Case Study Bennett Footwear Group

Company Highlights Predecessor company founded in 1961 Designs footwear under the Franco Sarto and Danelle brands, as well as under private labels Imports from Italy, Brazil, China and Portugal Major customers: Nordstrom, Macy's, Filene's, Lord & Taylor, Dillard's, Wal-Mart, Payless ShoeSource and Meldisco Recent Growth: Rapid due to the relaunch of Franco Sarto, acquired November 1998 Current strategy: Capitalize on the growing popularity of Franco Sarto by expanding women's footwear and introducing men's footwear and accessories; while further pursuing growth opportunities in the middle-tier channel CIT provided a $20 million revolving line of credit and a$6 million term loan

Company Overview

Bennett Footwear Group is a rapidly growing leading designer, importer and distributor of women's and children's footwear. The flagship brand, Franco Sarto, makes up the majority of sales after undergoing a rapid expansion over the last two years. Bennett also makes footwear through private-label arrangements. Founded in 1961, the present formation of Bennett is an amalgamation of three companies merged in late 1998 in a move to create a multi-channel footwear business serving both high-end and commodity distribution channels.

At the close of 2000, Bennett discontinued a number of its smaller volume brands to focus on Franco Sarto, which sells to chains such as Nordstrom and Macy's, and the private label business, which designs and sources footwear for mass merchants and discounters on a commission basis.

A Star is Born: Franco Sarto

Since acquiring the license in November 1998,Bennett management has re-energized the merchandising and marketing for Franco Sarto and the relaunch has met with great success. Driven by the Franco Sarto line, sales, gross margins, and profits have grown substantially. Franco Sarto is poised for expansion. A men's line was launched and concept shops are being introduced in high-end department stores. Going forward, management is exploring the possibility of licensing the Franco Sarto name for accessories, possibly handbags, belts and small leather goods. To support this growth, Bennett is leasing a 110,000 square foot, state-of-the-art distribution facility in New Hampshire.

Expanded Financing

The 1998 merger through the rollup of three companies created a complicated financial structure. Despite its recent success, Bennett remained over-leveraged and needed extra funds to resolve subordinated debt issues. At the same time, Bennett needed adequate funding to grow quickly, particularly to take advantage of the recent momentum experienced in its Franco Sarto line.

CIT Finds Value

In evaluating the loan, CIT Commercial Services tapped into its deep knowledge of the footwear industry and retail market through its comprehensive customer credit files. As a leading lender to apparel and footwear companies, CIT has vast experience in assessing the value of accounts receivables and inventory. CIT also intimately understands the power of brands in consumer's minds and the importance of management skills.

Solution Provided by CIT

CIT Commercial Services provided a $20 million revolving line of credit secured by inventory, accounts receivable and trade names, as well as a $6 million three-year term. The facility allowed Bennett to refinance outstanding debt under its existing $15 million line of credit with its former lender, and retire the majority of its $11.5 million of subordinated notes. The CIT line also provides abundant liquidity for Bennett to continue to pursue its aggressive expansion plans for Franco Sarto. With the new facility, Bennett has the funds to clean up its balance sheet and keep growing.

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