Clintotron

Senior Member
Is Dianne single? Hmmmm. Seriously, though. The words "materials sourcing" didn't sit well with me. I have one pair of AE and no history with those shoes or the company, but they're fantastic quality.


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momsdoc

Connoisseur
The comments from Caleres pertaining to AE's manufacturing ability, and Paul's comments about access to greater materials sourcing, gives me pause.

As a subsidiary to a much larger, and broader based clothing supplier, it would seem AE's corporate philosophy of quality and U.S. production will inevitably be drowned out. From his comments here and in the news, I've always thought Paul regarded AE as more a family owned enterprise despite its corporate owners. As such he has been able to keep it true to its traditions. Will the new CEO, be it Paul or someone else continue to do so? History does not give one hope.

Thankfully I have all the AE shoes and boots I will need or want for my lifetime. I hadn't planned on any future purchases, and am now glad I have oversupplied myself.

Gentlemen who have been sitting on the fence, consider 2017 your year to jump into the pond and have your fill. As for me, I'm glad my Iberian makers are still going strong.
 

SG_67

Connoisseur
This was the statement that got my attention:

"We’re also eager to explore their manufacturing resources, as we continue to focus on our ability to increase our speed to market.”

That means expanding production, which means off-shoring more of the production. I realize AE is a proud domestic heritage brand, but I'm over them. I have enough shoes in my rotation that I can look elsewhere at more interesting options. Once you've got the basics covered, AE loses it's relevance.
 

swils8610

Active Member with Corp. Privileges
To bad. AE is likely become like Florsheim, Hanover and many other long gone but not forgotten quality US manufactures.


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mreams99

Senior Member
I'm not happy to hear about a big change for a company that I appreciate. It's a little scary not knowing what changes will be made.

I think that's a key point though -- we don't know what will change. Perhaps it's premature to mourn the loss of this company. Perhaps the changes will be improvements. We just don't know.

I have decided that rather than worry and complain about changes that haven't even happened yet, I will wait to see what happens.
 

Watchman

Advanced Member
When I toured the factory about 2 years ago, they were working 6 days a week from what I remember and making about 1000 pairs of shoes/boots per day.

And there was like a war cry for more and more then...now look at them...

This really is tragic. But, I suppose we should give them the benefit of the doubt.
 

Fraser Tartan

Senior Member
I think in the next few years we'll be left with a select group of Made in USA shoes selling for $150 or $200 more than they do today. The majority of Allen Edmonds shoes will be made overseas and they'll try to sell those at current prices.

I don't think Made in USA will be going anywhere but you'll have fewer USA-made models to choose from and you'll be paying a premium. Those $395 (retail) Park Avenues will be going for $545 soon enough.
 
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Oldsarge

Moderator and Bon Vivant
There is something in the American soul that loves bad news and is always eager to make the assumption that any change will be for the worst. As a Registered Skeptic I refuse to leap to judgement. Come the day when the phrase "made in the USA" no longer appears on the AE label I will concede the jeremiads were correct. Until then, should I need another pair of dress shoes I will look first to AE. Of course, that day may be years in the future since I already have wall full!
 

harmelba

New Member
Like the rest of you, I assume this will negatively impact quality. I have plenty of their shoes to last a while, certainly long enough to hear how this will turn out long term.

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FLMike

Connoisseur
First of all, this shouldn't come as a huge surprise. Every private equity portfolio company is bound for a new owner within 5-7 years no matter what. It's just the nature of PE....AE has been an exit strategy in the making since it was bought by its current ownership.

That said, I'm not encouraged by this transaction. Caleres is a portfolio of Chinese-made, mass market footwear brands and discount shoe stores. According to their most recent 10-K, of the 47 million pairs of footwear sourced in 2015, 45 million were sourced from China and Vietnam. I sure hope they don't make any drastic changes to AE's current production model in the name of efficiencies and/or cost savings that would bring harm to the brand. Similarly, if they start selling parts of the AE line through their 1,000-plus Famous Footwear stores in strip centers and discount malls, that would likewise be very bad news for the brand, in my opinion.

