The Company That Grew Too Fast

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Along the way Le Gette and Wilson were learning to live the good life. Besselman, who has remained friends with both, recalls a vacation they took with their significant others in 2002. The venue was Vail, Colo. Wilson showed up in a new Hummer H2, while Le Gette drove up in a Porsche.

But over cocktails, the Wharton grads had a debate about the relative merits of single brands versus multiple brands, "BMW versus GM," in the words of Besselman. A former McKinsey & Co. management consultant, Besselman was surprised when he sensed that the discussion was drifting over the heads of Wilson and Le Gette. "That's when I thought to myself: 'Maybe they're not so good at operating a company after all."

Beneath the surface, all was not well. For one thing, Le Gette and Wilson had been taking note of their differences. "It always surprised me that they got along so well so long," says Daphne Howard. Le Gette, Howard recalls, was the big-picture guy. Wilson, says Howard, was more nuts and bolts, more focused on keeping the production line moving. Le Gette doesn't disagree: "Ron was all about getting the product on the shelf." Le Gette, by contrast, didn't want the product on the shelf "until it was perfect." It made, he adds, "for a great struggle" -- and a great partnership -- for a long time anyhow.

Wilson resigned as co-CEO two years ago. "You can't have two daddies," is how he explains it. "That was okay when we were a little company. But we weren't a little company anymore. When you have two daddies, and something goes wrong, the kids go to the daddy they like and complain about the daddy they don't like.

"Not good."

Even before Wilson left, Le Gette had set about changing the company. For one thing, he started hiring people who were more like, well, him. "The current 180s people," Le Gette told a reporter in February, "are my people. They aren't Ron's people. Who they are is a reflection of me." That's exactly right, says Curt Golkow. "They all looked like Brian -- GQ men and WASPy blonde women." They didn't come cheap, either: "Brian was good at incentivizing his people."

Le Gette's goal was to transform the company. In the early days, says former GM Rick Olson, who left the company following the Patriarch takeover, 180s found success by reaching for "the low-hanging fruit, the large retailers." The company's rapid growth -- fueled by sales of ear warmers to the May Co. and Federated Department Stores -- meant, says Olson, "that every other department in the company was trying desperately to keep up with sales. That was the adage: If you can sell it, we can build it."

It was in 2003 that Le Gette decided to change the company's name to 180s. Perhaps more important, he also changed the company's distribution strategy. Where the old business plan began and ended with sales to the big department stores, the new paradigm looked like a pyramid, with the department stores at its base. Under the new system, products would be introduced at the top. The entry product would be state-of-the-art apparel sold at specialty running and skiing shops. The initial buyers would be highly competitive athletes. As part of this new strategy, the company decided to sponsor a team of nonprofessional athletes, Team 180s.

After a year or two, the product would then find its way into nationwide sporting goods stores like Modell's and the Sports Authority. The user now would be a weekend runner or occasional skier. Only later would the same product wind up on the shelves of a department store for sale to the general public. It was understood that the new strategy might cost the company revenue in the first year for a given product -- when the target would be high-margin sales to specialty buyers -- but the theory was that it would lead to greater sales down the road when the product hit the department stores.

This paradigm shift would have a profound effect on growth and the need for additional financing at 180s. For one thing, sponsoring Team 180s was costly. More important, where the three big sporting goods companies had perhaps 1,500 to 2,000 stores, the department store chains had 15,000 or more. As a result, Besselman explains, 180s "went from a two-year return on investment to a three-year return."

Wilson's departure in 2003 was hastened by a controversial plan for a stock buyback. The plan split the company's executives and investors, with Wilson wanting to take some money off the table while Le Gette believed the company was not in a position to hand out cash. But Wilson, who was in the midst of a messy divorce, insisted. "Ron needed the money," says Le Gette.

In part because some of the newer investors wanted out as well, Le Gette eventually caved. In the ensuing buyback, stock was priced at $80 a share, and the value of the company set at what former CFO Mason thinks was a realistic $45 million to $65 million. Those who cashed in "made off like bandits," says Besselman. Most of the original investors stayed put -- "and were left holding the bag two years later," he adds ruefully. Shortly after the buyback, Wilson left the company.

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