Houston-based Parker School Uniforms (“Parker”) is the second largest, and the most profitable, school uniform company located in the United States. It dominates the school uniform market in Texas.
In late 2006, Parker CEO Mac Shuford was approaching 60. While not ready to retire, he was interested in preparing for his eventual retirement. One of his best friends introduced him to Dos Rios Partners’ Bo Baskin and Kevin Benoit who at the time were affiliated with a predecessor fund. Mac described the industry to Bo and Kevin as stable, highly fragmented and the only material segment of the U.S. apparel industry that had not yet used Asian sourcing to reduce its Cost of Goods Sold.
In 2008, Bo and Kevin helped Parker recapitalize. Parker borrowed a modest amount of debt; the predecessor fund invested equity capital into Parker and received 70% of the company; and Mac received a signicant cash distribution while retaining 30% of the company and remaining Parker’s Chairman and CEO.
Working together, Bo, Kevin and Mac undertook a three-part plan. First, they strengthened management by retaining a strong President, who would eventually become Mac’s replacement; hiring a new CFO and a new Vice President of Sourcing; and instituting a management stock option program. Second, they commenced an ambitious Asian sourcing program. Third, they purchased two other school uniform companies–one in Atlanta to be a base for serving the Southeast and another in California to be a base for serving the West Coast.
Less than a month after the recapitalization, Lehman Brothers collapsed, sending the country and world into the deepest recession in 70 years. For the first time in Mac’s fourteen-year association with the business, Parker’s sales failed to increase. Nevertheless, the strength of Parker’s underlying competitive position and the aforementioned strategic changes enabled Parker to return to its growth path only one year later. Its sales and EBITDA are now more than 50% greater than they were at the time of the investment.