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Wilsons plans to revitalize Wallet Works

By DONALD FINLEY

Reprinted from Value Retail News

Wilsons recently purchased Wallet Works at a bankruptcy sale and plans to expand the chain.

Wallet Works has been a financially sound outlet chain since its first store opened more than 15 years ago, but its future became doubtful in March after its parent company, AR Accessories Group, filed for Chapter 11 bankruptcy in federal court in Milwaukee.

To the rescue came Wilsons The Leather Experts, which purchased the Milwaukee-based Wallet Works retail chain (separate from the manufacturing operations of AR Accessories) for $5.2 million at a bankruptcy sale May 6. Wilsons, a leather manufacturer and mostly full-price retailer, plans not only to keep the existing 40 Wallet Works outlet stores, but to more than triple their number.

"We did not purchase Wallet Works to liquidate it," said Joel Waller, CEO of Brooklyn Park, Minn.-based Wilsons. "We want to grow our market penetration. I believe Wallet Works is at least a 150-store concept, maybe more."

He said he plans to begin talking soon to developers about sites for new Wallet Works stores, which have sold the Amity and Rolfs brands of wallets and other leather products. The existing Wallet Works stores in outlet and other value-oriented projects are in 20 states from coast to coast. They generally range from 1,200 square feet to 2,000 square feet.

As of presstime no decision had been made on whether the Wallet Works name would be retained for the outlet chain, Waller said. To a degree, the two leather retailers complement each other: Wallet Works sells mostly wallets and other small accessories, while 75% of sales by Wilsons are leather clothing.

Wilsons, a $420 million per year company, operates 459 full-price stores, including 24 small airport stores, plus 11 Wilsons Leather Outlet units. Seven of the outlet units are in Arlington, Va.-based Mills Corp.'s megamalls: Arizona Mills in Tempe; Franklin Mills in Philadelphia; Grapevine (Texas) Mills; Gurnee (Ill.) Mills, Ontario (Calif.) Mills; Potomac Mills, Prince William, Va.; and Sawgrass Mills, Sunrise, Fla. Two other units also are in megamalls: Columbus, Ohio-based Glimcher Realty Trust's SuperMall of the Great Northwest in Auburn, Wash., and Hollywood, Fla.-based Michael Swerdlow Cos.' Great Mall of the Bay Area in Milpitas, Calif. The other two are freestanding units in Burbank, Calif., and Warwick, R.I.

The Wilsons outlet units are larger than Wallet Works stores, ranging from 3,000 square feet to 8,000 square feet.

Wilsons manufactures about 85% of the men's and women's outerwear, handbags, purses and other leather product it sells at retail. One out of every six leather coats sold in the United States is from Wilsons stores, according to Mr. Waller.

Wilsons does not own any manufacturing plants, but subcontracts with factories in China, Korea, India, Pakistan, Indonesia and several South American nations.

Tandy Brand Accessories, a $123 million per year leather goods manufacturer and wholesaler based in Arlington, Texas, bought most of the remaining assets of AR Accessories for $18.55 million. These assets include the bankrupt company's machinery, equipment and real estate at its West Bend, Wis., leather goods manufacturing and distribution facilities, as well as its customer lists, patents and brand names. Tandy officials indicated they would continue the Amity and Rolfs brands.

Brown Deer, Wis.-based AR Accessories earlier this year shut down its manufacturing plant in West Bend, but the distribution facility remained in operation.

AR, formerly called Amity Leather Products, was founded in 1907 by Robert H. Rolfs and remained a family business until a leveraged buyout in 1992 by the J. H. Whitney Group, New York City, and Greylock Management Co., Boston. The new owners changed the name to AR (for Amity and Rolfs) Accessories.

AR has operated an Amity-Rolfs factory store at its West Bend plant since the 1950s, but the first Wallet Works outlet store was opened in Raleigh, N.C., in 1982. Wallet Works operated 70 stores at the end of 1997 before closing 20 of the lower-performing units this year because of the parent company's financial problems.

Several creditors and fired former CEO Lawrence Slowik filed court claims against AR Accessories, which court records show listed debts of $70 million and assets of $62 million.

Part of AR's financial problem may have been slowness in moving AR's production facilities offshore.

"It's tough for anyone who stays in the United States to compete on wages and other production costs," said Mr. Slowik, who was dismissed in March. "We were partway through the process of moving offshore, mostly to China and India, when the company went bankrupt."

Mr. Waller said Wilsons plans to retain the 200-plus employees in the Wallet Works stores, but decisions had not been made at presstime about whether to keep a five-person corporate staff at Wallet Works headquarters in Milwaukee, including Gene Sedli, vice president of retail.