BUSINESS

The expansionary designs of Dylex

James Fleming April 18 1983
BUSINESS

The expansionary designs of Dylex

James Fleming April 18 1983

The expansionary designs of Dylex

BUSINESS

James Fleming

At first glance the two executives appear to be an unlikely corporate team. Seated in the finely appointed confines of his Toronto office, James Kay, the 60-year-old chairman of Dylex Ltd., seems to harbor a sense of mirth that, despite serious moments, constantly threatens to erupt into a flash of wit. Beside him, Wilfred Posluns, president of the firm, exudes an authoritative air, reinforced by his imposing physical stature. But as the two men discuss the fortunes of Dylex, Canada’s largest specialty clothing operation, a special chemistry flows between them. It is a mutually reinforcing energy that has helped propel the company and its ubiquitous clothing stores along a stunning growth trajectory throughout its 16-year history.

From their mahogany-panelled offices in the 53-year-old Tip Top Tailors building on Toronto’s waterfront, Kay and Posluns run a nationwide empire with controlling or partial interest in nine textile manufacturing concerns and a 921-store web of retail clothing chains under 13 names, aimed at the wide spectrum of consumer tastes. The operations range from the Ontariobased B.H. Emporium, with its pulsating, eclectic ambience designed for teenagers, to the more sophisticated styles of the Fairweather, Braemar, Tip Top, Town and Country, and Harry Rosen chains. Now, brimming with cash from a recent share issue that raised more than $25 million, the company is developing plans for further expansion in both Canada and the United States.

Stock analysts are enthralled by the performance of Dylex during the recent 18-month recession. At a time when retailers in general suffered severely and industry-wide sales of men’s and women’s clothing levelled off or declined, Dylex actually boosted its market share and profits to a record high. Combined profits for the company, including its partially owned affiliates, reached $17 million last year on total sales of nearly $900 million. At the same time, it cornered 11 per cent of the men’s market and roughly 10 per cent of the women’s, a feat that far outstripped other specialty retailers and moved Dylex into a league in which its main competitors are large department stores.

Retail analyst Susan Keohane of Wood Gundy Ltd. attributes much of Dylex’s success to its “wide range of stores that appeal to a broad cross sec-

tion of consumers.” Indeed, not only do its chains span the spectrum from brash emporiums to up-scale outlets aimed at wealthier customers, but bargain hunters are flocking to its Bi-Way stores for goods as diverse as peanuts, cosmetics and clothing. Describing Bi-

Way as “enormously successful,” Posluns pointed out that it has yet to saturate the Ontario market but will eventually expand across Canada.

There is more than clever customer appeal behind Dylex’s success, however. Ross Cowan, a McLeod Young Weir Ltd. analyst, credits Dylex’s management

with the decision to “swim against the tide of the recession by stepping up promotion and advertising.” For his part, Posluns maintains that “a successful merchant cannot allow himself the luxury of blaming economic conditions for failing to perform.” He adds, “I may sound like a macho coach of a college football team who bullies his players, but it is amazing how much can be achieved when an organization is dedicated to performance.”

Both Kay and Posluns rhymed off several other explanations for their firm’s good fortunes, stressing in particular the benefits of weekly headoffice gatherings in which executives of the various chains share insights and advice. But there is little doubt that much of Dylex’s momentum stems from the synergistic combination that Kay and Posluns bring to the organization.

Analysts and business associates alike describe Kay, who rarely grants interviews, as an unassuming but extremely shrewd businessman with great mental acuity. At board meetings he has impressed colleagues with almost total recall. He is also noted for his tremendous energy. Jack Gwartz, vice-chairman of Shoppers Drug Mart Ltd., describes Kay as “a very bubbly, charismatic guy who is always on the move.” Born in Winnipeg (his Jewish grandparents emigrated there from the Soviet Union in the late 19th century), Kay took over his father’s small industrial textile business after serving in the Canadian Army in the Second World War. Within a few years he had founded a plastics firm called Mastex, which he developed into Canada’s largest manufacturer of garbage and dry cleaning bags. In 1958 he sold out to Canadian Industries Ltd. and worked as an executive with the Montreal-based firm until 1964, when he left to run his own investments.

The rewarding relationship between Kay and Posluns began by chance in 1966 when both men became interested in Tip Top Tailors, then a money-losing company owned by the Dunkelman family of Toronto. Posluns was trying to acquire the firm’s building to house his family’s flourishing clothing manufacturing operations, and Kay wanted to buy out Tip Top’s operations and add them to his holdings, which already included Fairweather. But, said Posluns, Benjamin Dunkelman was not interested in the advances of “this guy from Winnipeg” because he did not do business with people whom he did not know.

Then, as a friend of Dunkelman’s, Posluns gained an entrée. And after an extended lunch at the Lord Simcoe Hotel, Posluns and Kay decided to jointly buy out Tip Top and merge their businesses. The result was Dylex, an acronym originally coined by Kay from “Damn your lousy excuses.”

Within a year Tip Top’s operations, which continued under the new umbrella company, were making money. And in the past 16 years Dylex’s retail operations have expanded from two chains with 70 stores into 10 divisions operating 921 stores and a bevy of manufacturing concerns.

For Kay, Dylex is now the linchpin in a personal financial empire that includes North Canadian Oils Ltd., Hatleigh Corp., an investment holding company, and Foodex Inc., which runs such

chains as Ponderosa Steak House and Frank Vetere’s Pizzeria. Dylex clearly benefits from Kay’s business acumen, but Posluns is credited with maintaining a tight grip over the operations of the company. As Kay put it, “Wilf is a fierce disciplinarian” in controlling inventories and operating expenses. But detractors contend that some employees have suffered as a result of Dylex’s efforts to keep costs down. Currently, 43 employees who were laid off without severance pay when Dylex shut down its Canadian Clothiers division in Toronto have taken their case to the Ontario labor ministry. For his part, Posluns pointed out that most of the employees at the operation were given jobs elsewhere and that the plant was shut down because of its costly, outmoded techniques. The alternative

was to purchase textiles overseas.

Such ripples aside, Dylex has ambitious plans for expansion in the next 10 years. Kay forecasts that sales will easily break through the $l-billion level this year and reach the $4to $5-billion range by 1993. This year Dylex plans to open 50 new stores in Canada. And for the first time, said Posluns, the company is in a financial position to make a major acquisition in the U.S. market. A number of factors are working in Dylex’s favor. For one thing, says Ira Katzin, a merchandising expert with Pitfield MacKay Ross Ltd., consumer psychology is improving, and Dylex will be well placed to cash in on the resurgence in demand. But the real basis of Dylex’s success will continue to be the entrepreneurial talents of the odd corporate couple—Kay and Posluns.