William Compton, credited with bringing Tropical Sportswear Int'l Corp. back from the brink of bankruptcy 13 years ago, stunned investors Tuesday by resigning after recently being diagnosed with leukemia.
Beyond news of his illness, Tropical's explanation of the departure of its 59-year-old leader was rather cryptic. Compton's letter to the board also cited "management issues." Company officials and Compton declined to elaborate, citing conditions of a $5.7-million severance agreement. Compton's attorney, Seth Rodner, said his client "agreed to resign" and expects to "start the next chapter of his life."
Compton sold some of his stake in Tropical for about $7.1-million as part of a public offering in August, but he still owns 7 percent of the outstanding stock.
The company's board replaced Compton as chief executive with Christopher Munday, the apparelmaker's chief operating officer. Michael Kagan, the company's retired chief financial officer, takes Compton's place as chairman of the board.
Tropical on Tuesday also reported mixed results for its most recent quarter. Earnings were $3-million, or 27 cents a share, up from $1.4-million, or 17 cents a share, for the quarter ended Sept. 29. Revenues were up 9 percent to $117-million.
But a botched consolidation of its fabric-cutting operation in Tampa has cost the company dearly as retailers canceled orders Tropical could not fill for the critical Christmas holidays.
Officials said the problems, still not completely fixed, will keep Tropical from being profitable during the current quarter.
Tropical does not expect to catch up on back orders and rebuild its inventory until January or February. The cost of retooling the expanded Tampa facility and closing the one in El Paso, Texas, also has run well over budget.
As a result the company on Tuesday said the upcoming quarter promises to be a break-even proposition.
"We realize the need to produce numbers consistent with shareholders' expectations," Kagan said. "But we're not going to be back on our blueprint" to do that until winter.
Tropical's share price plummeted 28 percent on the news to close at $8.23, down $3.19.
An apparel industry veteran, Compton led a group of Mexican investors to buy Tropical in 1989, then a tiny men's pants manufacturer with annual revenues of about $20-million. He rebuilt the company's ancient factories, updated its fashion offering and bought out rivals. In the fiscal year ended Sept. 29, Tropical had grown into a public company with reported annual revenues of $464-million.
But the company's fortunes _ an up-and-down affair much of the past few years _ took a sharp turn for the worse this summer.
While the growth in men's apparel has shifted to dressier styles, Tropical's big sellers remain all-cotton khaki pants that compete with Levi's Dockers. The company hopes to extend the weakening market for khaki by adding stain-resistant fabric and elastic waistbands that are being heavily promoted by rival Dockers and Haggar. But as evidence mounted that consumers were getting frugal and pricing more brutal, investors steered their cash elsewhere.
Once the maker of private label pants for department stores such as Burdines and Dillard's, Tropical's foundation broadened under Compton. He added brand name casual pants such as Flyers at Costco, Farah at Wal-Mart and Victorinox at Saks Fifth Avenue. The company's Savane line, the second biggest selling casual pants brand behind Dockers, recently debuted in moderately priced department stores JCPenney, Mervyn's and Kohl's.
Tropical gets about a third of its business from Wal-Mart. Some analysts have wondered whether Levi's recent deal to create a low-price denim brand for Wal-Mart will cost Tropical valued shelf space. Munday said it won't affect their shelf space. Tropical is also introducing a new George line of casual knit and woven shirts at Wal-Mart.
"People buy four or five shirts for every pair of pants," Munday said.
_ Mark Albright can be reached at albrightsptimes.com or (727) 893-8252.