Father Knows Best

The world's largest producer and retailer of apparel, Nashville-based Genesco is a family business run with Tennessee savvy by W. (for Walton) Maxey Jarman and his son Franklin, 40. It was a proud day for Maxey when, at 65, he turned over the chairmanship to Franklin three years ago. Quipped Franklin then: "Dad is getting out at a good time."

Those were prophetic words in the light of Genesco's--and the Jarmans' --present situation. As is often the case when a strong-willed patriarch turns over power to his son, relations between the two have become strained. Maxey, an abstemious Southern Baptist who teaches Sunday school, had built Genesco into an empire of 105 operating divisions. Franklin, a member of what Nashville residents call their suburban "Belle Meade jet set," has been hard pressed to coordinate his father's motley acquisitions. At a six-hour board meeting last month the two argued with considerable heat.

While Genesco's sales have risen to $1.3 billion, profits have dived from $36 million in 1968 to $16 million last year. Genesco stock has dropped from a high of $58 in 1968 to less than half that today. At a board meeting last week, officers announced a quarterly earnings loss of 5-c- per common share, down from a 51-c- gain for the same quarter last year. Alarmed, outside directors voted at the meeting to give the elder Jarman "added management responsibilities." The finance committee, of which he was still chairman, will be combined with the executive committee, and both will be placed under his active control.

Several of Genesco's problems can be traced to Maxey's acquisitiveness in the 1960s. The firm expanded furiously, sometimes taking into the organization successful regional companies that did not fit well. Executives of some of the acquired firms may have seen Maxey coming. Genesco's standard takeover agreement allowed the sellers to keep the ownership of the buildings that they occupied and offered fat stock bonuses to men who could produce profit increases for Genesco in the first three years after acquisition. Some managers simply rewrote their building leases, temporarily cutting rents in order to raise earnings. Now that the three-year periods are lapsing, the rents are rising again--and Genesco is saddled with mounting costs.

Genesco is also the victim of uncontrolled forces. It depends on the manufacture and retailing of fashion-sensitive clothing and shoes for 90% of its revenues. Its subsidiaries include Esquire Sportswear, Johnston & Murphy shoes and Formfit Rogers lingerie, as well as Henri Bendel, Bonwit Teller, I. Miller, S.H. Kress and Roos/Atkins. Lately, the fashion world has degenerated into volatile anarchy. The men's clothing industry has suffered especially, as young men have chucked tweeds and worsteds in favor of blue jeans and Army fatigues. One of Genesco's subsidiaries, Dante, Inc., which manufactures cuff links, has been hit by a move away from French cuffs. Until recently, consumer spending as a whole had lagged this year, so Genesco's profits from successful retail operations have not been able to balance setbacks elsewhere.

When it comes to making the most of a rough situation, Genesco's directors evidently feel that father knows best. Though the younger Jarman remains Genesco chairman, the elder will be in charge. At least one Genesco director believes that Maxey will use his restored position as a steppingstone to the Tennessee governorship in 1974. He tried for that office in 1970 but finished second in the Republican primary to Winfield Dunn, the current Governor. Genesco directors appear willing to keep Maxey on until the company is out of its slump. In a firm that depends on strong retail sales and stable fashions for its fortunes, he may be around for a long time.

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