Owners Box Stuart Weitzman Cut 3
[00:00:00] Peter Baumgarden: In the 2012 Footwear News Lifetime Achievement Award, Beyonce said this about today's guest. My performances can last more than two hours sometimes, so I need comfort as well as style. After countless tours and TV specials and concerts, I have literally danced a thousand miles in his beautiful shoes.
From stage to red carpet to everyday wear, He's added comfort and style, not only to my lifestyle, but to many women around the world. Let's fast forward a decade. It's December 2023. We are in the tail end of the regular season of Kansas City's eventual Super Bowl winning campaign. The Chiefs are playing the Green Bay Packers at Lambeau Field.
All eyes are on, you got it, Taylor Swift. There to cheer for Travis Kelce. And what is she wearing? A pair of Stuart Weitzman boots. Writing in Who Wears What in 2019, one celebrity stylist put it this way. If you were to take a peek into any celebrity's closet, [00:01:00] I'm 99 percent confident that you'll find a pair of Stuart Weitzman shoes.
From the sleek clinger ankle boots we're seeing everywhere this season, to the nudist heels you can spot on red carpets, the brand is a celebrity favorite no matter the occasion. Lorde. Gigi Hadid, Jessica Alba, Blake Lively, Selena Gomez, the list goes on. So how did Stuart Weitzman build this company and what can we learn about owner strategy from the various twists and turns from this brand's evolution over time, bringing you insights on ownership from Wash U's Olin's Koch center for family enterprise.
I'm your host, Peter Baumgarten, professor and director of the center today on the owner's box. We talk with Stuart Weitzman about models of ownership in fashion. We learn what he learned about taking investment and the eventual transition of his company to a coach and tapestry product. 
[00:01:49] Stuart Weitzman: I started it small because I did not, I did not want an investor.
I don't know. I just didn't have, I don't know how you take in [00:02:00] someone else's money. They then don't work for you and then they get the same dividend maybe you get. I don't know that I, that would have. led to a good night's sleep. So I stayed away from that. I also didn't want a bank on my neck who was going to make, force me to make decisions that I wouldn't make otherwise.
So I just grew internally with our prophets. Um, and that was how some, some way, the way I always grew up and always thought. I met my wife, truthfully, Was the last of her friends to move out of an apartment into a house Because I wasn't getting a house till I could buy it without a bank 
[00:02:38] Peter Baumgarden: This is Stuart Weitzman while this name is now synonymous with celebrities donning shoes to red carpets or sometimes cold December football games Stuart's story starts with a very different feel in the 1950s his father Seymour Weitzman founded a shoe manufacturing company in Haverville, Massachusetts called Seymour shoes Given some interest in joining the family operation, [00:03:00] Stewart left home to study business at the Wharton School of University of Pennsylvania before joining Seymour's after graduation.
By the late 1960s, Stewart and his brother had begun to put their unique fingerprints on the family operation. 
[00:03:11] Stuart Weitzman: I ran it as CEO. My background in university had been business oriented. And I ran it as chief creative director because I had always been a designer and an artist and made things. I was very good with creativity in that regard.
I kept both jobs. And that grew. And as it grew, uh, I thought someday I guess I have to let one of them go if we get so big and so many divisions of people. But I knew I'd never let go of the creative side because that was the heart of a product. I had seen so many successful fashion companies flounder when the head designer was gone.
And it takes years for them to get it back if [00:04:00] they ever do. And they can only come back if the brand has is so strong that it's still in the marketplace, even though it doesn't have the same cachet. So I didn't want to run that risk. I created everything and I just hoped and prayed that I would be healthy enough so that the day.
To sell it and pass it along to someone else, um, I'd still be around and we wouldn't flounder. And I was lucky in that regard. But, you know, you only play poker with God with so many hands. So the time came that, uh, you know, not to risk another hand and I looked for a home for the company. 
[00:04:36] Peter Baumgarden: By the early 1970s, in part due to the changing nature of shoe manufacturing in this country, the family decided to shut down the business.
End of story, right? Not quite. With the center of shoe manufacturing migrating to Europe, Stuart Weitzman joined an American firm and was tasked with launching a new product line. In 1986, he bought the division of that company and branded it under his own name. Having started [00:05:00] with his father's craft and then refined it in work with the new organization, we now have the skills that act as the genesis of a new organization that led us to Beyoncé, Taylor Swift, and others.
Following Stewart's story from here requires paying attention to shifts of who is in the owner's box and what that means for company behavior. In 2005, he took on a minority investor, Irving Place Capital, with a 40 percent share. This allowed him, amongst other things, to maintain control. Here is Weitzman on the minority partnership.
