Gerry Weber International AG History

Address:

Neulehenstrasse 8
D-33790 Halle/Westphalia
Germany

Telephone: 49 (0) 52 01 18 5-0
Fax: 49 (0) 52 01 10 9-31

Public Company
Incorporated: 1989
Employees: 1,600
Sales: EUR 350.1 million (2003)
Stock Exchanges: Frankfurt
Ticker Symbol: GWI
NAIC: 315999 Other Apparel Accessories and Other Apparel Manufacturing; 315232 Women's and Girls' Cut and Sew Blouse and Shirt Manufacturing; 315234 Women's and Girls' Cut and Sew Suit, Coat, Tailored Jacket, and Skirt Manufacturing

Company Perspectives:

Gerry Weber International AG is a globally operating fashion and lifestyle company. Our recipe for success is the perfect blend of innovative power experience and professionalism. Last but not least, it is our added attention to the wishes, needs and demands of our customers that has made so many women delighted with our collections for more than 30 years. Our brands are individual and unmistakable. Which is exactly what makes them so fashionable.

Key Dates:

1973:: Gerry Weber founds Hatex KG in Halle (Westphalia), Germany, to make trousers for women.
1982:: Manufacturing is extended to a full line of coordinates for women.
1986:: The brand Gerry Weber is created and Steffi Graf is signed to promote it.
1989:: Taifun brand is created; Hatex goes public as Gerry Weber International AG.
1993:: The first Gerry Weber Open tennis tournament is broadcast on television.
1994:: Samoon brand is created for plus sizes.
1996:: The Gerry Weber shop-in-shop system is introduced at 50 German fashion houses.
1999:: The first House of Gerry Weber opens in Bielefeld, Germany.
2003:: Company restructures; Court One and Yomanis brands are discontinued.

Company History:

The union of tennis and fashion propelled Gerry Weber International AG into its position as one of Europe's leading fashion labels. Founded in 1973, the German company gained brand name recognition as a sponsor of tennis champion Steffi Graf during the 1980s. In the 1990s, the company began sponsoring the Gerry Weber Open, a sort of German Wimbledon, which further publicized the label. The company's responsiveness to retailers' needs also helped sales grow, so that Gerry Weber posted increasing sales throughout the 1990s while the fashion industry as a whole was performing poorly. Gerry Weber now designs and sells women's clothing under three main labels. The core Gerry Weber label offers modern clothing with a classical feel for the mid- to high-price market segments and has a market recognition of about 60 percent in Germany. The Taifun label, offering business apparel for younger consumers at mid-range prices, is the company's second strongest label. The third label, Samoon, is a collection of separates in plus sizes and accounts for about 10 percent of sales. In addition, the Gerry Weber name has been licensed for the production of shoes, eyewear, handbags, jewelry, and a fragrance. The company sells most of its apparel through the so-called "shop-in-shop" system, in which retailers set aside a minimum amount of floor space for one of the Gerry Weber labels in exchange for advertising and display support from the company. In addition, the company oversees more than 50 "Houses of Gerry Weber," where a full selection from all three labels is available in an exclusive Gerry Weber store. About 40 percent of the company's sales are abroad, mainly in exports to Western Europe, although sales in Eastern Europe, the Middle East, and the Far East are growing. The company is led by cofounders Gerry Weber and Udo Hardieck.

Birth of a Label: 1973-88

Company founder Gerry Weber came from a working-class family and was educated as a textile salesman. At the age of 23, he opened a small fashion shop in the country, which soon expanded into six different locations. In March 1973 he joined with Udo Hardieck to found Hatex KG in their hometown of Halle, a small village in the West German state of Westphalia. Gerry Weber was the personally liable partner and Udo Hardieck was a limited partner. For two years Hatex produced and sold trousers for women. In 1975 the company began producing skirts as well. In order to meet increased production demands, in 1976 Hatex acquired the facilities of a Halle dress manufacturer with approximately 80 employees. The manufacturer became known as ha-we-modelle GmbH and acted as a supply firm for Hatex. Ha-we-modelle moved to Paderborn, a slightly larger town southeast of Halle, in 1979. That same year, Hatex purchased a piece of land for its headquarters in Halle. However, legal provisions held up developments at that site, so the company headquarters moved south to the nearby village of Brockhagen.

Hatex expanded its production to include women's blouses and jackets in 1982. Now the company was able to offer a full set of mix and match coordinates for women. With sales increasing, the company moved about 40 percent of its production to foreign facilities in 1983. Another 20 percent was handled by domestic contractors, and only 35 percent at the company's Paderborn facility. By 1986, annual sales were DEM 72.7 million. That year the brand name Gerry Weber was first created. At the same time, Hatex entered into a sponsoring contract with rising German tennis star Steffi Graf. Graf won her first Grand Slam tournament at the French Open the next year and went on to hold the number one ranking in women's tennis for eight of the next ten years. Her success brought attention to the Gerry Weber brand. The brand was registered as an international trademark in 1987. That year the company also made the decision to build a new factory and headquarters on the piece of property in Halle that had been purchased in 1979. The first segment of the factory, a state of the art shipping facility, warehouse, and forwarding bay, was completed in 1988.

