Prepared by:






Billie Jo Evanco     Joan F. Franek     Brian Cicioni     Karen Kozich




Table of Contents




Executive Summary…………………………………………………..1









Findings and Interpretation………………………………….….……5



Conclusions and Recommendations…………………...……….……9



Leslie Fay Stock Prices and Earnings per Share.......…..Appendix A



Competitor Financial Information………………….......…Appendix B



Summary Cash Flow, Income Statement and

Balance Sheet Data……………………………….…….….Appendix C



Breakdown of Current Employee Base……………..……Appendix D



References……………………………………………..……Appendix E



Leslie Fay Cos., Inc.

Analysis and Recommendations



Executive Summary


BJBK Consulting group conducted extensive research on The Leslie Fay Cos. Inc.  After examining the information about the company’s past financial success and its current position, there are certain strategies and recommendations the company should employ to improve the company image and move forward.  Research indicated that in the beginning Leslie Fay showed a profitable financial profile with a stable inclining market.   From 1986 to 1992 the company appeared to be in a positive position and had been realizing their goals.  In 1993 the company was immersed in scandal.  Discrepancies were discovered in their accounting operations and high level management was responsible for committing fraud.  This fiasco forced the company to file Chapter 11 Bankruptcy.  Leslie Fay survived and recovered from the bankruptcy proceedings in a reorganized state.  Now the company holds positive ground once again, however, it is nowhere near where it used to be.  In this uncertain time, it is necessary for the company to assess themselves and implement a plan for change.


BJBK Consulting recommends implementing strategies that will keep Leslie Fay a viable player within the fashion industry and help the company grow.  We suggest that the company needs to focus on a goal if they wish to accomplish growth.  Our recommended goal is growth and viability through increased sales and net profit.  In an attempt to assist Leslie Fay achieve this goal, we suggest the company focus on five specific strategies:


¨      Establish a men’s clothing line

¨      Increase unisex small accessory product lines

¨      Explore the opportunity to design and manufacture a footwear line

¨      Initiate an intense advertising program that focuses on the re-establishment of a positive public/consumer reputation for the company name Leslie Fay.

¨      Incorporate technology into all areas of the marketing and advertising plans





The Leslie Fay company was founded by the Pomerantz Family in 1947.  For many years the company experienced growth and profitability.  The company mission was to design, manufacture, and sell moderately priced women’s clothing targeted toward the 40 to 60 year old woman.  During the following years, the company experienced substantial growth after expanding and acquiring new divisions such as Nippon and Hue.  The company entered the 1990’s with a $20,091,000 net income and stock valued at 1237 ½ per share and was clearly a big player within the fashion industry.  In 1993, auditing detected fraudulent accounting information and a scandal surfaced.  Paul F. Polishan, Chief Financial Officer, and Donald F. Kenia, Company Controller, had deliberately misreported sales, income, overhead costs, and earnings per share figures.  Because of the fraudulent procedures, net income for 1990, 1991, and 1992 were grossly overstated at $82,000,000 when in reality there was an actual net loss for this period of $36,700,000.  Once the false accounting figures were corrected, the true picture indicated that Leslie Fay was in financial ruin.  In April 1993, Leslie Fay was forced to file for protection under Chapter 11 of the U.S. Bankruptcy Code.  In the midst of the bankruptcy proceedings, the company’s problems were further compounded by a strike initiated by their ILGWU unionized workers.  Leslie Fay, which historically had been one of the last American unionized garment worker plants, had no choice but to permanently lay off all workers.  This action ended the strike, but generated a lot of bad press for the company.  Shortly after the bankruptcy and strike, the company developed a plan for reorganization.  The courts approved this plan and Leslie Fay began the task of rebuilding its business.  The reorganization plan centered upon the separation of Leslie Fay’s most profitable division, Sassco Fashions, from the parent company.  In addition, as a result of the severe lack of available funds, Leslie Fay was forced to discontinue its Theo Miles, Albert Nippon and Castleberry lines.  Emergence from bankruptcy occurred in 1997.  Since that time, the company, newly named Leslie Fay Cos. Inc., has struggled to regain a place in the fashion industry and become profitable once again.  The damage done to the company’s reputation made progress very difficult.  Through hard work, the company has survived and has established a solid foundation for recovery.  Leslie Fay is beginning to recognize positive cash flows and continues to move forward in company growth.  The current company structure includes the following divisions/lines:  Haberdashery by Leslie Fay, Joan Leslie, Reggio, David Warren, Rimini by Shaw, Outlander Sportswear and Hue.  They are also a licensee for Liz Claiborne, Elisabeth and Cynthia Steffe dress labels.  As a result of the restructuring, Leslie Fay has changed and expanded it mission by moving the company into the business of design, and arrangement for manufacture, and sale of moderate and better women’s dresses and sportswear.


