Mitchells Acquires Wilkes Bashford

The Mitchell family is now wearing a new hat — that of a white knight. Late Monday night, the Mitchells, operators of the largest family-owned specialty store in the U.S. with sales of $100 million, inked an 11th-hour deal to acquire the assets of Wilkes Bashford, which simultaneously filed a voluntary Chapter 11 petition. The deal by Ed Mitchell West LLC is for $4.6 million in cash and is subject to higher offers and bankruptcy court approval. A contingency of the sale is that the purchase be completed by Nov. 30 in order to maximize business during the holiday selling period, according to Bob Mitchell, co-president of Mitchells.

The San Francisco-based Wilkes, a men’s wear institution that opened its doors in 1966, operates a seven-story flagship on Union Square as well as a store in the Stanford Shopping Center in Palo Alto, Calif. At the end of last month, the struggling Wilkes closed its store in Carmel, Calif., and, the month before that, a Mill Valley, Calif., unit also was shuttered.

If its offer is successful, the Mitchell family, which owns Mitchells in Westport, Conn.; Richards in Greenwich, Conn., and Marshs in Huntington, N.Y., would gain a beachhead on the West Coast and immediately make it a formidable force within the luxury men’s wear community in San Francisco and the surrounding area.

“The best-run family-owned specialty store business has just gone national,” said Allan Ellinger, partner in Marketing Management Group. “This is fantastic. If anybody can make economic sense out of that retail business, it’s the Mitchells.”

Mitchell said Wilkes Bashford approached the Mitchells in August in its search for a financial infusion. And although expanding to California was not on their agenda, they decided to take a closer look at the business “as a personal favor to Wilkes,” Mitchell said.

Despite the store’s financial problems, Mitchell said he “could see it as a jewel that we felt we could polish and make shine again.” He said the company’s reputation, sales associates and “relationship with its customers and the community mirror what we do in Connecticut and Long Island. Once we put in our infrastructure — the technology, financial planning and inventory management systems — it’ll be a great combination,” Mitchell said.

Under the terms of the agreement, the Mitchells are proposing to buy the inventory, trademark and fixtures and “substantially all of the people.” Wilkes Bashford himself will continue to be the face of the store “in front of the customers and the community.” Although the Mitchells are not assuming the firm’s liabilities, Mitchell said his family believes “we can provide a future for the business going forward.”

As hands-on operators, the Mitchells will move one family member to San Francisco to run the store on a daily basis: Tyler Mitchell, currently vice president of men’s buying and furnishings, will take the plunge. Jack Mitchell, Bob’s father and co-chairman, along with his son, Andrew, vice president of marketing, will spend two weeks at a time at the store during the transition, Bob Mitchell said. The buyers — both men’s and women’s — will travel between the two coasts as needed, he noted. “As challenging as our business has been in Connecticut and Long Island, we have the manpower to do this,” Mitchell said, noting sales have “shown some signs of life” in October. “We decided to stop playing defense and start playing offense.”

Mitchell acknowledged entering the competitive San Francisco market will be “a new adventure for us, and we’re not taking it lightly.” He expects that the family will learn a lot about the differences between the two coasts, but that there is “enough overlap” to make the pairing synergistic. Nearly all the major vendors are the same, he said, although Wilkes’ mix is even more upscale. “Zegna is their opening price point,” Mitchell said, “and Brioni and Kiton are their two most dominant brands.”

If the Mitchells are successful in gaining control of the store, Mitchell said there are no plans for any major merchandising changes right away. “The key suppliers will still be the key suppliers,” he said. However, he sees women’s wear, now one-third of Wilkes’ sales, along with jewelry, to be opportunities for growth.

Bashford himself said he was “excited” about having the Mitchells come on board. “I feel it’s as good a match as it gets. This merger would have been exciting even if we didn’t need the capital injection.”

Market observers also gave the deal a thumbs-up.

Robert Ackerman, president and chief executive officer of Zegna North America, said, “The Mitchells are great retailers and do a great job taking care of their customers. They will be very successful. Wilkes is going to be there and he understands the market and has a great eye. So it’s a win-win for the customers on the West Coast.”

According to Michael Appel, managing director of Quest Turnaround Advisors and interim ceo of Wilkes, the filing of the bankruptcy petition was needed to effect the sale since the Mitchell family didn’t want to buy all of the assets. The two stores they didn’t want have already been shuttered and neither one had met planned sales and profit expectations, he said.

Luxury sales have been tough for all luxury firms, and in the case of Wilkes, “it has been tougher for us because of our inability to fund inventory levels,” Appel said. “The company knew in the beginning of last year that it would need an infusion of capital to sustain the operation. It was able to get a lot of cost savings over the course of the year, but was unable to get the required outside capital.”

According to Appel’s affidavit filed with the bankruptcy court, Wilkes’ principal liabilities are its unsecured obligations to vendors and secured debt held by its lender, Comerica Bank, at $3.1 million. Wilkes is seeking court approval of a $650,000 debtor-in-possession financing facility so it can buy new inventory for the holiday season.

Listed as number one among the top 20 unsecured creditors is Brioni USA Corp., New York, owed $2.2 million. Kiton is second at $1.4 million. Bogner of America is third at $409,958. Ermenegildo Zegna is owed $290,234; Loro Piana USA LLC, $184,229, and Roberto Cavalli, $126,128.

In the Chapter 11 petition filed, assets were listed as between $10 million and $50 million, with liabilities estimated in the same range.