Adding New Brands As a Public Company: 1989-94

In 1989 Hatex changed its name, went public, and launched a second fashion label. Gerry Weber Fashion GmbH was founded as a subsidiary early that year to launch the brand name Taifun. The Taifun collection had a sportswear influence and was meant to appeal to younger women. An East German-born Olympic sprinter, Katrin Krabbe, signed a sponsoring contract to help publicize the new brand. In October 1989, Hatex KG went public and changed its name to Gerry Weber International AG. The company had sales of DEM 103 million that year.

Gerry Weber began production for a third label in late 1989 when it signed a licensing contract with Etienne Aigner, a Munich-based leather goods manufacturer and designer. Gerry Weber was to produce women's clothing for the high end of the market under the Aigner name. The first collection for the new label was presented in 1990. Meanwhile, the company was carrying on with intensive investment in its facilities. The second segment of construction at the Halle site was completed in 1990 and several departments moved operations there. The following year a second warehouse was built. About 80 percent of manufacturing was now handled by foreign subcontractors, mainly in Poland, Yugoslavia, Hungary, and North Africa. In order to ensure a reliable supply of goods, Gerry Weber decided to build a company-owned factory in Portugal after negotiations for a site in East Germany fell through.

The new production and warehouse facilities were needed to keep up with skyrocketing sales. The Taifun label was well received and contributed to a one-year doubling of revenue to DEM 201 million in 1990. In 1992 revenue reached DEM 291 million, 35 percent of which was attributed to the Taifun label. Gerry Weber had about 6,000 retail customers for its three brands and was designing over 600 pieces a season for the core label, 570 pieces for Taifun, and 200 pieces for Etienne Aigner. The collections, which consisted of mix and match separates built around a central piece, were presented at fashion fairs in Düsseldorf twice a year and were on display year-round at the headquarters in Halle. Gerry Weber gained an edge on competitors by starting the design process earlier and delivering goods ahead of most other labels. Exports had grown to about 40 percent of sales in 1992, mainly to northern Europe, Japan, and the Near East.

The company headquarters was finished in 1992 after an investment of about DEM 45 million. Construction began immediately on another ambitious project. Weber wanted to build on his firm's association with tennis by bringing an internationally known tournament to Halle. With the dynamism and focus he was known for, Weber managed in the course of one year to transform a grassy meadow on the edge of town to a tournament site with ten grass courts and a 9,000-seat stadium. As groundskeeper Weber hired Jim Thorn, who had tended the courts at Wimbledon for a decade. The first Gerry Weber Open was broadcast internationally in 1993 and attracted top-ranked tennis stars. Although the tennis enterprise was not officially part of the firm's operations, Gerry Weber was the number one sponsor. The Open served as a vehicle to further publicize the Gerry Weber brand--the firm noted that brand awareness rose from 14 percent pre-Open to 30 percent after the broadcast of the second Open. Meanwhile, ongoing construction over the next few years transformed the site into an all-around sports resort with a golf course, soccer field, hotel, spa, and fitness center. Weber developed a morning routine where he got up at five o'clock to play a round of golf on his course before heading in to the office nearby.

The company-owned factory in Portugal was finished in 1993, leading to the closing of the manufacturing facility in Paderborn. A small amount of domestic production was still centered in Halle. At the start of 1994 Gerry Weber introduced a fourth label, dubbed "Samoon" after an Arabian desert wind. The Samoon collection aspired to provide young-looking, fashionable attire for large sizes. Like the other three labels, it had a distinct identity with its own independent team of designers. The Samoon line sold DEM 31 million in its first year alone.

New Retail Strategies for the Late 1990s

In the second half of the 1990s Gerry Weber turned its attention to finding the optimal retail strategies for its brands. Weber's early experience as a clothing retailer had convinced him that shops needed to offer well-organized, focused collections, rather than trying to cram several different lines into a small space. In order to promote this approach at the stores selling Gerry Weber brands, the company introduced the "shop-in-shop" system on a trial basis in 1996. The firm partnered with 50 German fashion houses who agreed to set aside 100 square meters of selling space just for the Gerry Weber label. The company offered its retail partners support in the form of an advertising package, twice yearly training, and a special division devoted to filling the shops' merchandise needs. In another step to accommodate retailers, Gerry Weber began presenting monthly rather than quarterly collections starting in the fall of 1996 for all three labels except Etienne Aigner. Under the motto, "the right goods at the right time," the more frequent collections ensured that the shop-in-shops could offer a full, changing selection year-round.