The company now faces the challenge of moving forward and once again securing a solid position as a dominant force within the fashion industry.  The primary goal for Leslie Fay should be growth and viability through increasing sales and net profit.  This is a major challenge as the company is now facing a differently structured manufacturing system, increased competition in the marketplace and, most importantly, a negative public perception of their product lines.  In an attempt to remain in line with the recommended goal, it is imperative that the company employ new strategies to ensure a positive result.




BJBK Consulting has collected and reviewed the available research accessible to our team.  Annual reports for the years 1990, 1991, 1995, and 2000 were examined and provided overall corporate financial information but did not include a divisional breakdown.  A review of the 2000 Annual Report provides supportive documentation that reflects the increase in net sales directly related to new product lines targeted at new markets.  Further evidence demonstrates the current, perhaps, old-fashioned Leslie Fay dress and sportswear divisions are experiencing decreased sales and are detrimentally effecting overall profit.  The stock valuations were gathered from the years 1990 through present.  A five year comparison was compiled on the earnings per share information.


A comparative study was done utilizing Liz Claiborne, Leslie Fay’s top competitor, and Polo Ralph Lauren, as a benchmark for the proposed new men’s line.  An extensive data base search of Proquest Direct provided background and general company information.  Numerous business newspaper, magazine, and journal articles were collected and read.  A brief interview was conducted with Lee Granahan, Director of Distribution.  He provided supportive historical information, however, his knowledge was quite limited to packaging and shipment information.


Consultants visited the garment district in New York City and other retail department stores.  This was done to gain knowledge of the Leslie Fay product lines and their store within a store concept.  While visiting, much attention was given to competitor comparison on the basis of style, display and market audience.


Findings and Interpretation


Leslie Fay must begin the task of changing the company’s philosophies about who they are and what they do.  Supportive of the competitor analysis, the company will discover that many of the major fashion designers of today and yesterday deal with products for a variety of ages and sexes.  Many top competitors have been entering new markets.  Most have included unisex lines, vast accessory lines, and are completely integrated into the technology era through the use of the World Wide Web.  These companies attempt to develop a customer base that is much broader in scope than the narrow focus of Leslie Fay by offering varied products that appeal to buyers of all ages and income levels.  Leslie Fay has recently eased into new and different areas with the establishment of the David Warren and Cynthia Steffe lines; however, more aggressive efforts in this area are needed.


Leslie Fay is severely lacking a good marketing and advertising plan.  Traditionally, division labels handle advertising their specific products which is a practice that should continue; however, there exists little or no mass media advertising for the parent company.  One of the major problems Leslie Fay faces is the negative public perception that exists in the market today.  This issue must be addressed.  All advertising programs should be centered on re-establishing a positive reputation.  Relationships with most of the department stores carrying the Leslie Fay lines have been successfully reestablished, however, the common consumer/typical buyer of Leslie Fay clothing, is still negatively biased.  Leslie Fay should approach this issue by openly acknowledging the scandal and informing the general public how they have changed for the better.


The greatest challenge facing the Leslie Fay Company is the lack of presence in the world of technology.  While the company has entered into an agreement with Tradeweave that allows its business clientele access to online sales on close out merchandise, it neglected the average consumer by not providing this advantage.  Leslie Fay must recognize that in this new millennium, the convenience of Internet shopping is expected and demanded by the public.  It is imperative that Leslie Fay create a web site.  Not only will this effort provide more convenient access of product to the customer, it can be fully utilized as a marketing and promotional tool.


A comparison of the financial data from the company’s peak, prior to bankruptcy (1986 to 1990); during bankruptcy, (1991 to 1997); and after reemergence from bankruptcy through reorganization, (1997 to present), presents a clear picture of the status of Leslie Fay.  These figures re-enforce the fact that the company must change and expand if it hopes to remain a player in the fashion industry.  In 1990 the company’s net sales were recorded at $855,217,000 and net income was $20,091,000.  This was the peak of performance for the company.  They were strong and viable.  1994 showed the sales figure as $661,779,000 and net loss at ($95,238,000).  While sales appear satisfactory, the net loss reflects the negative bottom line caused by the exorbitant expenses of the bankruptcy. Current information for 2000 indicates sales at $197,466,000 and a net income of $8,316,000.  These profits are evidence that Leslie Fay is recovering from the bankruptcy and is once again profitable.  A solid foundation has been established on which to build future company growth.


