Coronavirus Diaries From the C-Suite is a new Marker series where leaders share how the pandemic is impacting their businesses.
Eight years ago, when Bayard Winthrop founded American Giant, a San Francisco-based manufacturer of T-shirts, hoodies, and other apparel, he never imagined he would be running the business out of his car. But with the coronavirus lockdown, that’s where things are right now for the 50-year-old CEO. Partly because of the chaos created by having three children—ages 3, 5, and 9—now at home, Winthrop is working out of his Tacoma pickup truck, parked in front of his house in the Castro so he can tether to his home Wi-Fi. (His three-month-old puppy, Dash, is often with him in the passenger seat.) His main focus is preserving as much cash as possible as sales slide for American Giant, which employs more than 120 people at its corporate headquarters, two cutting and sewing plants in North Carolina, and retail stores in New York, Los Angeles, and San Francisco. He’s also busy converting his factories to make medical masks. Here he shares what life has been like at his company since the pandemic hit.
— As told to Courtney Rubin
When the news about coronavirus started breaking in China, I had this vague sense of worry. Pretty soon we started discussing what-ifs, and little by little began to ramp up plans. I’ve frankly been so flat-out the last few weeks that I don’t remember exact timing.
Probably four weeks ago we began to communicate to our staff that we needed to be vigilant with hand-washing, because San Francisco is one of the major points of entry of people coming in from China. Then we started lifting work-from-home guidelines in our corporate office so people could work from home if they wanted — it used to require manager’s approval. Then we made it mandatory to work from home, and eventually there was a quarantine in San Francisco.
We shut our retail stores down on March 17. We’ve committed to pay our hourly employees through the end of the month, and then we’ll reevaluate. Our online sales have taken a hit, too. Right around the first of March, our digital business got hit hard when people, appropriately, turned inward and didn’t give a shit about buying T-shirts. We’re down by about 50% for the month to date. Our sales hit a bottom four or five days ago, and we’re beginning to climb back up, but it’s five days of data. We need a few more days of that to begin to believe it.
Our business is in an interesting category, because we make comfortable work-from-home-type fashion. We’re not like fashion brands that, at least according to the rumors I’m hearing, are getting absolutely destroyed right now, like no activity at all. We’re still sending marketing emails — we sent out an email on Sunday about a track pant that did extremely well — but we’ve cut back. We would normally send out seven emails a week, and now we’re down to two or three. We’re trying to be sensitive. I try to think about these emails as a father. How would I feel getting this thing? Does it feel okay, does it feel like it’s too salesy? You do your best, and I’m sure we get it wrong a lot. But people do seem to be buying casual things they can be comfortable in and keep working in.
I think we’ve got a very healthy business, but once sales stop or decline, and all you’ve got are expenses, you get pretty protective of cash and liquidity pretty quickly.
Normally, this would be the time of year when we start to gear up for the holidays. We do 45% of our business in the last quarter of the year, and we typically slowly ramp up manufacturing from spring until November, because it’s more efficient. But how do you start thinking about holidays right now? The answer is, we aren’t. We carry a safety stock of everything we sell. Like, we sell black T-shirts, and let’s say we sell five in a month — these aren’t real numbers — we carry 40 in safety stock in case we get a big run. And those 40 are obviously not working capital. So in the spirit of trying to preserve cash, we are bleeding through as much of that safety stock as we can and banking on the fact that when things start to ease, we can start to sprint to refill those safety levels. But you also can’t just hire 300 sewers in November and have them work double shifts around the clock. So we’re reassessing almost daily.
I think we’ve got a very healthy business, but once sales stop or decline, and all you’ve got are expenses, you get pretty protective of cash and liquidity pretty quickly. Right now, our whole orientation is on people — keeping our people engaged and healthy and feeling connected — and doing whatever we can to sequester and preserve cash. We’re looking at every single cash outlay, and if it’s mission-critical we’ll pay it and if it’s not, we’ll talk with our providers about whether it can wait a day, a week, a month.
