Philip Hawley: He’s Back, and Not Forgotten
He’s 71, wealthy and fit. He’s got 18 grandkids demanding attention.
He’s even put some distance between himself and the abrupt end three years ago of his big-time corporate career, though he’s still being blamed for ruining the onetime retailing colossus Carter Hawley Hale Stores--depriving employees of hefty retirement savings in the process.
Yet, at an age when most erstwhile industrial chieftains have slipped into a twilight of golf outings and cushy board assignments, Philip M. Hawley is back in the corporate suite--for better or worse.
Last week, a much smaller Brea retailer that has struggled, as Carter Hawley did, through California’s weak economy, losses and layoffs, drew him out of retirement to spearhead a hoped-for turnaround. Hawley became chairman and chief executive of Krause’s Furniture Inc. after joining with other investors to provide the company with a $17-million infusion.
Hawley insists he only took the job because he viewed the company as an attractive personal investment. He persuaded others to invest millions of dollars to back up his bet that he can recast its management, hone its strategy and overhaul its showrooms.
“I’m not doing this to start my career over,” Hawley said in an interview.
The job is temporary, he said. He hopes to develop a successor within a year or two, then withdraw from active management.
“We have significant core values here--great chain of stores, good name. We think it’s lacked a retail emphasis. If we do the ABCs of retailing and give this management team an opportunity to perform, we’re confident that it’ll return well on its investment.”
Any of his returns will go to his heirs. “That’s what you do all of your investments for, at my particular point in life,” he said.
The ever feisty executive also contends his current activities have nothing to do with his past. Still, people have long memories, and he can’t escape the bitter legacy left by Carter Hawley.
Williams Fiore uttered a derisive laugh when he learned of Hawley’s new job. “He should sit on whatever fat retirement he got and leave good working people and companies alone,” said the former president of a union local that represented Carter Hawley employees.
Fiore estimates that he personally lost $8,000 in a company-directed savings account that was invested entirely in Carter Hawley Hale stock. Other former employees say they saw retirement savings of as much as $100,000 disappear when the company entered bankruptcy and its stock plummeted.
Sen. Barbara Boxer (D-Calif.) says she’s seen the aftermath of Carter Hawley’s practice of pressuring employees to put their earnings into 401(k) retirement accounts that were invested in company stock. She is pushing legislation to limit such company stock purchases and force companies to diversify employees’ investments.
Boxer said one former Carter Hawley employee told a congressional hearing this summer how she has lost hope of a comfortable retirement that would have allowed her to take her grandchildren to Disneyland and other places.
“I hope that he’s watched these people come forward . . . because he and his company hurt a lot of people and stole their dreams,” Boxer said.
But a Hawley admirer says the Krause’s position will give him a chance to end his career on a better note.
“That is what’s going to happen,” predicted Thomas DeLitto, who stepped aside as chief executive at Krause’s in favor of Hawley. “His experience, his management skills and his energy are exactly what’s needed.”
Dapper in his finely trimmed suit and yellow print tie, Hawley presents a striking contrast to the nitty-gritty, loss-ridden company he now heads. The patrician son of an Oregon paper mill worker commutes from his Wilshire Boulevard home to Krause’s sole furniture-making factory in Brea.
He refused to be photographed inside the factory, or even on the company-made sofa in the reception area.
He chose instead what passes for an executive retreat there--the utilitarian front office. Studded with duck decoys and staid prints of hunting scenes and of a bear poised to devour a fish, it’s lit by recessed ceiling fixtures, their panels missing and the florescent bulbs exposed.
“I’m having a ball and I love the people here,” Hawley said.
He gets a charge out of watching executives light up when he expresses interest in overhauling the company’s moribund merchandising.
“If you say, ‘What would a Krause’s showroom really look like if we were going to excite the customers?’ the ideas flow out of them,” he said.
They’ll scratch the cookie-cutter look of stores across the country, then craft store environments geared to the regional tastes of customers. Endless displays of stuffed furniture will be broken up into stylistic schemes, replete with end tables, lamps and the like. Still, Hawley’s challenges must resemble those of a retired baron of a bankrupt railroad who is straining to fix his grandchild’s toy train set.
Throughout the retailing heyday of the 1970s, Hawley spirited Carter Hawley Hale through a rapid expansion that built it into the nation’s sixth-largest retailer.
He became president of the former Broadway-Hale Stores in 1972. Two years later, the company added his name to the title and became Carter Hawley Hale. In 1977, he took on the role of chief executive and embarked on an acquisition spree, adding John Wanamaker, Contempo Casuals and Thalhimers to a cluster of chains that also included Neiman Marcus.
