How Spiegel Recovered
3. Golden Gate Capital acquired both Spiegel and Newport News in August 2004, then consolidated their respective management teams in Newport's New York headquarters, and cleared out of Spiegel Group's massive Downers Grove, Ill., headquarters.
4. The Spiegel Group emerged from Chapter 11 last year as Eddie Bauer Holdings, and continues to operate the Eddie Bauer division today.
Kevin Silverman, managing partner with the Chicago-based investment management firm Two Rivers Capital Management, reflects on Spiegel's credit-related problems of the early 2000s: "You had these two camps that seemed to be working at odds with one another — the catalog people and the credit people."
"Each side of the boat kept tilting, and it could never get everybody in sync," he says. "Buyers would think they were geniuses because they were selling a lot of blue sweaters as if they were going out of style. What they didn't know was that 20 percent of those customers who bought on credit were never going to pay for them."
Beyond that, and given a relatively clean start and fresh capital from Golden Gate, Madonna and her team worked to optimize the synergies of the two catalogs. Although she restructured the Spiegel and Newport News
catalog organizations so there were separate marketing, merchandising and advertising teams, the two brands would share such functions as finance, operations and information technology.
"She's a talented leader," says Craig Battle, managing director of investment bank Tucker Alexander, about Madonna. "I was impressed with her turnaround game plan a couple of years ago. When I was involved in the due diligence on the business, I listened to her for a day-and-a-half talking about the plans, the metrics that had to change, and found them very compelling."
Among some of the most striking results, the company increased gross merchandise margins by 400 basis points. "Spiegel had sourcing opportunities we saw immediately," Madonna says. "We took advantage of those through an improved sourcing base to get us better margins. I went to China direct [to arrange new sourcing channels]; we had previously sourced in Hong Kong."