[00:05:27] Stuart Weitzman: No, no, no, no. I never, I never took on investors. I, I took on, a venture capital firm, but that, in my mind, it was an insurance policy, um, just concerned about who's going to follow me if they had an insurance policy to protect on that, you know, key man, um, sort of like I had with them. And then, uh, I just ran it until I thought there's a company large enough and successful enough in its field of fashion that they could run an entrepreneurial business.
[00:05:59] Peter Baumgarden: In [00:06:00] 2010, Stuart Weitzman, the company entered into an agreement with Jones Apparel Group, which initially bought a majority stake of 55 percent for 180 million. The remaining 45 percent was bought two years later for 275 million. On a company total revenue of 300 million. Here, Stewart reflects on the reasons behind entering into the initial purchase at less than the full ownership.
[00:06:20] Stuart Weitzman: No, I didn't exit. I sold 55%. Because I wasn't sure. I wanted to be sure. And I kept 45. They put no one into the business at all. Which, in the end, bothered me. Um, We had a, an agreement. They decided to liquidate. They were selling for nine. A venture capital group came along and said, we'll give you fifteen for everything.
Because we know where we can get rid of this and sell off that and close down that and keep two or three, um, and they decided to make that sale. And actually he liked that idea. [00:07:00] And he did it with me and one other firm that was part of this so called fashion conglomerate. Um, and I insisted on the company that it should go to if they were willing to buy.
And they did. And actually that was, um, at 80 percent of what another company in fashion offered. But it was, it was the security, I thought, with this other firm that would be long lasting and there was a greater risk with the guys who were willing to pay more money, and to do so they were going to take debt.
That was out of the question. 
[00:07:38] Peter Baumgarden: After the sale, Weitzman agreed to continue as its executive chairman. The newly organized enterprise was not as fruitful as it might have been, and a later group, Sycamore Partners, came in to buy and then carve up the broader Jones Group. This meant that Stuart Weitzman, the company, needed to find a new home.
In 2015, Coach, now Tapestry, a family of luxury brands, purchased [00:08:00] the company for 574 million without adding any extra debt, and Stuart stayed on for another year. So what started as a son and his father's company, Seymour Shoes, Stuart's journey takes him on a path towards creating and running a new firm, in part out of the legacy of these initial learnings.
That project is now the iconic Stuart Weitzman Company, one part of a family of luxury brands stretching around the globe. That's a big shift, but a shift in terms of what in particular? Given that this is a family enterprise center, let me start there. What does it mean for the Stuart Weitzman Company, or early on, his family's company, Seymour Choose, to be a family business?
When Seymour started it, we would likely think of that as a startup, a founder led firm. Seymour, then, was an entrepreneur. But what about when his sons joined? Was this the moment it became a family business? Importantly, for Stuart and his brother, were they not entrepreneurs just because they weren't there from the start?
I bring this all up to say that the lines between a startup and a small business, or a founder and a [00:09:00] family, are not nearly as clean as we might think. In fact, many times, the skill sets overlap. Let me make one other related point on why it's hard to understand ownership, this time by looking inside the business, not just from the top.
Here, Stewart talks about some of their mission critical, small, family owned suppliers, a set of individuals in many ways far removed from their eventual celebrity customers. 
[00:09:23] Stuart Weitzman: So they would make for other people, and um, very early on, fortunately, I learned a lesson. I was in a factory that was making shoes for me and three others.
I got a wonderful reorder. from Neiman Marcus, and they needed it in five weeks. And they said to me, we have to make these shoes for X, Y, and Z, and we can give them to you in eight weeks. That was it. You know what I did? Bought a factory. And every factory I used, until I sold it to these people, only made Stuart Weitzman shoes.
Whether we owned it, [00:10:00] or made a deal with them for exclusivity in manufacturing with a guarantee of orders. Yeah. And that no one else did. 
[00:10:08] Peter Baumgarden: As for what made the companies different? 
[00:10:10] Stuart Weitzman: Okay. There's one overriding factor. If the factory opened at eight and the owners were there by nine, and if the factory closed at seven, because in Spain they had that two and a half hour siesta, so it's a different, and the owners were gone at six, I did not even consider making a deal with that factory.
I only made a deal where, where the owners were so committed to their business that they had to be there. When the door opened, and they had to be there to clean things up when it closed. Now these are, these are suppliers. Remember, we may have owned a piece, but they were suppliers. 
[00:10:55] Peter Baumgarden: The world of fashion is filled with many of these artisanal suppliers, even for [00:11:00] large corporate players like Tapestry.
