Esprit de Corp. History
San Francisco, California 94107
Telephone: (415) 648-6900
Fax: (415) 415-550-3951
Sales: $350 million (1998)
NAIC:315212 Women's, Girls' & Infants' Cut & Sew Apparel Contractors; 42233 Women's, Children's & Infants' Clothing & Accessories Wholesalers
There is no one perfect Esprit woman. Because Esprit is about the individuality of many. About what's on the outside and what's on the inside. About variety of sizes, shapes, colors, faces. There is no one perfect Esprit woman. There are many. She is the woman everyone wants to be. She was born a woman and just keeps getting younger. She doesn't lead and she doesn't follow, she's just out there if you can catch up with her. She believes that if you believe it, it will come. She believes that words haven't lost their meaning, like love and desire, like forever and a day, like different but the same, like life is what you make it.
Esprit de Corp. designs, manufactures, and distributes a wide variety of apparel and fashion accessories for women and children. Renowned for fostering a sense of social responsibility among its employees and customers, the company built its image on commitment to such causes as AIDS awareness and environmental conservation. Having soared to high-profile success from the mid-1970s to the late 1980s, by 1992 the company had plummeted to a state of financial ill-repute where it remained until the late 1990s, when the company launched a comeback under new leadership that freely capitalized on the brand recognition won during Esprit's glory days. The Esprit brand is marketed in 44 countries and is available in department stores, specialty stores and over 350 freestanding Esprit retail stores. The late 1990s saw the addition of a web site and a reinstated catalog as important alternative marketing venues.
Esprit was built primarily by Doug Tompkins and Susie Tompkins, a husband-and-wife team whose personal and political values informed the company's early business strategy. The couple met outside Lake Tahoe in 1963, when Susie Russell offered the hitchhiking Doug Tompkins a ride in her Volkswagen. Both Susie and Doug were from wealthy backgrounds and had dropped out of high school to explore more Bohemian lifestyles. After several months of travel together in Mexico and the western United States, they married and settled in San Francisco. There they embraced the social causes and fashions of that city's active counterculture.
In 1964 Doug, an enthusiastic skier and rock climber, invested $5,000 to start a retail business devoted to mountaineering equipment. Called North Face, the store was established in a prime location across from San Francisco's popular City Lights Book Store, and it quickly achieved success. Because of his capable staff, who oversaw daily operations, Doug was able to spend much of the year on international rock climbing and skiing expeditions. Susie remained in San Francisco, raising the couple's two children and occasionally assisting at the North Face store.
During this time, Susie Tompkins became interested in a business venture proposed by her friend Jane Tise. Together they formed the Plain Jane Dress Company, which offered puffed-sleeve, acrylic minidresses that Tise designed and Susie distributed. After the Plain Jane dress line became successful locally, it was marketed to New York department stores by Allan Schwartz, a salesperson who became a partner in the company.
Late in the 1960s, having sold the North Face operation for approximately $50,000, Doug Tompkins joined Plain Jane as a partner. While Tise and Susie designed the product and added new designs and labels to their popular line, Doug and Schwartz handled the marketing and sales responsibilities, targeting affluent California households with colorful, oversized catalogs.
Growth in the 1970s
By 1970 Plain Jane had sales exceeding $1 million a year. Doug and Susie Tompkins owned roughly 45 percent of the company, while Tise and Schwartz held the other 55 percent. At this time, some observers allege, Doug Tompkins stepped up his interest in the company, making bold decisions concerning the company's direction and professing an interest in taking charge. He was instrumental in steering the company's focus to more contemporary designs as the American "hippie" look subsided. In 1972, after he and Susie visited several countries in Asia, Doug decided to move manufacturing operations to Hong Kong, where clothing could be produced less expensively.
Schwartz and Tise sold their shares to the Tompkinses in 1976. Although Schwartz left the company immediately thereafter, Tise remained as chief fashion designer until 1979, when she reportedly became dissatisfied&mdash Schwartz had--with the lack of input allowed her by the Tompkinses. That year Susie took charge of the design department. By this time the company had expanded its product line under several different labels to include pants, blouses, and skirts. These different divisions of the company were soon reorganized and consolidated, and Plain Jane was renamed Esprit de Corp. The company's trademark loose-fitting casual designs in bold colors caught on, and Esprit rapidly evolved into one of the most popular clothing companies among 18- to 24-year-old women.
