Mothers Work, Inc.

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Mothers Work, Inc.

1309 Noble Street
Philadelphia, Pennsylvania 19123
U.S.A.
(215) 625-9259
Fax: (215) 440-9845
Web site: http://www.motherswork.com

Public Company
Incorporated: 1981
Employees: 2,600
Sales: $199.2 million (1996)
Stock Exchanges: NASDAQ
SICs: 5621 Women’s Clothing Stores; 2339 Women’s and Misses’ Outerwear, Not Elsewhere Classified

Mothers Work, Inc. is the largest specialty retailer of career-oriented and high-end maternity clothing in the United States. After cornering and developing the market for career apparel targeted at moms-to-be, Mothers Work has expanded to include casual and special-occasion maternity wear as well. Mothers Work operates over 450 stores throughout the United States, under the names Mothers Work, A Pea in the Pod, Motherhood Maternity, Mimi Maternity, and Motherhood Works. The company also owns and operates the Episode U.S.A. clothing chain, which deals in non-maternity women’s clothing.

The Early Years

Mothers Work, Inc. was founded in 1981 when Rebecca Matthias, pregnant with her first child, experienced an almost impossible time locating career-oriented maternity clothing. While she had no difficulty finding an abundance of casual wear, Matthias could not find anything that she felt was appropriate to wear to her job at a Boston computer company. She believed that other mothers-to-be were surely having similar problems, and realized that the market for career apparel for pregnant women was a virtually untapped segment of the clothing industry. At the time, most other maternity clothing stores specialized in casual styles—comfort at an affordable price, since the clothes were needed for only a short time.

Soon after her first son was born, Matthias quit her job and decided to find career-oriented maternity apparel and sell it through a mail-order catalog. At the time, Matthias had $10,000 in her savings account, of which she used almost half to purchase maternity outfits she felt were representative of the clothing that women would wear to work. The rest of the money was used to create, print, and distribute a black-and-white catalog to a few hundred prospective customers. In early 1982, the first edition of a catalog that she called “Mothers Work” was shipped out, containing photos of herself and her son, and an extremely limited selection of clothing at prices that averaged between $50 to $100.

The first catalog generated approximately $3,500 in sales, which unfortunately did not even cover Matthias’s original expenses. Feeling deflated, she might have given up if it had not been for the fact that she still possessed a good deal of the inventory she had purchased. Thus, she decided to try one more catalog. The second catalog, however, was the result of extensive market research and preparation, which brought about some dramatic changes. For example, she learned that consumers typically did not respond favorably to black-and-white catalogs. Therefore, the second edition contained more color photographs of the available clothing items.

When customers received the second catalog in late 1982, the response was immediate interest in a conservative matching blazer and jumpsuit that Matthias had added to the collection as an experiment. Although she was pleased with the positive response, this actually posed great problems for her because she had dyed the blazer herself to match the jumpsuit, which she had purchased at a different store. Essentially, orders were pouring in for an item of which only one was in existence. So Matthias quickly searched and found a sample maker who agreed to cut and sew the suit for her if she provided the material. She did, and the outfit was the second catalog’s biggest hit. Matthias now knew that her customers were interested in items that fell on the more conservative end of the spectrum. With the money she earned from the second catalog, she altered her product line slightly and began preparing for a third edition.

Rapid Expansion in the 1980s

In 1983, after giving birth to her second child, Matthias and her husband moved their family to Philadelphia. Once there, she obtained access to space in a local manufacturing plant where she set up a production and shipping facility for Mothers Work. Matthias had decided that she needed to find a way to rely less on purchasing items from other stores, due to the fact that availability was always uncertain at best. Therefore, she wooed an experienced designer from Albert Nippon named Beate Hemman to come to work for her, and then hired her own sewing crew to staff the new facility. Together, the group set out to create and produce sophisticated clothing items for the third catalog.

The following year, sales continued to increase and Matthias began to toy with the concept of opening retail stores to sell the Mothers Work product line. Because she did not possess the capital to open her own store, she decided to try franchising the concept to someone else, who could then test Mothers Work’s ability to sell in a retail setting. By 1985, Mothers Work had opened six franchises around the United States, all of which were performing beautifully. Matthias was pulling in approximately five percent of those stores’ profits, but wanted to open one of her own and fully reap the benefits. Late that year, she obtained a $150,000 loan and used the money to open her own Mothers Work store in Boston, Massachusetts.

