Hawley’s Overhaul

BREA — 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 one-time 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 sofa 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 he and other investors provided 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 investment 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.

Yet, 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 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 went into bankruptcy and its stock plummeted.

Sen. Barbara Boxer (D-Calif.) said 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. Boxer is now pushing legislation to limit such company stock purchases and force companies to diversify employees’ investments.

Boxer noted how 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 said 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 owner commutes from his Wilshire home to its 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, 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 florescent bulbs exposed.

“I’m having a ball, and I love the people here,” he 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 plan to scratch the cookie-cutter look of stores across the country, replacing it with store environments geared to the regional tastes of customers. Endless displays of stuffed furniture would be broken up into stylistic schemes, replete with end tables, lamps and the like. Hawley’s new job no doubt presents a break from the routine personal investments, corporate committee tasks and consulting that have occupied him since he retired in 1993 from Carter Hawley.

Still, the challenges must resemble those of a retired baron of a bankrupt railroad who is straining to fix his grandson’s toy train set.

Throughout the retailing heydays of the 1970s, Hawley spirited Carter Hawley Hale through a rapid expansion that built it into the nation’s sixth-largest retailer.

Hawley became president of the former Broadway-Hale Stores in 1972. Two years later, it changed its name to Carter Hawley Hale, adding his name to the title.

In 1977, he added the title of chief executive and embarked on an acquisition spree, adding John Wanamaker, Contempo Casuals and Thalhimers to a cluster that 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 company profits, making it vulnerable to a takeover.

In 1984, the year after Hawley became chairman, he blocked a hostile bid by Leslie Wexner’s the Limited chain.

Two years later, he fended off a juicy $60-a-share offer by the Limited and the 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, New York analyst Alan Millstein 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 put up $800 million to refinance the company’s emergence from Bankruptcy Court.

In May, Hawley went back to GE Capital, which agreed to put up more than half of 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.

“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.”

Still, Krause’s seems to present a clean slate.

Several factory workers interviewed outside its plant last week seemed to know little about him. A receptionist taking a call from somebody seeking a management job even had to spell out his last name.

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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

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A Career in Retail

* 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 parent Broadway-Hale Stores, which two years later is renamed Carter Hawley Hale Stores to reflect leadership roles of Edward W. 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 anti-takeover restructuring that spins off company’s crown jewels--Neiman Marcus, Bergdorf Goodman and Contempo Casuals stores. Move also put biggest block of Carter Hawley stock in hands of employees, some of whom later suffer heavy losses after stock plummets.

* 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, says 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.

* August, 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

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Krause’s Furniture Inc.

* Headquarters: Brea

* Business: Manufacturers and sells made- to- order upholstered furniture.

* Employees: 1,000

* Showrooms: 88 in 12 states.

* Fiscal 1996 revenue: $122.3 million.

* Fiscal 1996 net lose: $8.7 million.

Source: Krause’ Furniture Inc.; Researched by JANICE L. JONES / Los Angeles Times