by Cynthia Rigg — Crains New York Business

River Edge, NJ, US — When Leo Gleicher bought a costume jewelry store in the early 1960s, his initial inclination was to close down the shop's existing luggage department. Much to his surprise, leather bags became his biggest seller as Americans became infected with wanderlust.

That West New York, N.J., store became the cornerstone of Innovation Luggage Co., a $38 million specialty retailing chain that now is the single largest seller of luggage in the tristate area. Today, rather than feeling the pinch of the travel recession, Innovation is in the midst of an aggressive expansion program energized by new owners and management.

"Of course travel is down and air ticket prices are up," admits Stanley Schwarz, Innovation's current president and a 20-year retail veteran. "People are talking gloom and doom, but not in this office."

Since taking the helm 18 months ago, Mr. Schwarz has expanded the chain to 31 stores from 19 and increased Innovation's share of the $165 million local luggage market to 23% from 18%. This year, the chain expects an operating profit of $7 million and is forecasting profits will grow to $9 million in 1991.

Vendors — including American Tourister Inc., Samsonite Corp. and Baltimore Luggage Co. — say that as their largest customer, Innovation has the ability to expand during tough times. Last year luggage sales increased by 7% to $3.33 billion, but nationwide sales are believed to have slowed considerably this year.

"They haven't escaped from the problems that are affecting every retailer," says Ray Rodgers, regional sales agent for Baltimore Luggage Co. "But they have the courage to open new stores, and I think they're doing the right thing when everyone else is sitting by the wayside."

The changes at Innovation began shortly after the company was purchased through a leveraged buyout in August 1988 by a group that included the investment firm Carl Marks & Co., General Electric Capital Corp., First Long Island Investment Group and a management team. They purchased a company that was the market leader and extremely profitable.

The chain, which had grown as a no-frills specialist, was being run "by the seat of its pants," says Mr. Rodgers. Still, by carefully choosing well-trafficked locations and reacting to consumer preference, Innovation had gained business mainly from mom- and-pop-type luggage Stores.

Upgrading outlet store

"It was almost like an outlet store," says Mr. Schwarz. The carpeting in the company's unit in the Willowbrook Mall in Wayne, N.J., hadn't been changed in 20 years, Mr. Schwarz points out. "We didn't change the idea, we have just cleaned up the act."

To accomplish that cleanup, the new owners brought in Mr. Schwarz. The 50-year-old Israeli native, who came to the United States as a teen-age exchange student, began his retailing career in the Alexander's training program. After executive stints at several department stores, he headed up the licensing efforts at Jordache Enterprises Inc. in the 1970s. He then went on to develop the North American franchise for the French designer Guy LaRoche.

One of Mr. Schwarz's first acts at Innovation was to update and upgrade store fixtures and put more emphasis on the training of its sales personnel. He added a regional management team and replaced 11 out of 13 of the company's top managers.

Mr. Schwarz also updated the company's computerized inventory control system, allowing Innovation to focus on the best-selling items. Inventory was pared to 6,300 items from 13,000, and the number of suppliers was whittled to 65 from 128 suppliers.

Jettisoning a cheap look

"We've also lowered our price points," says Mr. Schwarz. "Before Innovation looked cheap, but actually wasn't. We are working on our vendors to be more gracious with us. The price difference isn't coming from Innovation."

Despite the new pricing pressure on vendors, Mr. Schwarz receives high praise from his suppliers.

"Innovation Luggage has become a very efficient organization under Mr. Schwarz," says Ed McEnaney, senior marketing manager for the tristate area for Lebanon, Tenn.-based Hartmann Luggage Co.

Mr. Schwarz is now looking to expand up and down the East Coast and plans to grow to 50 stores by 1993.

But New York City, where Mr. Schwarz hopes to have a 33% share of the market within three years, will remain key to the company's fortunes in the near term. Innovation has already added two new stores in Manhattan — a market that currently accounts for 19% of its profits. Mr. Schwarz expects Manhattan to grow in importance, representing 27.5% of the company's income by next year.

He is looking to add four or five more locations in the city. The larger the presence, the easier it is for Innovation to compete against its main competitor — R.H. Macy & Co.

Mr. Schwarz already talks about Innovation's potential to become the only national luggage retail chain.

"If Innovation Luggage proves capable of going up and down the East Coast, it would prove our concept," says Rob Marks, managing director of Carl Marks. "At that time we could get some major company excited about taking the chain national."

Long-term planning involved growing the luggage chain locally, then flipping it to an even bigger retailer that would take it national. At one point, Innovation predicted that it would have 50 stores by 1993.

HURT BY GULF WAR

But the Persian Gulf war and the national economic downturn stymied the strategy, and Mr. Schwarz had to scramble to keep the business profitable.

The luggage chain started to run more promotions, and a computerized inventory system led to better merchandise management.

With sales swelling again, Mr. Schwarz is focusing on the fine points, including training salespeople.

"Stan's management team is very professional," says Jeff Lieberman, regional account manager in the New York region for American Tourister Inc. "They are on top of what is happening."

Mr. Schwarz says that if the business continues to improve, he may try to take the company public in 1996. "Our concept has always been right, but our timing sometimes has been wrong," he says. "Now I think the timing is better."

© Crain Communications Inc. 1990