Sole survivor
Five years ago, some thought the long-time maker of Dearfoams
slippers was dead.
R.G. Barry had recorded three consecutive year-end losses —
the worst totaling $21.7 million in fiscal 2003 — and net sales
had dropped $18.4 million in a single year. A $10 million bank
loan had been called in, and the company’s stock was delisted
from the New York Stock Exchange.
“The company was going through some horrible times and
didn’t look like it was going to make it,” Tunney says. “A lot of
the team members here had to answer questions from their
friends, their family, their spouses about, ‘Hey, what’s going on
over there? Are you guys going to make it?’”
Now that the company has come out on the other side —
returning to profitability in fiscal 2005 and setting last year’s
earnings record — the victory is that much sweeter.
“The company’s doing great,” he says, noting that he expects
revenue to grow at least another 4 percent this fiscal year and
profits to increase 6 to 10 percent, despite the weak retail environment. “I’m hoping that our team members here get to enjoy
the good side because they went through the bad side.”
Tunney didn’t mastermind R.G. Barry’s turnaround. In fact,
he wanted nothing to do with it. He’d orchestrated turnarounds for companies like Brown Shoe Co. and Phoenix
Footwear Group Inc. before coming to Ohio and knew all
about that sleepless, pit-in-the-stomach stress that accompanied bringing nearly dead companies back to life. So before he
agreed to take the top spot at R.G. Barry, Tunney made sure the
turnaround was complete.
“When I got here, they had already changed the model and
said, ‘We’re going to get out of manufacturing.’ So I didn’t have
to get my hands dirty and bloody and all that stuff,” he says.
During the turnaround, R.G. Barry closed all three of its manufacturing plants in Mexico, shut down an operation center in
Texas and cut more than 90 percent of its work force. At its peak,
the company employed more than 2,500 people. Today, R.G. Barry
has just 130 employees.
“I didn’t have to live through that,” Tunney says. “One of the
things that attracted me to this company was I wasn’t going to
have to go through the turnaround and do the clean up. It was
a company that was ready for growth.”
The first step
Tunney’s primary job when he arrived on the scene two years
ago was to take the pared-down company and develop a
growth strategy to move it forward.
“A lot of people when I came here, their big thing was, ‘What’s
the strategy?’ like there’s some magic pill or something,” he
says. “What we’ve focused on here is really the development of
good leadership and good managers.”
After all, no matter what strategy you come up with, Tunney
says, things change. Having a leadership team that can roll
with the changes and overcome obstacles is a growth strategy
in and of itself.
Tunney illustrates his point by singling out what could have
been a terminal flaw in the business plan he developed with his
new leadership team.
“We never put in place that a barrel of oil would go from $60 to
$100,” Tunney says. “But you’ve got to realize a big portion of our
products are petroleum-based; they come from oil. We weren’t
smart enough to have that in our strategy to say that oil was
going to virtually double.”
So R.G. Barry’s leadership team — which received extensive
training from The Covey Institute shortly after Tunney’s arrival
— got to work and started cutting expenses elsewhere and
finding more efficient ways to operate in order to offset the
increase in oil costs.
“When you look at the expense we’ve taken out of this company in
the last 18 months alone, it isn’t because I’m the smart guy and
I’m doing things behind the curtain pulling the levers,” Tunney
says. “It’s because we have people who have been given the
leadership tools to really figure out what we have to do to re-engineer and restructure our business to take advantage of
that.”
For example, R.G. Barry reduced its selling, general and administrative expenses by roughly $3 million between fiscal 2006 and
2007, putting that line item at its lowest point in at least five
years.
“If you develop your team and help your team grow, they will
grow your business,” Tunney says. “That’s what’s happening
here.
“I wish I could come up with the perfect strategy each year,
but I’m not that smart. And as we go forward, the economy is
going to get more and more turbulent; it’s going to get more
and more tricky, so that’s why I’m more interested in how well
we can develop these people. The better we develop them, the
better they’ll be able to respond to the economic challenges
that are out there.”