Starter Corp.

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Starter Corp.

370 James Street
New Haven, Connecticut 06513
U.S.A.
(203) 781–4000
fax: (203) 776–3689

Public Company
Incorporated: 1971
Employees: 619
Sales: $282.7 million
Stock Exchanges: New York
SICs: 2329 Men’s/Boys’ Clothing Not Elsewhere Classified;
2339 Women’s/Misses Outerwear Not Elsewhere
Classified; 3089 Plastics Products Not Elsewhere
Classified

Starter Corp. designs, manufactures, and markets insignia clothing for professional athletic organizations and retail markets. Known as a “pioneer in the fusion of fashion with athletic clothing,” Starter holds the top share of the $7 billion licensed sports apparel market. Its licensed sports apparel division is divided into two lines: “official apparel” which incorporates the names and logos of teams in the National Basketball Association, the National Football League, the National Hockey League, and over 150 colleges and universities; and “authentic apparel,” which is a virtual copy of the clothing worn by professional players and coaches during games. The company recently ventured into the highly competitive sportswear market, taking on giants such as Champion, Inc. with a line of basic athletic clothing, casual sportswear, non–athletic footwear and young men’s fashion. Starter goods are sold through sporting goods stores, specialty stores and department stores. The majority of its sales are in North America; however, the company has recently expanded into Europe and South East Asia and plans to increase its presence in both regions.

Starter was founded in 1971 by David A. Beckerman, a former basketball player for Southern Connecticut State University, to manufacture team uniforms for high school athletic programs. In 1976, the company entered into non–exclusive licensing agreement with a number of professional sports league, paying royalties of eight to ten percent for the right to manufacture and market copies of professional athletic apparel. Its first retail product was a line of jackets emblazoned with the insignias of Major League Baseball teams. Soon the company expanded its licensed apparel line to include into headgear, activewear and accessories. In 1979, the company became one of the first licensees to supply clothing worn on the field by professional teams through an agreement to manufacture satin jackets for players on Major League baseball teams. Starter incorporated this design into streetwear, and was, in the words of Business Week reporter Tim Smart, the “first to make team jackets out of satin, instead of the usual cheap nylon.”

Attention to quality drove Starter’s tremendous growth in the 1980s. By 1983, the company had entered licensing agreements with the National Basketball Association, the Canadian Football League, the National Football League, and the National Hockey League. As coverage of national sports leagues on cable television expanded, Starter’s bright, flashy team jackets became status symbols among kids. But the company’s growth during this decade can also be attributed to an aggressive marketing strategy. Not only had the company made licensed sports apparel a fashion status symbol, it also created brand loyalty by making its “S and Star” logo a prominent part of the apparel’s design. Starter innovatively placed its embroidered logo on jacket sleeves and on the back of baseball caps. Often, when people wore their baseball hats backwards, a person saw the Starter logo before they even saw the insignia of the team it represented.

Behind the company’s marketing program was the desire to represent a connection between the fan and the team, and then, according to Starter’s 1993 annual report, “translate the fans’ enthusiasm for sports into a demand for sports–related products.” To this end, Starter sought maximum exposure on the field, and in the locker rooms. In 1986, the company became the first to create NBA locker room t–shirts, first worn on television by the Boston Celtics, and later worn by millions of kids across the United States and Canada. In a similar way, Starter won a contract to create the parkas that coaches wore on NFL sidelines. For the retail market, Starter designed the “breakaway jacket,” a pullover jacket that closely resembled the coach’s parka and soon became an important wardrobe element of fashion conscious teenagers. The rage for Starter clothing was so strong that some children owned as many as 20 baseball caps; others would pay over $150 for a Starter jacket. Sales in 1989 were $58.9 million. By 1990, they had more than doubled to $124.6 million.

Starter also aggressively pursued “promotional exposure,” cultivating relationships with players, managers, and coaches in all sports in order to enhance the company’s image as an authentic sportswear manufacturer. In 1991 it launched the “Starter Tip–off Classic,” a college basketball exhibition game bene–fitting the Basketball Hall of Fame. On the non–athletic front, the company secured placements of its clothing on popular television shows such as The Fresh Price of Bel Air, Seinfeld, In Living Color, and Roseanne, and in the films Sleepless in Seattle and White Men Can’t Jump. Using sports figures such as Florence Griffith Joyner, Don Shula, and Emmitt Smith, Starter advertised heavily on the ESPN sports channel and MTV, as well as in trade publications, magazines, newspapers, and outdoor advertising.