Gerry Weber launched a fifth label, Court One, in the fall of 1997. This was a casual collection created to take advantage of the firm's sporty image, since the Taifun label had evolved into business attire. The next year the shop-in-shop system was extended to the Taifun, Samoon, and Court One brands. By that time, there were about 270 shop-in-shops open in Germany. The company planned to implement the concept internationally as well. In particular, several dozen shops were opened in the Middle East in the late 1990s. The shop-in-shops contributed to ever increasing revenues at Gerry Weber. At a time when the fashion industry as a whole was stagnating, Gerry Weber's annual sales rose to DEM 516.5 million (EUR 297.5 million) for 1998.

With the shop-in-shop network firmly established, Gerry Weber moved its retail engagement to a new level in 1999 when it opened the first House of Gerry Weber in Bielefeld. This store was devoted exclusively to Gerry Weber products and carried a full selection of all the company's brands. The Bielefeld store was located in a former movie theater, which allowed for visually impressive apparel displays. The company also operated a small bistro next to the store. Two more Houses of Gerry Weber opened in Paris and Hamburg over the next year. The fourth House of Gerry Weber was opened in 2001 on the Kurfürstendamm, Berlin's upscale shopping and entertainment street. This store was located on the former site of the famous Café Kranzler, for decades a place to see and be seen after a day of shopping. Gerry Weber planned to sell cake and cocktails next to the historically protected café rotunda. The Gerry Weber Retail GmbH subsidiary was founded to manage all retail activities.

Expansion Despite a Slowdown: 2000-04

The company's next expansion came in the area of licensing. In 2000 the Gerry Weber brand granted licenses for shoes, eyewear, and handbags, with jewelry and watches soon to follow. The idea was for the firm to become a "lifestyle company." The Gerry Weber Open was still an annual destination in the pro tennis tour, and the stadium was used for concerts and other large events as well. Weber's twin sons Ralph and Udo were now active in the family business. Ralph managed the hotel and sports park, while Udo was in charge of marketing the shop-in-shops and Houses of Gerry Weber.

In the fall of 2001 Gerry Weber introduced the Yomanis label. This new brand was intended to replace the Aigner brand in the premium apparel segment. Although Aigner was selling well, Gerry Weber decided not to renew the Aigner licensing contract so that it could create its own exclusive label. Yomanis was the main focus of marketing at that year's Open. Neither of Gerry Weber's two newest labels, however, performed very well. The company's upward trajectory finally hit a bump in 2002 when annual sales remained flat at about EUR 395 million. The following year, as a depression in consumer spending continued, sales were down more than 10 percent. Both the Yomanis and the Court One brands were discontinued after the 2003 spring/summer collection. The Court One label was to be rolled into the core Gerry Weber label. That same year, the firm carried out a critical examination and restructuring of its production processes. About 350 positions were eliminated, many of them related to the closing of factories in Portugal and Tunisia. The company's recently built factory in Romania was now the most important production site.

Despite the slight drop in sales, Gerry Weber planned to go ahead with expansion plans. A Gerry Weber fragrance and line of body care products was expected to be introduced in 2004, based on a licensing contract signed with Cosmopolitan Cosmetics two years earlier. There were now over 50 Houses of Gerry Weber and 600 shop-in-shops. The company planned to increase the number of shop-in-shops to 1,000, concentrating on expansion in foreign markets such as Eastern Europe and China. The core label had been segmented into a "vertically structured" brand that offered clothing for all price brackets under different sublabels, including Gerry Weber Edition, Gerry Weber Sport and the "aggressively priced" G.W., which was expanded to all venues after being available only at the Houses of Gerry Weber for the past two years. The company planned to rely on its established labels and the reputation of its core brand to support growth no matter what economic challenges the future held.

Principal Subsidiaries: Taifun-Collection Gerry Weber Fashion GmbH; ha-we-modelle GmbH; Gerry Weber Life-Style Fashion GmbH; First Class Fashion Bekleidungs-GmbH; SAMOON-Collection Fashion-Concept Gerry Weber GmbH; Gerry Weber Far East Ltd. (Hong Kong); Gerry Weber Fashion Outlet (Spain); Gerry Weber Service International; Gerry Weber Retail GmbH; Gerry Weber Beschaffung Osteuropa GmbH; Gerry Weber France S.A.R.L.; Gerry Weber Tunesia S.A.R.L. (Tunisia); Gerry Weber Dis Ticaret Ltd. (Turkey); Gerry Weber Support S.R.L. (Romania); Hawe Textil SRL (Romania).

Principal Divisions: Gerry Weber; Taifun; Samoon.

Principal Competitors: Hugo Boss AG; Esprit Europe; Marzotto S.p.A.; Calvin Klein, Inc.

Gerry Weber International AG History

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Key Dates:

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