In St. Louis, one organization heavily involved in this work is the non profit Nest, started out of Wash U by Rebecca Van Bergen and run in partnership with her husband Chris, the company's CFO. Nest works to train and support artisans and makers by ensuring transparency in the ethical practices of these firms, and giving them access to supply opportunities with groups like Crate Barrel, West Elm, Kenderscott, and Tory Burch.
The company works with artisans in 123 countries and in every U. S. state. These are the kinds of individuals and organizations that touch a product far before it hits the red carpet. As for Stuart Weitzman, the company, even with its current ownership by Tapestry, 37 percent of the brand's total units come from three principal vendors in Spain, something very much in line with Stuart's initial vision.
In the next section of the podcast, we revisit how one chooses who joins in the box. It's implications for the company's operations and culture and the communities these businesses sit within. 
[00:11:59] Jennifer Wintzer: Here at the Koch Center, [00:12:00] one of our central areas of research this year is a project with the Brookings Institution.
We focus on the transitions of family held firms, whether that is the decision to keep in the family or to navigate some of the transitions that Stuart mentions here. These transitions matter a lot. In the U. S., close to 60 percent of employees are working in a family owned business. These firms form the fabric of our communities.
So what happens when these transitions happen? We have a lot of stories on what we think happens, but not nearly as much data. As a university research center, we are also grateful to do this work in partnership with our wonderful students. The Koch Center is committed to expanding opportunities for our students to not only participate in research, but be shaped in work alongside practitioners, what we call our Practice Scholars Program.
With our practice scholars, we make WashUOLE in a place to learn how to be a strategic owner. This summer, we have two amazing students, one BSBA and another MBA, Kate Kirchdorfer and Jessica Topp respectively, helping us explore these [00:13:00] issues and more. If interested in learning more of this work, please sign up for our newsletter at familyenterprise at wustl.
edu. That's familyenterprise at w u s t l dot e d u.
[00:13:15] Peter Baumgarden: For many organizations, the owner's box is neither singular or stable. It shifts, it evolves, and these points of transition can have a significant impact on a company's operations. We talk a lot about what it means to be a strategic owner in this podcast, but when multiple parties are involved, it's more like a choreographed dance than a solo performance.
Collaboration isn't easy. This means that the choice of partners is key. Here, Stewart reflects on the advice he would give to an entrepreneur wrestling through whether to take on a capital partner. 
[00:13:46] Stuart Weitzman: I guess it's how you can, uh, cope with whatever your conscience, the way your conscience will see it. I couldn't cope with debt, so, or a partner, even minority, so I didn't look for money [00:14:00] from them.
And I, I was young, I was really young, um, and I had 30, 40, ended up being 46 years of career ahead of me. Uh. Yeah. I didn't see any need to double and double and double and double and look for another business to add to it. No, I wanted to build the best shoe company I could in women's wear. Um, not parcel out my, uh, my talents into other products at the time.
Um, and I just grew slowly, 10, 15 percent a year. And you know something, you invest in something that grows 15 percent a year, you can't imagine what it ends up at. And really, I had, and I didn't think of it that way, it was never an economic issue for me. I really want to make that clear. It wasn't because I thought I would make more money from it.
It was because I wanted to absolutely control it and I didn't want to have to worry about how I was supporting someone [00:15:00] else's investment. So, if I didn't take a nickel out of a company for 10 years. That was fine with me. And other investors don't put in money for that reason. They don't, because they don't have the passion and the love for it that the founder does or the entrepreneur does.
I had that. How are we going to ever agree? The best way is not to put myself in that position. Now, for someone else, so many people look for angel investors they call on and why they put the word angel on them. Sometimes they're devil investors, as you know, from your experience, but, um, yes, they want to do something.
They don't, they don't, they want to do it right away. I tell them no. 
[00:15:43] Peter Baumgarden: What you hear from Stuart is that one way that co-ownership matters is in different return expectations or even time horizons. Not all investors are the same. A 25-year-old, fresh out of undergrad, I might have a risk to return ratio that looks very different from my 65-year-old [00:16:00] co-investor, just about ready to enter retirement, or an institutional investor looking to aid returns for a pension fund.
Keeping control, for Stewart, allowed him to identify the kind of growth he felt he could manage, all while retaining the fabric of the firm. Stewart's point is a great one to emphasize. I think too often in a world of start ups, people brag about how much money they raised. But put another way, every dollar raised is a fraction of the company you gave away.
A boast in one form, a regret in another. The other thing that happens with consolidated ownership Is control on how you want the company to run both culturally and in operations. Here's Weitzman again, reflecting on the original setup and where he thinks it's changed. Since ownership has adjusted. 