Leslie Fay’s stock price has dramatically changed over the past 10 years (see Appendix A).  Between the years 1990 and 2000 the company’s stock price dropped by 1234 ¼ per share.  The company, prior to bankruptcy, traded on the New York Stock Exchange.  During the bankruptcy, company stock was worthless and did not trade at all.  Currently it trades on the NASDAQ Small Cap Market under the symbol LFay.  The primary shareholders are the Board of Directors, the Pomerantz family, and Three Cities Brokerage.  This translates to a total of 5,073,138 current outstanding shares.  Of these shares, 4,515,040 are held by the officers and directors.  Stock prices must be forced upward if the company hopes to raise additional equity for expansion and be an attractive investment to the public. 


Earnings per share of Leslie Fay stock (see Appendix A) are demonstrating marked improvement over the past five years.  Currently, the ratio is 1.46 which is average in comparison to other similar companies.  The competitor companies that we have researched include, Liz Claiborne and Polo Ralph Lauren There earnings per share ratios are 3.12 and 1.45 respectively.(see Appendix B).


Cash Flow information reflects the past and present financial status for the company. (see Appendix C). Obviously the company’s latest financials are a mere shadow of what they were a decade ago.  We suggest that the years during the scandal and bankruptcy (1991 – 1997) be recognized but discounted.  At this time, nothing can be done to change these figures and they are distorted by the turbulent situation occurring within the company at that time.  The better figures for comparison and examination are the years 1990, 1997, 1998, 1999, and 2000.  It is obvious that net sales must be improved.  In 1990 the cost of goods sold was 69% of net sales.  In 2000 this same ratio is 75%.  This reflects the fact that the cost of goods sold is higher now and must be reduced.  Fundamentally, increasing sales and decreasing cost of goods sold translates into a larger net profit.


Employee information for the years prior to 2000 is quite limited.  At one point, the company employed approximately 3000 people.  In 2000, Leslie Fay employs a total of 444 people (see Appendix D).  As a result of the bankruptcy, Leslie Fay was forced to shut down all of its U.S. based manufacturing plants and currently manufactures all clothing in plants outside of the United States, primarily overseas in third world countries.  This appears to be a cost effective and wise decision.  Production costs have decreased due to the lower standard of wages and benefits that must be paid to the overseas workers.  Other major competitors within the fashion industry adhere to the practice of utilizing the manufacturing locations in third world countries because of lower production costs. The facilities currently owned and operated by Leslie Fay are firmly established and have reasonable costs associated to them.  The corporate headquarters are located on Broadway in New York, NY. A small manufacturing area for the new product designs and templates and a fashion showroom are also housed in New York.  Lease agreement for facilities, such as, distribution centers, warehouses, etc,. are reasonable.  The current U.S. distribution center, located in Laflin, PA, is operating efficiently.  Orders are filled on time with the added advantage of reduction in charge back costs that directly increase the profit margin on goods sold.


BJBK Consulting has focused additional research on the top competitors in the men’s apparel industry.  Most popular clothing companies carry a unisex line.  For instance, Tommy Hilfiger carries both Tommy and TommyGirl ,Liz Claiborne, and Ralph Lauren all carry products for both genders as well.  Companies such as Polo Ralph Lauren are ideal as benchmarking companies for the establishment of Leslie Fay’s proposed new men’s line.  Polo Ralph Lauren’s net income for the year 1999 was $124,606,000.  Their fourth quarter for 2000 net income is $143,497,000.  The company’s fiscal global wholesale sales offers many divisions such as; Children 5.9%, Fragrances 8.2%, Home 9.4%, Accessories 10.2%, Womenswear 24.0% and Mensware 42.2% .  This information clearly reflects that although there are several divisions, the men’s line makes up the better part of the percentage of total sales.  This information supports a market for Leslie Fay’s expansion into men’s clothing.  Leslie Fay can experience success by benchmarking themselves against a top selling menswear line. 