The Brand Becomes an Image in the 1980s
During the early 1980s Esprit swiftly expanded and distinguished itself in the business community through both its sales and the way in which it reflected the eclectic tastes of Susie and Doug Tompkins. An art and architecture enthusiast, Doug Tompkins spent a great deal of time and money to renovate the San Francisco winery that would become the company's new headquarters. Featuring skylights, wood floors, and Amish quilts on the walls, the brick building gained national recognition among architects and interior designers. The facility offered Esprit employees access to tennis courts, a running track, and a trendy café. Seeking to create an enjoyable work atmosphere to match the spirit of Esprit clothing, the Tompkinses encouraged employees to dress fashionably yet casually; high heels were not permitted on the easily scuffed wood floors of the headquarters building. Furthermore, the Tompkinses offered a unique benefits package. In addition to a 52 percent discount on Esprit clothing, employees received subsidized tickets to the theater, ballet, and opera, as well as free vacations in the mountains and foreign language lessons. Employees came to refer to their workplace as "Camp Esprit" and "Little Utopia."
From 1979 to 1985 the company's sales grew from $120 million to $700 million. As design director, Susie approved all drawings and fabrics, while Doug held the titles of president and "image director." During this time, Esprit became the first clothing company to require department stores to relegate a part of their sportswear section specifically for use as a "shop within a shop." While the concept called for a relatively large amount of floor space, expensive track lighting, and special signage, many department stores complied because of the Esprit line's high sales volume. Catalogs also served as an important marketing strategy in the early 1980s. Oversized, glossy booklets featured pictures of employees and other "real people" modeling Esprit clothes, alongside written personal statements. In an interview, Doug Tompkins asserted that the Esprit customer is of "above-average intelligence and knows the difference between 'substance and superficiality'." "Women who wear Esprit," he concluded, "are the new feminists."
Between 1984 and 1986 the company borrowed nearly $75 million to open several retail stores, the first of which was a superstore in Los Angeles that showcased Doug Tompkins's design taste. The store cost about $15 million to build. Subsequent stores were established in New Orleans, San Francisco, and Aspen, Colorado, and by 1987 there were 14 Esprit retail stores nationwide. While owners of department stores that carried Esprit clothing protested that these retail outlets represented unfair competition, company executives disagreed.
Fiscal Stumbling in the Late 1980s
As Esprit grew, some critics charged that the company was overextending itself. In late 1986 and 1987, Esprit experienced losses for the first time in its history. Earnings fell from $62 million to $10 million, representing an 83 percent downturn. Several reasons were given for the abrupt reversal. The San Francisco Examiner suggested that competitors were copying Esprit designs and offering them at lower prices and further reported that some retailers were complaining of inferior quality and design in new Esprit lines. The Tompkinses maintained that while the company may have tried to expand too rapidly, its spring lines were selling well. They pointed to the decline of the U.S. dollar as the primary reason for the company's losses. Furthermore, they maintained, while international sales were escalating, Esprit's foreign operations were jointly owned with local investors so that profits were reinvested in the foreign market.
In 1986 Doug Tompkins turned Esprit over to Corrado Federico, who became the company's president, while Doug remained as Esprit's CEO and chairperson. Exploring ways to cut the company's costs and consolidate its operations, Federico implemented a freeze on hiring and bonuses that year. Although employees were soon required to pay for coffee and phone calls made in the office, the Tompkinses ensured that some of the unique benefits that made up Esprit's image as a fun, creative workplace remained. The following year the Esprit work force was cut by 30 percent, and Doug Tompkins brought in experts from rival fashion companies to manage the newly consolidated divisions.
It soon became apparent, however, that Esprit's downturns were more than just temporary. Critics cited both Esprit's failure to stay abreast of fashion trends, as well as irreconcilable differences that had developed between Susie and Doug Tompkins, as reasons for the company's troubles. Specifically, the Tompkinses had begun to argue about the direction the company should take. Susie regarded the company's image as too young, maintaining that customers were seeking a more sophisticated look. She believed Esprit's original customers had grown up, and she suggested introducing a line of corporate wear for the loyal Esprit buyer. Doug, on the other hand, argued that the company's youthful image was too important to change and that corporate women would not purchase Esprit.
In March 1988 the Wall Street Journal reported on the rift between the Tompkinses. While the column focused on the couple's relationship and Doug's alleged extramarital affairs with women in the company, it also reported that weak financial management and the design department's failure to note the fashion world's shift to a more traditional look were hurting business. In addition, interviews with former Esprit employees revealed that tension in the workplace was being fostered by two factions--those who sided with Doug and those in Susie's camp. The article also revealed that Doug was seeking minority equity partners to help maintain the struggling Esprit retail stores.