[00:16:42] Stuart Weitzman: Each area of the company was run as a separate company, as if it was on its own.
Of course, it was all part of Stuart Whiteman holdings and the whole umbrella, and these people shared a bit in, in the final sale 'cause they stayed with me. That [00:17:00] was a mistake that that coach made. They didn't realize that not just I was retiring ten of my key people because they'd been with me from the beginning.
They left within two years too. Um, and that's been an issue for them trying to replace that. Uh, but that's, that's the way I did it. I didn't, I didn't have outside directors. I mean, we paid a lot of attention to customers, um, to heads of department stores, especially we paid attention to the coolest boutiques in New, in America and Europe because they know they run circles around the buyer of Saks Fifth Avenue.
I will say that the, the, the, the kid who ran and owned Jeffrey's on, uh, uh, in Chelsea ran circles around. I, I'm, I gave my name, uh, to one store in New York called Scoop, with their name on it, so it was Stuart Weitzman for Scoop, the only store I did that with, and I did it because they were so prestigious that if Stuart Weitzman's in [00:18:00] Scoop, it's like, wow.
The head of SAC said to me, why don't we have any of those shoes I just saw in Scoop? This is like, not the tail wagging the dog, an earlobe, for God's sakes. She's doing 20 million and they're doing 4 billion. Um, so I paid attention to them. They were my board of directors. And then I invented wonderful ways to determine, this is very hard, to editing your product, especially when you're the father of it, like I was, designing 300 shoes, which are the best ones.
I mean, how do you throw, if you have 300 kids, you can't throw any of them out, right? I needed the rest of my team to, it was painful to see some go, but we, uh, I really created it. A, uh, a system to determine which are going to be the best sellers at retail the season before they hit the stores. That's like having [00:19:00] next year's almanac.
And I'm telling you, we had it. It worked. It got to the point where the buyers would come in and say, what are the first eight shoes we should buy before they started looking at the line for their own taste. So if you can come up with that, if you can keep that and, and use it to build iconic items, uh, I mean, you know, windows.
You look at Windows 1 and Windows 16, you wouldn't know, why do they have the same name? But they have the same name. Because Windows is iconic to Microsoft, right? And as Chanel No. 5 is, probably doesn't smell anything like 60 years ago when it was created. But these are the iconic things, and all these creative people that I hired, they thought that way.
We never, ever took the road to the finish line. That led to the finish line. We took circuit circuitous roots around and had so much fun and CRE got so much attention because of [00:20:00] it. And it was be, it was, the reason it worked is everyone we hired got trained that way. I never took people from big companies.
I thought they're gonna take me too long. I took people, I took a lot of design school people who turned out, by the way, to be the best entrepreneurs because this, the imagination and creativity, if you lead them that way, they have it naturally. Whereas maybe a, you know, a businessman at a Wharton or whatever, or Olin, they're following the book you taught them.
[00:20:32] Peter Baumgarden: But is moving away from the practices that Stuart names progress or regress? This all dovetails with some interesting research around ownership done by the economist Nicholas Bloom at Stanford. Some of Nick's work looks at professionalism of firms run with a tool called the World Management Survey. In this work, researchers go around and explore the management practices of different kinds of industries, different countries, and distinct ownership models.
Some practices are seen as being more professional than others. [00:21:00] Specific to family firms, in aggregate, Bloom's research finds that the order of professionalism from top to bottom goes like this. First, public companies. Second, private equity backed firms. Third, family owned but professional operations.
After government run entities and a few others, you get to the bottom of the list. This includes family owned, family led firms, which some of my colleagues hate to hear, and founder led firms, which the entrepreneurs especially hate. But the real challenge is knowing when, quote, professionalism is pure gain in performance, and when, instead, it means losing something of what made the organization special in the first place.
It's not hard to imagine a financial engineer trained in one particular school of thought who can't understand the magic of something that comes from outside their business textbook. So they buy and then replace what is foreign. But might something be lost here? Is there an importance in maintaining some of the methods from the original company?
Here Stewart reflects on some of those differences. 
[00:21:59] Stuart Weitzman: [00:22:00] Corporate mindset should not buy entrepreneurial businesses. I'm convinced of that. I've heard too many bad stories about it, including mine. They shouldn't. It's a different approach. Listen. I had. Five people in my design team and two analysts. They have 12 analysts and two designers.
What's important to them and what was important to me. And we, six years later, they do half of what we did. It's a different mindset. It works for Häagen Dazs because it's one product, you know, and, and it works, I guess, for cups or whatever, or steel rods or whatever. But something that changes every three, four months, not 100%, but say 40 percent of the product mix has to change to stay active and alive.