Conclusions and Recommendations:


The Leslie Fay Cos. Inc. must undertake a complete internal and external research evaluation.  This evaluation includes an in-depth market analysis and competitor study.  Leslie Fay must utilize this information to develop a marketing and advertising program for the company.  The information should also be used to determine the best opportunities for the company to expand product lines and/or acquire new divisions.  Based upon the company analysis we feel that by slightly changing the direction and product lines, Leslie Fay can realize continued success.  All aspects of the company must focus on the newly established goal, growth and viability through increased sales and net profit.  In order to achieve the goal we offer several recommendations.


¨      Establish a men’s clothing line

¨      Increase unisex small accessory product lines

¨      Explore the opportunity to design and manufacture a footwear line

¨      Initiate an intense advertising program that focuses on the re-establishment of a positive public/consumer reputation for the company name Leslie Fay.

¨      Incorporate technology into all areas of the marketing and advertising plans


Financing and cost are challenging key factors in this reorganization.  Target areas must be identified as areas where the company can shift resource allocation.  Perhaps, focusing on ways to reduce manufacturing costs and division consolidation or folding will provide a good starting place in the search for funding.  The company must review the current divisional sales figures and identify product lines that are thriving as opposed to those whose sales information reflects decline.  The information obtained can be utilized to make a determination to consolidate different lines, and/or possibly completely fold others.  Cost savings associated with these decisions can be reallocated to finance the recommendations made for new label creation, advertising, and technology needs.  Relative to this approach is the internal discussion currently occurring about the merger of the product lines Haberdashery by Leslie Fay and Leslie Fay Sportswear.  Leslie Fay has recognized that these lines are similar and are competing against each other in the market place.  Merging these lines into one division will reduce both production and marketing costs associated with these products.  There are other opportunities for the company to experience additional cost savings by the merging of other duplicated lines.


Our first recommendation is to establish a men’s clothing line.  The name for this line must reflect a different image for the company and be appealing to the new target market while including an association to the parent company.  Most of the primary competitors within the industry are marketing men’s clothing.  Traditionally, Leslie Fay focused on women’s clothing; however, manufacturing clothes for men expands its limited consumer base by 50%.  The line will have to meet the needs of the stylish, well-dressed man of the new millennium and should be moderate to better wear.  It should fold directly into the store-within-a-store marketing style currently being used by Leslie Fay.  The new product line should be marketed under a name other than Leslie Fay, but provide a clearly defined and recognizable connection and ownership to and by the parent Leslie Fay company.  The proposed new men’s clothing label having a primary name but including by Leslie Fay is an example of this philosophy.  This name is concise but has a positive feel and promotes good public relations.  All marketing and sales initiatives that relate to this line should be twofold.  The first goal is promotion of the new and exciting name brand of clothing, and the second is to clearly define the relationship with the Leslie Fay Company. 


Secondly, explore the creation of a small goods accessory line, which provides an opportunity for expansion into a unisex footwear division.  We feel that this will increase visibility and awareness of the Leslie Fay products and name and expand the product base currently offered. The Leslie Fay name has always been associated with women.  In today’s world most companies cannot afford to have a narrow product line and Leslie Fay is definitely one of those companies.  BJBK Consulting sees this as a self-imposed limitation.  The time has come to change and explore a new relationship with customers.  Leslie Fay should consider the addition of accessories for the new men’s line (belts, ties, socks, handkerchiefs, etc.), while expanding existing female accessory lines.  In this way, the company can generate more of a unisex market base.  If successful, the next logical step is to continue expansion.  The suggested area for future growth is a unisex footwear line.  We feel that broadening their customer base drastically will directly increase net sales.


An obvious issue facing Leslie Fay is the lack of marketing and advertising. The company needs to direct a significant portion of their attention to these areas. Leslie Fay needs to explore the idea of a new image for the company.  It has suffered a tremendous amount of bad publicity that has sullied the company name and reputation.  This, in turn, is negatively impacting sales.  The advertising program should focus on the acknowledgement of the scandal, and promote the ideals and changes that the “new” Leslie Fay has adopted.  This campaign should be targeted at the general consumer, rather than business to business clients.  A mass media campaign must be undertaken to promote the Leslie Fay name. 


In addition, the company is well behind the times in the technological era.  Technology is a necessary method utilized to gain attention in the marketplace today.  Currently, Leslie Fay does not have an Internet site on the World Wide Web.  They need to take a big technological step if they hope to remain competitive in line with other apparel companies.  Leslie Fay must create a web site.  This site will have the potential to reach millions of customers both within the country and globally.  We suggest that once the site is established, it can incorporate online shopping, runway fashion shows, and provide an additional venue for the advertising campaign.  Offering information via the most highly used consumer media source of the century will be a step toward reaching the company’s goal.  In addition, a web-site is invaluable in compiling market research.  The web site should contain information concerning products and services.  It should also provide customers with the history of Leslie Fay and their current financial information.  An online consumer survey can be used a tool to solicit public input about future company ideas and customer needs which will allow interaction between the public and Leslie Fay.  The company must position itself to be more accessible to the buyer.