Within two years, Starter’s net sales nearly doubled to $356 million. The company went public on the New York Stock Exchange in April of 1993, earning an estimated $98 million. Profits increased 24 percent in its first period after going public, and stock prices leapt from $21 to $28 dollars a share before stabilizing around $24 a share. Proceeds from the initial pubic offering were used to expand sales to Europe and the Pacific Rim and also to launch “Brand Starter,” the company’s own sportswear line minus team logos. “We built the brand alongside of the team logos and now our awareness is up dramatically,” said Beckerman in 1993. Capitalizing on the high recog–nizability of its name, Starter went head–to–head against such formidable brands as Champion and Russell. Basic athletic clothing was offered under the name Starter Sport, casual active clothing was marketed under the name S2, young men’s fashion was introduced under the brand name Flipside, and a line of non–athletic footwear was launched under the name Rugged Terrain. Retail prices ranged from $12.99 for headgear to $200 for a vintage style jacket.

Brand Starter was launched in February 1993, supported by a $10 million national television advertising campaign and a $2 million bus and shelter advertising campaign in 12 to 14 metro markets. The $10 million TV campaign was geared to the youth market. Styled after music videos and highlighting the lives of well known athletes, the campaigns narrate the inspirational tales of Emmitt Smith and Karl Malone, athletes who were once told they would fail, yet ultimately achieved tremendous success. “This business is about selling fantasy,” Stuart Crystal told Brandweek in 1993, “If you put on the jacket Dennis Eckersley wore, you can share his dreams and build your own.” Other campaigns relied heavily on celebrity spokespeople such as college basketball star Christian Laettner, MTV veejay Karen “Duff Duffy, and NFL player Doug Flutie (for ads airing on the East Coast and Canada). In its first year, Brand Starter netted sales of nearly $30 million.

Starter also strengthened its international distribution network in 1993, covering over 25 countries in North America, Europe, and the Pacific Rim. Promotional exposure in Europe and Asia was gained through sponsoring exhibition games such as the McDonald’s Open basketball series in Europe and the NFL’s American Bowl in Japan and Europe. In a move to further strengthen its European market position, Starter signed licensing agreements with the Juventus and Manchester United soccer teams of Italy and England, as well as the D.E.G. hockey team of Germany and the Australian Football League. All of this was supported by advertising on the Eurosport and MTV Europe networks. In North America, Starter continued expanding its professional sports apparel line, supplying outerwear to the Toronto Blue Jays and Philadelphia Phillies during the 1993 World Series. 1993 sales totaled $356 million, up 26 percent over 1992.

Starter’s competition in the licensed sports apparel business intensified in 1994 when Logo 7 Inc., the number two licensed sports apparel manufacturer, won a much coveted NFL Pro Line license and beefed up its advertising budget in an attempt to knock Starter from its number one position. Overall, the boom in the licensed sports apparel market began to slacken in early 1994, slowing from an average of 38 percent annual growth to 15 percent annual growth. Starter moved into new markets with its licensed sports apparel, focusing on sales to young children and youth, and signed a new contract to manufacture the Center Ice Jersey for the National Hockey League. The company purchased a retail chain, First Pick Stores, for $5 million of new stock in March of 1994, and also established a Hong Kong office to better coordinate relations with manufactures. Beckerman stepped down as president, although he retained the posts of chairman and chief executive. John Tucker, former president and chief executive of a sporting goods and sportswear concern, assumed the position of president.

Although Starter began 1994 with a 23 percent increase over the first quarter 1993, it suffered a loss of $2.2 million in the second quarter. Second quarter 1994 sales were flat: $57.8 million, slightly lower than second quarter sales from 1992. Starter had predicted the loss, which it blamed on late deliveries from vendors, shipping delays to retailers, additional advertising and personnel costs, as well as start–up costs for a new Memphis distribution facility. Despite the licensed sports apparel slump, Starter seems to be in a healthy position for future growth. Management seems cognizant of the fact that the licensed apparel market is saturated, and its move to sell its own sportswear line is perhaps a proactive moved based on that understanding. Its decision to closely control manufacturing relations and to diversify its holdings into the retail arena can be taken as a healthy sign that Starter is ready to move from a maverick seller of trendy clothing into an established apparel manufacturer.