Garan, Inc. - Changes in the Late 1990s and Beyond

Changes in the Late 1990s and Beyond

Competition remained fierce in the apparel industry well into the late 1990s and beyond. Garan continued to rely heavily on its relationship with Wal-Mart and its other large customers to shore up sales and profits. In 1998, Apparel Industry Magazine named Garan as one of the top eight most successful apparel manufacturers in the industry based on profits, a sure sign that management's efforts were paying off. Indeed, the company forged ahead creating a strategy focused on remaining competitive in the early years of the 21st century. Sales in 2001 reached $257 million, an increase of 8.9 percent over the previous year. Net earnings rose as well, climbing from $17 million in 2000 to $22.6 million in 2001. The company decided to phase out its professional sports team and college and university licensed activewear that year.

During this time, Garan management began laying the groundwork for a major change that would secure a financially sound future for the company. In 2002, the firm struck a deal with Warren Buffett, chairman of Berkshire Hathaway Inc. Known for his business savvy, Buffett had amassed billions over the years by acquiring shares of various companies. "Because he controls, through his company Berkshire Hathaway, one of the most liquid sources of capital on earth, Buffett has recently been able to step up and buy huge chunks of American businesses, especially in the hard-hit sectors like telecom, utilities, and energy," reported a November 2002 Fortune magazine article.

Berkshire Hathaway's holdings were diverse, proof that Buffett's interests ran across the board. The aforementioned article described the company, stating, "It is a conglomerate with sizable operations in insurance. It holds large stakes in giant American companies such as Coke, Gillette, and American Express. Berkshire also controls a significant utility and gas pipeline business, and it owns an amazing cornucopia of mundane operations—things like furniture retailers, jewelry shops, and shoe factories." As such, industry observers were not shocked Berkshire Hathaway announced its acquisition of Garan in the summer of 2002.

Buffett made a $60 per share cash offer for the firm, believing it would fit nicely into Berkshire Hathaway's apparel division along with Fruit of the Loom Co., the underwear manufacturer purchased earlier in the year. Garan management agreed, and the acquisition was completed in September. The company remained intact with headquarters in New York. Seymour Lichtenstein remained at the helm, confident Garan would succeed in the years to come as a Berkshire Hathaway subsidiary.