We have a domestic supply chain and we pay more because of that, but there are also benefits that we get, especially in our current environment, when many companies are having problems with their supply chains. For instance, I went to buy my daughter, who had a cold, some Motrin at Walgreens, and it was all sold out. I started researching and it turns out virtually all of Motrin comes through China.
Companies have built these incredibly complicated globalized supply chains, and they are remarkably fragile. So if we as a company were pulling in our supplies from China today, or anywhere else for that matter, we would be underwater on next spring’s production or late holiday production. Because of my domestic supply chain, I am currently renegotiating summer production, and I’ve got all fall on pause. My ability to react from a capital standpoint is way better. I’ve got about 40 suppliers domestically, and I know all of them and what they’re about. So I’m able to call up my supplier and say, “Hey, I’m getting hammered here. What do you need? What can you do?” And he says, “Hey, I need you to take 20,000 yards, and if you do that, I’m okay for another month.” Those conversations are happening right now.
All hiring is frozen. All contract-signing is frozen. All raw materials-purchasing is frozen.
We’re also talking with all our landlords for our retail stores and our corporate headquarters about deferment or abatement. All hiring is frozen. All contract-signing is frozen. All raw materials purchasing is frozen. We’re looking at software. Can we get rid of this data analytics tool that is ancillary to the core business function? We’re looking at every single outlay. Some of them are tiny, like $1,000 or $2,000 a month. I’m an eternal optimist, and I do think we’re going to turn a corner here, but we’re just kind of combing everything we’re doing to buy some time.
Other than our retail workers, virtually all of our employees are still cranking. Our whole marketing team is still in full gear, although the nature of some of that stuff has changed. We’ve got a summer catalog they’ve still got to produce. Customer service is still fully underway, and obviously our supply chain team is up to their eyes. We may not be able to sustain everybody working forever. I think there’s another set of more draconian measures if things get worse from here that we’ve got to be all prepared to kind of deal with.
About a week ago, we decided to stop manufacturing apparel, and start making medical masks. You always have this vague notion that you would help if you ever could, but it wasn’t something I thought we could do initially. I didn’t want to make masks that weren’t up to spec, because you know, they’re medical equipment — a mask not up to spec won’t block the spread of germs. But then the folks at Parkdale Mills [a North Carolina yarn company], who have been working with Peter Navarro [the White House Trade and Manufacturing policy director], reached out last week and said they needed domestic needle. So we’ve converted the plants entirely to medical mask production. The costs are being paid for by the government; the company doesn’t make a profit.
It’s nice to be able to keep people employed in the factories, but that wasn’t the motivation for making masks, frankly — we wanted to help.
There are about a thousand hurdles, but the technical production is actually relatively straightforward as long as you have binding machines and folding machines and single-needle machines, which we do. So we’re training our operators, and we started producing yesterday, with material from Hanes. Our factories have sanitizer at every door, there’s spatial separation between workers, and we’re checking temperatures.
It’s nice to be able to keep people employed in the factories, but that wasn’t the motivation for making masks, frankly — we wanted to help. We’re trying to get essential manufacturing clearance so we can stay open even if there is a shutdown in North Carolina. Right now we can make 35,000 masks a week, more if we can get some more machines, which I think we can, because people are really opening up the floodgates to try to be helpful. We don’t determine who gets the masks — that’s Navarro.
Right now, about a third of my time is spent on converting our factories to making masks, a third is the daily function of the business, and a third is family stuff: keeping the kids from killing each other, keeping my daughters getting their schoolwork in, exercising the dog. My wife, Alice, is an absolute superstar, but she’s got her own business to run [a jewelry company]. I find myself answering emails at 10 p.m. and watching videos of [National Institute of Allergy and Infectious Diseases Director] Anthony Fauci. He’s in his 70s and going a hundred miles an hour. I’m taking inspiration from his guidance and his energy level.