They can't, they're too slow. They, the corporate mindset is, it needs time. It really does. Uh, my turnaround was six weeks from a hot idea to offering it to [00:23:00] my customers. Theirs is seven months. They're designing 2025 winter collection when 2024 hasn't come yet to tell us what maybe is new that's hot.
Depends how big you want it. I was happy at five, five hundred million dollars worth, where 20 percent net profit is. Industry, not just me. What am I going to do with all the money? I'm giving it away. Believe me. That's what I'm doing with it. But it wasn't about that. No, it's, uh, yes, if you want to be a big, I had a CEO for a while when I sold a few percentage to this venture capital firm and he wanted a CEO.
I said, okay. So I became what they call executive chairman. I had never heard of that title name. Tell me it exists. Okay. And. After nine months, he was gone, and I said to him, All these things you said that were wrong, look how well they [00:24:00] are. He says, Stewart, If I had been running this instead of you, I would be at the same volume you're at.
I just would have done it a different way. I said, what do you mean? He says, I would have bought two or three companies. You're not who you are, and I wanted to sell this business. If I were in bags, sunglasses, accessories, and leather goods, a buyer comes in and says, well, they're already in all these fields.
What can we add that's new? I remember what the coach people, the CEO coach said, You have a goldmine here, Stuart. We're going to do two, 3 billion in five years because we're going to go into bags where geniuses at bags. We're going to do sunglasses. We got sunglasses in all our store. I left that. It was a strategic decision to concentrate my talent on one field and leave the others available.
To water the mouths of potential [00:25:00] buyers. That was absolutely not by accident. 
[00:25:05] Peter Baumgarden: The composition of the owner's box can also be designed with an eye to add voices necessary for the next phase of growth. For example, the Stuart Weitzman of today has 90 plus stores, only 36 of which are in the United States.
The capability and capital for that kind of growth might be held by a different owner. This is the case in whether you are selling something or even if passing from one generation to another. The next generation, or next owner, might have capability not present in those holding it now. And so, this is ultimately Stuart Weitzman's gift to us.
There is hard won wisdom gained by an entrepreneur who has gone through all these different shifts in and around the owner's box. Two sons brought into their dad's company. A family going through the process of selling as the broader economy shifts. Time spent as an employee, all leading up to a decision to buy a product line he was involved in building.
The decision to use that opportunity to build upon an initial [00:26:00] family legacy by imagining a new firm, sitting under the new Weitzman name. An entrepreneur, who, though realizing the power of control, ventures into minority investment and majority owners, realizing that different partners can bring on different capabilities.
And finally, a decision to sell the iconic fashion company to Coach in part because of their commitment to run it in the way that he would, without taking on extra debt. Yes, Stuart's wisdom comes from knowing how to navigate major transitions. At the very tail end of our meeting, I asked him again, if you had a company doing a half a billion dollars of business and you wanted to exit, for whatever reason, how would you suggest they go about it?
Here is how Stuart responds, with insight garnered from his own experience and from watching similar transitions across his industry. 
[00:26:45] Stuart Weitzman: You need a lot of support from banks. Um, too many businesses in the fashion field have gone out because of debt. First one that I saw was Halston. It was a grand, grand American brand.
And [00:27:00] uh, he sold it to Norton Simon. Norton Simon took out all the money, put in all the debt, it was gone in seven years. Um, happened to the first sale of people I made. Nine West was their main shoe company. Sycamore took out all the money. Nine West took on one point something billion in debt. It's still in the courts because they're claiming there was fraud here.
But anyway, um, yeah, there are, if it's small, you can do it. If it's, you know, 50 million, you can get it, you can get that risk with employees. Um, if employees can find investors, Not banks, because banks want their money back, investors may not get their money back, and they know it, so it's a different attitude.
That's okay. It wasn't for me, but it is for most of the world. I know that. I mean every school even has programs giving out money for startup companies.[00:28:00] 
It's a different approach. I can't advise on it because I didn't do it, and I, and I was Uh, not interested in doing it. It's not that I didn't, it's just I wasn't interested. I preferred, I mean it took 46 years to get to where it was, but that's a different attitude. 
[00:28:19] Peter Baumgarden: As always, thanks for joining today's episode of The Owner's Box, the show where we explore what it means to be strategic from the position of company ownership.
In our next episode, we will hear from two brothers who started a wine and hospitality business together, and what they are learning as they go into an industry filled with multi generational family vineyards. If you haven't done so already, please subscribe wherever you get your podcasts. Apple, Spotify, Overcast, or others.
Many thanks to our creative producers, Jennifer Wintzer and Austin Allred, for all they do to support this work. Until next time.