Loews – Bulova: ‘no guts, no glory.’

Plastered across the pages of many a magazine these days is the ad slogan, It’s Bulova time again.” Indeed, after years of steady decline, the century-old, Flushing, N.Y.-based watch brand is enjoying new life and new spirit.

But six years ago time nearly ran out for Bulova, which came perilously close to demise until rescued by Loews Corp., America’s fifth-largest holding company.

Loews, whose diversified businesses include CNA Financial Corp. (insurance); Loews Theaters; Loews Hotels and Lorillard Corp. (makers of Kent, True and Newport cigarettes), is controlled by the billionaire Tisch family. Renowned for their buying and selling savvy, the Tisch dynasty grabbed upBulova–ailing though it was–as a potential money-maker. What Lowes saw in the brand and what it did to revitalize it make a classic study in asset management.

Desperate straits: Once America’s most popular watch brand, Bulova had fallen on hard times in the u970s, during which it changed hands several times like a proverbial “hot potato.” In 1976, the giant Gulf and Western Industries Inc., New York City, sold the sagging company to Stelux ManufacturingCo. Ltd., a Hong Kong watchmaking, banking and real estate firm.

Stelux had high hopes for Bulova. But not even the installation of Stelux managing director C.P. Wong as CEO could improve Bulova’s sad financial fortunes. Wong gave up the post two years later to devote more time to his family firm. And in early 1979 he finally sold the holding to Loews Corp. for $14 million. After gaining more than 30% of Bulova’s common stock from STelux, Leows quick purchased outstanding shares from other Bulova watches stockholders. In all, Loews would spend an estimated $30 million to acquire Bulova as a wholly-owned subsidiary.

“We viewed it as a company with potential…a good long-term investment,” recalls Bulova president Andrew Tisch, 35. “A name can be magic, and Bulova’s was still good among consumers. What’s more, the stock was underpriced. We weren’t talking here about a major acquisition.”

Loews’ review of Bulova’s 10K annual report revealed that inventory and accounts receivable–among other aspects of the business–had been poorly run. Yet given Lowes’ management savvy–and its perception that the watch industry faced lucrative times ahead–the Family Tisch was confident Bulova could be turned around.

But what did Loews really know about making or selling watches? “At first nothing,” Andy Tisch admists. “Then again, we knew nothing at the start about insurance, hotels or cigarettes. As the saying goes, ‘No guts, no glory.'”

New money, new blood: The return of Bulova to American hands gave employe morale–which had been understandably low after years of shakeouts–an immediate boost. Right after the takeover, vice chairman Sol Flick, who had replaced Wong as CEO, insisted the future looked bright and that the firm would soon turn a profit. In their traditionally thorough manner, however, the Tisch family took a direct personal interest toward that end.

Loews chairman Laurence Tisch and his brother, corporation president Preston “Bob” Tisch, began holding “familiarization” meetings at Bulova’s Flushing offices. Meanwhile, Andy Tisch (Larry’s son) and another Loews vice president, Herbert Hoffmann, oversaw daily operations.

For the first eight months, Tisch and Hoffmann would hold untitled positions at Bulova while learning the business. In late 1979, Tisch became president and Hoffmann, CEO. Paul Sayegh, a Loews assistant controller, became Bulova’s controller (eventually, executive vice president). Loews executives also were put into such key Bulova slots as manufacturing vice president and personnel director. Similarly, the home office made available to Bulova any needed support service–personnel, tax accounting, real estate, data processing–along with a huge cash advance (most of which has since been paid back with interest).

Loews set up a new six-man executive committee which included the three Tisches and Hoffmann. The re-organization packed off the nucleus of Bulova’s old guard–Sol Flick included–into early retirement. One survivor, former Bulova president R. Mark Bourquin, was made board vice chairman (he left in 1981).

Numerous weaknesses: Loew’s critique of Bulova turned up myriad weaknesses: “The operation had serious quality, styling, service, delivery and promotion problems,” recalls Tisch. “It just wasn’t keeping up with the competition.” Nor had there been any previous market research or longrange planning. “The company,” he adds, “was just existing from day to day.”