I know it doesn't make sense to jump to conclusions about their plans for AE, and as others have suggested, we should problem give them the benefit of the doubt. Still, I'm not feeling real warm and fuzzy about this one. Time will tell.....
 

ErnstStavroBlofeld

Senior Member
I can see why some people sense dread at this news and tbh I'm concerned as well.

However, I have some reasons to look up in a sense as AE was already owned by another private equity firm before this deal. Furthermore, I was speaking to an AE employee that I know and he said the company's long term strategy was "to double down on the Made in America aspect. As he told me AE was expanding it's WI manfaucturing operation due to the above and generous tax and investment ncentives from the State of WI.

Which makes sense because let's be honest that's one of the few things a company in the anemic menswear business has going for it these days. Get rid of that and quality-an AE will be worthless from a financial standpoint.

Also from the macro view of things let's also remember that the US has just elected a President who has been harshly critical of outsourcing and has threatened to go after companies that do so and/or attack them on Twitter causing their value to plumment.
 

MNJ83

Active Member with Corp. Privileges
There is something in the American soul that loves bad news and is always eager to make the assumption that any change will be for the worst. As a Registered Skeptic I refuse to leap to judgement. Come the day when the phrase "made in the USA" no longer appears on the AE label I will concede the jeremiads were correct. Until then, should I need another pair of dress shoes I will look first to AE. Of course, that day may be years in the future since I already have wall full!
Has this not happened already with most of the American shoe industry? I don't think anyone is being a prophet of doom, it's just hard to imagine that Calaris, has any interest in continuing the current AE model of US made shoes
 

Oldsarge

Moderator and Bon Vivant
Attacks on Twitter dropping value? Really? I'm sorry but I seriously doubt that there is a CEO in the US that gives a rat's patootie about what The Donald says on Twitter. Carrier and Ford squeezed huge tax advantages out of the gov and still sent thousands of jobs to Mexico. There's a cartoon running around that has a little girl on her phone saying, "Trump? If I don't get a $7,000,000 bailout I'm outsourcing my lemonade stand to Mexico." That's how much his Twitter matters. Now, off all political topics and back to the sackcloth and ashes over this change of ownership.
 

ErnstStavroBlofeld

Senior Member
Attacks on Twitter dropping value? Really? I'm sorry but I seriously doubt that there is a CEO in the US that gives a rat's patootie about what The Donald says on Twitter. Carrier and Ford squeezed huge tax advantages out of the gov and still sent thousands of jobs to Mexico. There's a cartoon running around that has a little girl on her phone saying, "Trump? If I don't get a $7,000,000 bailout I'm outsourcing my lemonade stand to Mexico." That's how much his Twitter matters. Now, off all political topics and back to the sackcloth and ashes over this change of ownership.
Oldsarge,

You might want to ask Carrier, Boeing,, or Lockheed Martin about that. ;)
 

Dhaller

Advanced Member
Well, just thinking out loud:

AE was acquired in 2013 for $180mil, and has just been bought for $255mil, which would be considered a moderately good return (11-12% annualized) from a private equity perspective... but it was a turnaround situation in 2008, so factoring that in, it's advanced remarkably in 8 years.

AE has stated (in May of this year) that a core feature of it's (then) strategic plan was do shift brand direction from "established workforce" to "millennial men", in particular men entering the workforce, even going so far as to develop discounted student packages for job seekers. I would guess that this direction is of interest to Caleres, and we'll see style launches targeting that market segment.

It's hard (for me, not having a current Hoovers subscription) to find financials on AE, but Caleres enjoys a gross profit margin of 40% on total revenues, which is certainly far leaner than AE. I'm not sure what AE's total revenue is, but it was $120 million when it was acquired in 2013, so just assuming that revenue tracks paper value (a gross estimate, admittedly), current revenue may be in the neighborhood of $180-$200 million. Just jumping ahead a bit, and using retail sector P/E averages, I'd guess AE's earnings are around $8 million, giving it something like a 4-5% profit margin.

So compare that: AE's 4-5% to Caleres' 40%. Caleres will certainly discipline the AE unit to bring it in line with overall financials, which means there absolutely have to be significant under-the-hood changes at AE : new diffusion lines, cost cutting, and so on, if I had to guess.

We'll see!

DH
 
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