Doug Tompkins Takes Over in the Late 1980s
When Susie Tompkins petitioned a San Francisco court to appoint a third director to help run Esprit in March 1988, a judge advised that she and her husband resolve the situation without legal intervention. The following month, hoping to reverse the stalemate, the Tompkinses appointed three new directors--Peter Buckley, Isaac Stein, and Robert Bartlett&mdashø turn Esprit around. By May of that year the new board recommended that Susie and Doug each remain 50-percent owners of Esprit but that they give up their operating control of the company. Under the plan Esprit president Federico became chief executive officer. Doug was given the title of chief executive officer of Esprit International operations and was required to abandon the idea of expanding Esprit's retail establishments through outside financiers. While many of Doug's duties at Esprit remained the same, Susie's role at the company changed dramatically. No longer the chief fashion designer, she was effectively out of the business. As a "fashion consultant" to Esprit she kept in close contact with the management team but announced that she would also spend time away from Esprit, concentrating on her volunteer work for such social causes as AIDS awareness. Early in 1989, Susie and Doug Tompkins filed for divorce.
That year Doug pursued his growing interest in environmental conservation within the parameters of the fashion industry by instituting a new marketing strategy in which the company actually advised the customer not to buy Esprit clothing if she did not need it. Doug argued that consumerism in general, and especially in the fashion industry, was leading to the destruction of natural resources and that Esprit should thus introduce clothing that would outlast the seasonal fads. Doug's "buy only what you need" campaign included hang tags with the warning on each article of clothing, as well as a new line of fashions in more traditional, muted colors. Initially the line was profitable, but it eventually declined, and, during this time, critics noted that Doug seemed to be more interested in ecology than fashion.
While Esprit had recovered from the previous two years' losses, the company was still regarded as unsteady and lacking a corporate vision. In July 1989 Esprit announced a new plan to refocus Esprit under one Tompkins. Doug was given the option to buy out Susie's 50 percent within 120 days of the agreement. If he did not, both halves of the company would go up for sale at auction. Clothing and footwear manufacturing giants Benetton and Reebok became interested in acquiring Esprit, when, after the requisite 120 days, Doug had not exercised his option.
Analysts speculated that by forcing the auction of the company Doug had initially hoped to acquire Esprit for a lower price than he would have paid to buy out Susie's share. However, as Reebok and Benetton became interested in purchasing Esprit, the price would have escalated. Furthermore, during this time, Susie was recruiting financial backing from the venture capitalist Bruce Katz, Esprit's head of Far East operations Michael Ying, and Isaac Stein. One day before the bidding on Esprit was to close, Doug and Susie worked out a deal, and Esprit never went to auction. Industry observers believed that Doug had been concerned that both he and Susie would lose the company to higher bidders, and, in order to keep Esprit in the family, he accepted Susie's offer in return for some interest in the company's international division.
Susie Tompkins: Solo in the Early 1990s
Susie Tompkins returned to head Esprit amid much publicity. Trade journals, newspapers, and magazines depicted her as the victor in the war to control Esprit. Some observed, however, that the recession of the early 1990s could prove particularly challenging for the company and her leadership. Under Susie's ownership, Stein was named Esprit's chairperson. Federico remained president until his resignation in April of the following year; Stein subsequently assumed the presidency. Appointing herself creative director, Susie brought back the design team with which she had worked before leaving Esprit in 1988. Expressing the desire to produce casual fashions that exuded social awareness, she stated that her mission was to ensure "that Esprit inspire good values."
In 1991 the recently appointed "image director," Neil Kraft, produced the "What would you do?" advertising campaign that surveyed young people about how they would like to change the world. The $8 million campaign featured quotes from America's young people on such issues as racism and abortion. Although the advertisements won several awards and generated a great deal of media attention, sales figures were nevertheless disappointing. The following year Kraft left Esprit, and his duties were taken over by Fritz Ammann, who was named chief executive officer while Stein remained chairperson.
Pursuing her goal of promoting a socially responsible work force, Susie Tompkins replaced the employees' free vacation program with a lunchtime lecture series featuring controversial figures speaking on current issues. She also established a volunteer program that paid Esprit employees for working ten hours per month at a nonprofit organization, providing that the employee matched that amount of time on his own. Furthermore, the ecological soundness of Esprit's manufacturing practices was monitored by a new environmental and community affairs department in the company called the "Eco Desk."
The Ecollection line of Esprit clothing and accessories, touted as both ecologically sound and fashionable, was introduced early in 1992. The line featured buttons made from reconstituted glass or carved from nuts, organically grown or vegetable dyed cloth, and purses handwoven in a Mexican cooperative. Also that year Susie introduced the adult clothing line she had conceived years before. Tompkins referred to the designs as "creative career" wear for the Esprit customer who had matured. The tailored trousers, sophisticated, pleated skirts, jackets, and vests were manufactured in earth tones such as plum, green, brown, and burgundy. Tompkins maintained that these clothes were functional as well as fun and appropriate for the business world. The unconventional fashion show at which the Susie Tompkins collection debuted received mixed reviews. Rather than provide a runway and models, Susie commissioned Reverend Cecil Williams of San Francisco's popular Glide Memorial Church to give a sermon on the troubled lives and deplorable living conditions of youth in America's inner cities. The show, featuring videotape and choral accompaniment, cost more than $5 million to create. While some reviewers were entertained, others reportedly were offended by Esprit's tactics. Nevertheless, the company reported that the line had generated $13 million in sales.