For starters, Loews commissioned a $200,000 market research study consisting of telephone interviews, questionnaires and 19 focus groups involving jewelers, consumers and Bulova personnel. “The study confirmed what we already knew about the firm’s weaknesses,” says Tisch. “It also gave us better understanding of consumer behaviour and retailer attitudes.” The chief discovery was that Bulova had a trade problem, not a consumer problem.

Ambitous plans: Based on early findings, Loews/Bulova developed high-octane marketing plans for 1979-1980 and beyond:

* Reestablish Bulova superiority; double its estimated 8-10% U.S. market share within five years.

* Reinforce Bulova’s long-standing relationship with the retailr via its 175-man sales force.

* Expand Bulova production; throw the company’s strength where the unit sales were–in the $100 range.

* Promote Caravelle, especially in the “bread and butter” $50-70 range.

* Continue to stress Swiss styling and technical innovation.

To meet these goals, Loews was prepared to spend huge sums. It launched a record $10 million fall 1979 media campaign with heavy prime time TV coverage to better acquaint consumers with the Bulova name. The 1980 media budget was even bigger. Besides trade advertising, Loews came up over the next several years with myriad special warranties, exclusivity assurances and promotional incentives to impress jewelers that Bulova was back. It also worked hard to correct watch service problems, eventually cutting turn-around to about 13 days.

Yet despite the massive money infusion and overhaul, many retailers still refused to carry Bulova products. “There apparently was a lag effect between what we had accomplished and the perception many jewelers still had of us,” speculates Tisch.

More losses: Loews entered the watch industry at precisely the wrong time. Hit by a market-saturating influx of cheap Far Eastern imports and a general economic recession, retail business–in a word–was terrible. Plagued by the same malaise afflicting much of the industry, Bulova sustained inventory and operational losses three more years in a row.

By 1983 it was clear to Loews that turning Bulova around would be tougher than anyone had anticipated. Fortunately, Loews viewed its long-range plans more as a guide than gospel. With the flexibility to reevaluate goals every three to six months, Bulova could respond realistically.

“The market was drastically changing,” Tisch recalls. “So until events played themselves out, we were forced to rely less on sales goals and more on survival strategies.” Though Loews hadn’t abandoned growth plans, it wisely postponed them, becoming instead as reactive as possible.

Unstable market conditions required improved communications and a smaller, tighter organization. Loews, for example, reduced Bulova’s staff from about 2500 to 600, trimming down manufacturing in Switzerland and closing a Flushing production plant. Subsequently, chunks of the huge New York property were sold off whenever possible.

The firm also bit the financial bullet on inventory, throwing out a large part of its line. According to Tisch, the idea was to bring the business dwon from a major corporation to one of more modest, realistic–and manageable–scale.

“We changed the way people thought about Bulova,” he says. “Before, people had over confidently thought in mega-terms…that Bulova had been around for 100 years and would always be around no matter what. Instead, we set up a more viable company run with good, sound management practices.”

Profits at last: Reduced overhead (except for continued heavy advertising), marked improvements in product and services–coupled with a methodical policy of higher price points, unit volume and gross margin–finally paid off. Early this year Bulova happily announced a 1984 fourth quarter net income of $3.4 million compared to losses of $7.7 million in the same quarter the year before. For all 1984 the company reported a $7.2 million profit compared with a 1983 loss of $13.3 million.

“We’ve learned a lot about running a watch company,” says Tisch who concedes Bulova, now successful, still has a long way to go. His personal plans involve staying an integral part of the watch industry; despite additional responsibilities at Loews, Bulova will remain his primary concern.

Will Loews undertake any other watch ventures? Possibly, says Tisch, if the right deal comes along. “We buy and we sell. If a watch opportunity comes along that makes sense, we’ll buy it. Then again, we may sell Bulova for Tissot the day that move makes sense. We’ve learned not to fall in love with our assets.”


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