But the company encountered classic operational problems that often plague an overly diversified conglomerate.
Tom Tashjian, a Montgomery Securities analyst, said the company’s merchandising savvy was admired, with each of its various businesses paying close attention to buying and changing consumer tastes. But it couldn’t control costs, budget well or plan, he said.
As a result, he said, it faltered, as “the only regional retailer up against a bunch of national chains.”
The operational problems eroded the company’s profit, making it vulnerable to a takeover. In 1984, the year after Hawley became chairman, he blocked a hostile bid by Leslie Wexner’s Limited Inc. chain. Two years later, he fended off a juicy $60-a-share offer by Limited and Edward J. DeBartolo Corp.
He put the company’s crown jewels--Neiman Marcus, Contempo Casuals and Bergdorf Goodman--up for sale. The company also pressed employees to increase their savings in its stock.
The moves left Carter Hawley saddled with $1 billion in extra debt, unable to weather a swift, devastating downturn in California’s economy. In 1991, it filed for bankruptcy reorganization.
At the time, Alan Millstein, a New York analyst, predicted: “Phil Hawley will go down in retailing’s ‘Hall of Shame.’ . . . His legacy will be that he fought off a $60-a-share buyout offer by selling the company’s best assets and getting his employees to invest their pension money in the company’s stock. Now the company is in bankruptcy, and those shares are worth less than $2 each.”
Hawley, the company’s largest shareholder, also reportedly lost millions. He retired in 1993, shortly after Carter Hawley emerged from bankruptcy under the control of Chicago investor Sam Zell. The company changed its name to Broadway Stores Inc. and was acquired last year by Cincinnati-based Federated Department Stores.
During the darkest days of Carter Hawley’s bankruptcy, Hawley managed a personal triumph: persuading General Electric Capital Corp. to refinance the company’ emergence from bankruptcy.
In May, Hawley went back to GE Capital, which agreed to put up more than half the $17 million worth of new capital in Krause’s. The only catch: Hawley had to run it.
Hawley brushes aside mention of his Carter Hawley days. He has little patience with questions about any lessons learned that he’ll apply at Krause’s. “I don’t worry about how I’m going to be remembered,” he said. “My life has been filled with a lot of activities and a lot of business issues, and I’d just like to be remembered for the totality of those.”
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Philip Hawley’s Career Milestones
* 1958: Joins the Broadway department store chain as a women’s sportswear buyer.
* 1968: Named chairman and chief executive of the Broadway.
* 1972: Becomes president of Broadway’s parent company, Broadway-Hale Stores, which two years later is renamed Carter Hawley Hale Stores to reflect the leadership roles of Edward Carter and Hawley.
* 1977: Gains additional title of chief executive officer. During his tenure as CEO for the next 15 years, company’s annual profits consistently fall below retailing industry average.
* 1983: Named chairman, replacing Carter, while retaining title of CEO.
* 1984: Leads company in thwarting takeover attempt by Leslie Wexner’s the Limited chain.
* 1986: Blocks second takeover bid, a combined offer from the Limited and the Edward J. DeBartolo Corp., by announcing a major restructuring.
* 1987: Completes a cpmplicated anti-takeover restructuring that spins off company’s crown jewels--Neiman Marcus, Bergdorf Goodman and Contempo Casuals stores. The move also put biggest block of Carter Hawley stock in hands of employees, some of whom later suffer heavy losses after stock plummets.
* 1990: Says in an interview that he plans to continue as CEO for four more years to fulfill a request from the board of directors and to complete the company’s reorganization.
* Feb. 11, 1991: High debt and poor retailing climate force Carter Hawley to file for Chapter 11 bankruptcy protection.
* July 25, 1991: Zell/Chilmark Fund, a Chicago investment group headed by an old business associate of Hawley’s, Sam Zell, announces offer to acquire control of company and pull it out of bankruptcy. Zell says no management changes are contemplated.
* Oct. 8, 1992: Carter Hawley emerges from bankruptcy.
* Oct. 9, 1992: Hawley, 67, announces plans to retire from active management on Jan. 31, 1993. Hawley says his goal of positioning company as a “strong and viable competitor” has been accomplished.
* 1995: Company, renamed Broadway Stores, sold to Federated Department Stores. Federated says all Broadway stores will be sold, closed or converted into Macy’s or Bloomingdale’s stores.
* 1996: Hawley, 71, named chairman and chief executive of Krause’s Furniture Inc., Brea-based retailer and manufacturer of made-to-order upholstered furniture.
Source: Times reports.
Researched by STUART SILVERSTEIN and JANICE L. JONES / Los Angeles Times
Los Angeles Times
