In his
letter to Berkshire Hathaway Inc. shareholders released Friday, chairman Warren Buffett writes with characteristic candor about his acquisition of Dexter Shoe in 1993 for $433 million in Berkshire stock. "To date," he says, "Dexter is the worst deal that I've made." He says that what he had assessed as a durable competitive advantage for Dexter vanished within a few years. He's especially tough on himself for paying in stock, noting that he gave away 1.6% of Berkshire to buy "a worthless business."
So how did this come to pass, and where is Dexter today?
Berkshire got into shoes with its 1991 purchase of
H.H. Brown Co. in Greenwich, Conn. According to a November 1993 article in Footwear News, Brown led to other shoe deals. Berkshire went on to add Lowell Shoe in Hudson, N.H., and then Dexter, of Dexter, Maine. In its initial report on the deal, FN called Dexter, which makes men's and women's casual and athletic shoes, "a branded resource some retailers call the most powerful, privately owned company in the industry."
Scanning other Footwear News articles in the years since, you see a company slow to face up to the need to manufacture offshore (Buffett blamed himself here, too). In 2001, Jim Issler, president and COO of H.H. Brown, stepped in to lead an overhaul at Dexter.
Fast forward to June 2007, and you find
this announcement, which we quote in part:
Payless ShoeSource, Inc. (NYSE: PSS), and H.H. Brown Shoe Company, Inc. announced today that they have signed a multi-year agreement making Payless ShoeSource the exclusive retailer for the Dexter brand of footwear and accessories in the United States and the rest of the Western Hemisphere. H.H. Brown will continue to design, develop and sell Dexter performance bowling and golf shoes, as well as the exclusive hand-sewn Dexter 1957 Collection hand-crafted in Maine.
This just skims the surface of a story that seems to be about transition in a family business, global economic forces and, no doubt, the fortunes of Dexter, Maine. Quite a tale.
- Kenneth Klee
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Juergen Lasowski
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