- The Washington Times - Tuesday, January 23, 2001

Sneaker-maker Converse Inc. said yesterday it had filed for bankruptcy protection, becoming the latest familiar brand name to fall on hard times.

The 97-year-old North Reading, Mass.-based company, which still produces the Chuck Taylor All Star shoe line that became popular in the 1950s, said it will reorganize by closing its North American plants and shifting production to an Asian supplier.

Glenn Rupp, chairman and chief executive of Converse, said in a statement, "The strength of our brand provides our business with a solid foundation."

But brand familiarity does not always translate into consumer loyalty, said George Whalin, a retail-business consultant in San Marcos, Calif.

"Customers have so many choices. You walk into a shoe store today and you have hundreds of more choices than you did a few years ago," he said.

Competition has helped kill or hurt several well-known American institutions recently:

• Montgomery Ward Inc., the 128-year-old discount retail icon that gave the world wish-list catalogs and Rudolph the Red-Nosed Reindeer, announced plans in December to close all 252 Wards stores nationwide.

The company blamed sluggish holiday sales and increased competition from newer discount chains like Target Stores Inc. and Wal-Mart Stores Inc. for its demise.

• Also last month, General Motors Corp. said it will phase out its 104-year-old Oldsmobile banner, the oldest brand name in the U.S. auto industry.

The decision to kill Oldsmobile, reminiscent of DaimlerChrysler's abandonment in 2000 of the Plymouth brand, was seen as an admission from GM that its best efforts to revive the brand, once synonymous with middle American prosperity, had failed.

• Sears, Roebuck & Co. is planning to close 89 stores including four department stores and some of its National Tire and Battery auto-repair centers because of weak holiday sales.

• In the fall, Xerox Corp. laid off workers and sold off assets to help pay off its debt. The world's largest copier company warned investors last month that its upcoming fourth-quarter losses would be wider than expected.

The company also was forced to squelch rumors that it didn't have enough money to pay off its debts.

Mr. Whalin said complacency is dangerous for older companies. "It's bad when a company is run by old, white guys who get comfortable and make a lot of money. It's hard for them to stay current," he said.

Charles W. McMillion, senior economist for MBG Information Services Inc., a District of Columbia-based business-research firm, said consumers may have more choices than they did a decade ago, but fewer companies control the well-known brands.

"Global consolidation has created a situation where a single company like General Electric controls thousands of brands," Mr. McMillion said.

He cited the example of Mission Foods Inc., a Texas cornmeal company whose recent recall resulted in 300 taco products being pulled off store shelves nationwide.

"This is one company that controls a huge segment of that market," he said.

Converse is seeking protection from its creditors under Chapter 11 of federal bankruptcy laws. In its petition filed in U.S. Bankruptcy Court in Delaware, the company reported $202.1 million in assets and $226.2 million in debts.

The company, burdened with debt from its 1995 purchase of clothing maker Apex One Inc., has seen its share of the $7.65 billion U.S. athletic-shoe market shrink after it failed to develop products that could compete with those of Nike, Adidas and Reebok.

"Their brand doesn't have enough leg to expand beyond basketball. They were making a big bet with basketball shoes, so when that failed, they were stuck with inventory," said analyst Margaret Mager of Goldman, Sachs & Co.

Converse was bought by Interco, a furniture, footwear and apparel company, in 1986, and remained a unit of that company for five years until it went bankrupt. As part of the reorganization, Converse emerged in 1994 as a public company.

The following year, the company discontinued its running, walking, tennis and football shoes to focus on basketball.

Converse hired sporting-goods veteran Mr. Rupp as chairman and chief executive in 1996. Losses widened to $43.6 million in 1999 from about $5 million in 1997. The company cut 5 percent of its work force in 1998 and another 20 percent a year later. Its stock has dropped from a high of $28 in February 1997 to 19 cents Friday before over-the-counter trading was suspended.

Sarah Scheyer, spokeswoman for the National Retail Federation, a D.C.-based trade group, said some older institutions have been able to reinvent themselves in the face of bad times.

For example, Woolworth Corp. shifted its business plan when it closed its signature dime stores, she said. The company, now known as Venator Group Inc., runs several specialty chains, including Foot Locker, the nation's top athletic footwear chain.

"Every time one retailer closes, it creates an opportunity for another," she said.

• This story is based in part on wire service reports.


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