One of the problems that often plagues retail clothing chains is the loss of profit when merchandise must eventually be marked down in order to sell. Because Mothers Work actually produced a majority of the items that it sold, Matthias felt that the company should be well-equipped to diminish such problems. She requisitioned the help of her husband, Dan, who was highly talented and experienced in computer database and software programming. He designed an information system for the Mothers Work chain that connected each individual store with the production headquarters in Philadelphia. The system, called Trend Track, enabled each store to keep on hand only one or two of each piece of merchandise at a time. Every night, each store’s computer connected with the database at headquarters and reported the previous day’s sales. New stock was then produced and sent out from headquarters on a daily basis to replenish the missing items from each store. Mothers Work soon became so efficient that its stores were actually constructed without back rooms.

Meanwhile, Rebecca Matthias was attempting to locate interested parties to invest in the expansion of the Mothers Work chain. Due to the fact that she had identified and cornered a segment of the clothing market in which there was not any true competition, it was not a difficult sell. By the end of 1986, she had secured over $1 million in venture capital and began using it to open new stores nationwide. This process continued throughout the rest of the decade, and by 1990 Mothers Work was composed of 40 stores across the United States, and annual sales were hovering around $10 million.

Diversification into the 1990s and Beyond

In the early 1990s, the company continued to distribute its catalog and sell its product through the mail-order channel, but was focusing the majority of its attention on the retail aspect of the business. Catalogs were now dubbed “Mothers Work and Play,” reflecting a shift in demand toward casual dress as well as conservative office apparel. Due to her knack for following market trends, noting her customers’ demands, and then responding accordingly, in 1992 Matthias received the Ernst & Young Entrepreneur of the Year Award.

Still, Matthias refused to rest on that achievement and instead pushed for further expansion. In 1993, the company went public, offering stock to the general population and earning about $16 million from the sale. This was a considerable accomplishment, given that the company’s total sales for that year were just over $30 million. With the added capital, Mothers Work immediately began to expand, adding approximately 50 new stores in 1994 alone. Sales nearly doubled in the space of one year, topping off at $59 million.

In 1995, Mothers Work began to diversify its holdings through a number of acquisitions. First came the purchase of over 60 “A Pea in the Pod” stores, a competitor specializing in maternity clothing that was somewhat more casual than the Mothers Work line. Later that year, Mothers Work also acquired 217 “Motherhood Maternity” retail units, which brought the company’s total number of retail locations to almost 400. Once again, yearly sales jumped forward dramatically, leveling off at $106 million.

The following year, as Mothers Work celebrated its 15th anniversary, it made another interesting acquisition when it purchased over 20 “Episode U.S.A.” stores throughout the country. The addition of Episode U.S.A. marked a solid entrance for Mothers Work into the non-maternity women’s career apparel market. At the time of the acquisition, Episode U.S.A. was involved in bankruptcy proceedings, but Mothers Work management believed that a shift into casual and dressy apparel would help revive the chain. In mid-1996, the company began signing leases for new store locations and worked to redevelop the chain’s product line. Matthias projected that the chain would grow gradually throughout the rest of the decade, eventually including around 100 stores.

Entering the end of the century, Mothers Work was well-positioned for continued future growth. In the process of growing from a $3,500 mail-order business to a multimillion-dollar enterprise composed of almost 500 store locations, Mothers Work had achieved steady increases in both sales and profits throughout its 15 years of operation. The company was continuing to expand its maternity-wear holdings, while also entering itself into the general women’s apparel arena. Based on its past successes and flexible management style, Mothers Work seemed capable of easily handling the demands it would face in the coming century.

Principal Subsidiaries

Cave Springs, Inc.; Mothers Work (RE), Inc.; Motherhood Maternity Shops, Inc.; Motherhood Maternity International, Inc.; The Page Boy Company, Inc.; Episode U.S.A.; Maternity Works; Mimi Maternity; A Pea in the Pod.