Financial Struggles and New Leadership
Soon thereafter, however, Susie Tompkins stepped down, or was forced out, as creative director of Esprit. In formal statements both she and the company contended that she was leaving&mdash her ex-husband Doug had&mdashø focus on her outside interests. Despite her lack of corporate title at Esprit, Susie remained involved as an advisor and consultant. From a public perspective, Esprit may have fumbled, but the damage was recoverable. More telling of things to come was the state of the financial end, which was described as a disaster by industry analysts and insiders.
Forced to restructure its loans in 1992, Esprit saw a succession of CEOs and fashion failures. In 1993, the company made a short-lived foray back into the mail-order business with a catalog devoted to the Esprit Ecollection. Although loyal Esprit buyers seemed willing to spend $18 for an organic cotton t-shirt, the catalog alone was not enough to change the company's fortunes. In 1994, on a whim, the company picked up the master apparel license for Dr. Seuss and produced a few t-shirts and hats to sell in Esprit boutiques during the holiday season. Intended for the children's market, the Dr. Seuss items were wildly popular among adults and served as the one bright spot in the company's mid-1990s slump. Meanwhile, Esprit's U.S. sales shriveled from $360 million a year to about $200 million.
Then, in 1996, Jay Margolis, a former vice-chairman at both Tommy Hilfiger and Liz Claiborne, came to the helm. Backed by Oaktree Capital of Los Angeles and Cerberus Partners of New York, he bought Esprit's defaulted loans for $80 million dollars, severing Susie Tomkins's fiscal ties to the company. Although Tomkins and Esprit de Corp. would wrangle over tax indemnities issues in legal battles drawn out for years, the Margolis era had begun. Bolstered by a Women's Wear Daily poll which ranked Esprit as 28th in a list of 100 most recognized fashion brands, Margolis refocused marketing to attract a slightly older clientele, moving to more expensive fabrics and quality control. At the end of Margolis' first year, Esprit had added ten "shop-in shops" in departments stores around the country and two retail stores, and, more significantly, had shown a profit for seven straight months.
In 1997, Margolis stepped up the pace of Esprit's turnaround even further. The company started by announcing a new catalog, a tool for consolidating Esprit's made-over image as "modern and sophisticated, yet distinctly fun." Margolis expressed hope that the catalog might follow in the footsteps of Esprit's ground-breaking catalog of the 1980s. Unafraid to use what had proved to work in the past, the company added 14 new retail stores that retained signature design elements, such as exposed ceilings, industrial lighting, and stained concrete floors. In a bold, new move, however, Esprit de Corp. purchased Moonstone Mountaineering, Inc., a manufacturer and distributor of technical performance apparel and sleeping bags. Further consolidating its active-oriented sportswear products, Esprit also made a licensing pact with Beach Patrol Inc., to gain immediate entry into the highly specialized swimwear industry.
The late 1990s saw further diversification of Esprit's product line as the company looked into adding menswear, sleepwear, and intimate apparel. The end of the decade also saw market diversification as Esprit established itself in e-commerce. In celebration of its 30th year anniversary in 1998, Esprit launched an on-line store. The Dr. Seuss merchandise earned an Internet site of its own, at www.seusswear.com, and Esprit's subsidiary, Moonstone Mountain Equipment, earned a "Gold Award" in the World Wide Web/On-Line Advertising category from SF Interactive, a digital marketing agency.
Esprit stepped up efforts to diversify the age of its consumer base as well. In 1999, it launched the "I Am Esprit" advertising campaign, a series of close-up shots of customers ranging from women in their 40s to 12-month-old infants. The ads were featured in established trade publications and in "wild postings," on construction sites and vacant store fronts to reach middle-aged and junior consumers. The campaign was well-received as were most of Esprit's attempts to reinvigorate itself under Margolis' tutelage. By the end of the 1990s, Esprit de Corp. seemed to have recovered its lost market share and to have assured its place among a new generation of buyers. The company continued to open new stores, and the speed with which the new Esprit catalog grew to become a $15 million dollar operation left even the tongue-wagging fashion industry speechless.
Principal Subsidiaries: Moonstone Mountain Equipment.
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Source: International Directory of Company Histories, Vol. 29. St. James Press, 1999.