The past history of the company is quite turbulent.  Leslie Fay has experienced both extreme success and extreme failure.  Yet, through it all, the company has survived and is in a great position to restructure and reorganize.  The company must confidently move forward, with flexibility and willingness to alter its historical mission.  Following these recommendations and strategies will allow Leslie Fay to not only remain in existence but become, once again, a premier apparel manufacturer in the fashion industry.




Agins, Teri. (1993). Leslie Fay Cos.’ Profits Restated for the past 3 Years – Action is taken to Reverse Financial Irregularities; CEO’s Duties Are Cut. The Wall Street Journal, New York, September 30, 1993), Retrieved 10/17/00 from the ProQuest Direct database



Leslie Fay official to resign; Division to be discontinued, The Wall Street Journal, New York, October 13, 1994, Retrieved 10/17/00 from the ProQuest Direct database



Kahn, Sharon. (1996). Profits out of thin air. Global Finance, New York, November, 1996, Retrieved 10/17/00 from the ProQuest Direct database



Leslie Fay, Cos.:Bankruptcy Court confirms plan for reorganization, Wall Street Journal, New York, April 22, 1997, Retrieved 10/17/00 from the ProQuest Direct database



Strom, Stephanie. (1994) Leslie Fay to be revamped and drop career clothing line, New York Times Current Events Edition, New York, October 13, 1994, Retrieved 10/17/00 from the ProQuest Direct database



Agins, Teri. Leslie Fay to sell some business amid Chapter 11. Wall Street Journal, New York, March 20, 1995, Retrieved 10/17/00 from the ProQuest Direct database



The Leslie Fay Company, Inc. Reports Second Quarter and Six Month Financial Results. (1999, August 8). New York: Company News On-call. Retrieved October 10, 2000, from the World Wide Web:  http://www.prnewswire.com/cgi-bin/storie…5&STORY=/www/story/08-08-2000/0001285789



MBA 601 Case, Leslie Fay Co. Breakdown of controls. (2000, October16) Retrieved October 10, 2000, from the World Wide Web: http://gemini.tntech.ed/~rsr2907/lesfayb.html



U.S. Company Database report: Leslie Fay (2000), Retrieved 10/18/00 from Disclosure’s SEC Database



Leslie Fay Incorporated New: Pricing History Report (2000) Dow Jones & Company Retrieved 10/17/00 from the World Wide Web: http://nrstg2s.djnr.com/cgi-bin/DJIntera…y


Hoovers Interactive is a great site for financial information concerning Leslie Fay




Financing Business: Leslie Fay Cos. The Wall Street Journal, New York, August 4, 1986, Retrieved 10/21/00 from the ProQuest Direct database


Underwood, Elaine. (1993) Who is Theo Miles? And can she save Leslie Fay? The Wall Street Journal, New York, May 31, 1993, Retrieved 10/21/00 from the ProQuest Direct database


Leslie Fay emerges from reorganization in bankruptcy court, The Wall Street Journal, New York, June 5, 1997, Retrieved 10/21/00 from the ProQuest Direct database



Leslie Fay, Fresh from Chapter 11, Reports a Profit. The Wall Street Journal, New York, August 28, 1997, Retrieved 10/21/00 from the ProQuest Direct database


Business Brief- Leslie Fay Cos.: Two Divisions will be shut as Part of a Restructuring. The Wall Street Journal, New York, March 19, 1993, Retrieved 10/21/00 from the ProQuest Direct database


The Associated Press. (1994). Workers Strike Leslie Fay over Plant Closings, St. Louis Post, St. Louis, Mo., June 2, 1994, Retrieved 10/21/00 from the ProQuest Direct database



Business Brief- Leslie Fay Cos.: Apparel Maker in Operation Amid Strike Over Job Cuts, The Wall Street Journal, New York, June 2, 1994, Retrieved 10/21/00 from the ProQuest


Researched the entire site for Polo Ralph Lauren, http://www.polo.com


Researched the entire site for Liz Claiborne, http://www.lizclaiborne.com


Researched the entire site for Nautica, http://www.nautica.com