still strong. This meek outdoorsman, Yvon Chouinard, still has a cult following.”
Some of Patagonia’s lenders have indeed played hardball, Chouinard admitted. “I wouldn’t say we were in danger of losing our financing altogether, but it was obvious that we were having problems, as were a lot of other clothing companies. Everybody agreed that something had to be done.”
Employees got their first inkling of the crisis last year when Chouinard cut short a yearlong sabbatical, returning from Europe with his wife, Malinda, and their two teen-age children.
One of his first steps was to persuade Kris McDivitt, a key factor in Patagonia’s early growth, to return to her former post as chief executive officer. McDivitt, now 41, had stepped down in 1987 to concentrate on design work and polishing the firm’s image. Chouinard and McDivitt both said the most traumatic part of the rebuilding project was firing 120 employees in one month last summer. “It hurt a great deal. We’re like a family,” McDivitt said.
Next, the company reduced its number of wholesalers and cut nearly 40% from its product line. Still, that left 263 styles for Patagonia fans to choose from, in outdoor colors such as cobalt, sapphire, “red violet” and bright yellow. Current items include ocean smocks ($265), riding tights ($98), stretch gloves ($28) and twill shorts ($44), all guaranteed for as long as the buyer uses them.
“Our big push now is toward cross-functional,” Chouinard said. “Instead of separate jackets for skiing, mountain climbing, hiking and so forth, for instance, we’ve asked our designers to come up with jackets that work for any of those activities.”
Even Patagonia’s well-publicized mail-order catalogue was affected by the cutbacks. Featuring articles on the environment, and colorful pictures taken by customers in the outdoors--from surfboarding in Hawaii to rock climbing in Australia--while wearing Patagonia clothes, the catalogues have been reduced in size, number of pages and frequency. Starting with the current issue, they’ll be produced twice, instead of four times, yearly, said company spokeswoman Megan Montgomery.
Even with sales growth stalled, Chouinard insisted that he wants Patagonia to remain focused on the outdoor rather than the fashion market. Besides mail-order and Patagonia’s own outlets, the company will continue to sell its clothes only through such outdoor retailers as R. E. I. and Sport Chalet, he said. “If we were to get into the department-store fashion wars by selling to Nordstrom or Bullock’s, it would be suicide.”
Chouinard first went into business in the late 1950s, opening a blacksmith shop behind his parents’ house in Burbank to forge hard-steel climbing pitons. He expanded to other climbing hardware, and in 1974 formed Patagonia to sell clothes to climbers.
He moved the company to Ventura to be close to his favorite surfing waters at Rincon Beach, north of Ventura. At first, he sold his wares out of his car trunk, sleeping in the onetime packing plant he’d rented as a blacksmith’s shop.
Montgomery said that Patagonia’s buyers’ range mainly from 25 to 45 in age, and that “they range all the way from doctors, lawyers and business executives to ‘dirt bags’--outdoors people who have no jobs and no income to speak of.”
Montgomery--wearing company-made hiking shorts like most other women at Patagonia’s headquarters--added: “After all, that’s what Yvon once was--a dirt bag.”
Arnold Fishman, president of Marketing Logistics, a Lincolnshire, Ill., concern that tracks the direct-mail industry, believes that despite Patagonia’s disclaimers, the company has increasingly aimed its products at fashion-conscious buyers. This could broaden the company’s market but could also lead to new problems, he noted.
“In the past, they catered to the more professionally oriented outdoorsman, reflecting Chouinard’s special experience in mountaineering,” Fishman said. “Now, they’re also aiming at people who merely want to look like a mountain climber. This puts them up against some strong competitors, such as Land’s End, L. L. Bean and Eddie Bauer.”
Being privately owned, Patagonia does not divulge its profits, but most industry sources concur with Chouinard’s assertion that the firm remains profitable despite its recent troubles. The company refused to comment on a report that it netted as much as $10 million two years ago, when sales totaled $86 million. Chouinard contributes 10% of annual pretax earnings or 1% of sales, whichever is larger, to environmental causes.
Fishman estimated that Patagonia does about $15 million annually in sales through company-owned stores, $80 million through wholesalers and $20 million through mail order. Chouinard described mail-order sales as “minor, despite all the attention our catalogue gets.”
Patagonia owns 11 stores in the United States, some called Great Pacific Iron Works and some The Patagonia Outlet. Overseas, where Chouinard said most marketing expansion will take place, the company has outlets in Germany, Japan and Ireland. A Canadian store is being closed this month.
Ron Jones, managing partner in charge of the Los Angeles office of Moss Adams Co., an accounting firm that specializes in the apparel industry, said he has been associated with Patagonia since its beginning. “I can assure you they’re profitable,” he said. “If they have a problem, it’s getting so focused on a new product or a new way of doing business that they sometimes get overextended.”
Jones added: “I can also assure you that Yvon is right in concentrating on functional clothes rather than fashion. I’ve seen too many clothing companies go into the fashion and department-store pitfall.”
Jones said he offers one piece of advice to members of his staff who visit Patagonia: “Never wear a tie.”
Chouinard, convinced that the hardest part of Patagonia’s comeback is behind it, recently has allowed himself to relax somewhat. He’s now on a kayaking and fishing trip in Siberia with NBC anchorman Tom Brokaw and other outdoor buddies.
Whether Chouinard keeps the expansion lid on permanently remains to be seen. He has changed his mind before, as when he scrapped plans earlier this year to move the company’s distribution center from Ventura to Missoula, Mont.
For the present, he’s keeping the warehouse in Ventura, Chouinard said, but even there, the theme has become small-is-beautiful. “We’ve upgraded the place so that it gets orders out a lot faster now. There are more bins, but the building is no bigger than it was in the past.”
Patagonia Inc. After growing dramatically through most of the 1980s, sales at Patagonia Inc. started to level off in recent years. The privately-owned Ventura clothing company has trimmed its work force, put into effect a hiring freeze, and has cut the size of its mail order catalogues in order to weather a financial strain. Company sales in millions: 1982: $7.0 1983: $14.8 1984: $20.3 1985: $28.8 1986: $33.7 1987: $41.4 1988: $60.4 1989: $73.5 1990: $86.0 1991: $106.0* 1992: $116.0 1993: $116.0 (projected) * The company’s fiscal years ended June 30 until 1991when its year-end was changed to April 30. Source: Patagonia Inc.
