With clothing-maker Tilley up for sale, iconic hat could cease to be Canadian

Daily Brew
With clothing-maker Tilley up for sale, iconic hat could cease to be Canadian

The word iconic is an overused cliche in the retail world, but when it comes to Canadian brands, Tilley Endurables is right up there with Tim Hortons and Roots.

So when founder Alex Tilley announced Tuesday via an ad in the Globe and Mail that he was selling his Toronto-based travel clothing and accessories company, you might have wondered if this is another Canadian company destined to pass into foreign hands, like Tim’s or Hudson’s Bay Co. (now owned by New York parent company NRDC Equity Partners).

And even if it doesn’t, will a company so closely identified with one man’s vision prosper after he’s gone?

Alex Tilley certainly hopes so, but admits he simply doesn’t know.

"I haven’t the faintest idea what’s going to happen," Tilley told Yahoo Canada News in an interview. “I know whatever I daydream now will not come to happen. I don’t even worry about it.”

Tilley is putting his company on the market because his daughters, who live in Hawaii, have no interest in taking it on. At age 77, he wants more time for the travel and volunteer work that already fill much of his days. For instance, he’s headed to Cambodia next month to help distribute bicycles to children there and provide essentials such as glasses and toothbrushes.

"That interests me more than hats," said Tilley, referring to the product that started it all. "After 35 years I don’t think I’m the right guy to run it anymore. What’s needed is a young person [and] a lot of bucks to bring it to the level that it should get."

Tilley’s roots in founder’s desire for better sailing hat

Tilley Endurables grew out of Tilley’s desire to design a durable hat he could use for sailing. He was an art dealer with a thriving business at the time.

"We rented and sold quality works of art to businesses in Toronto," he said.  "We were probably the world’s largest in a very small business community."

Guessing that he wasn’t alone, Tilley oversaw the design of his ideal sailing hat in 1980 and began selling some out of his home.

"When I first made the hat they were very costly to make back then," he said. "God spoke to me and said, ‘Alex, people will not pay more than $16 just for a hat.’ So I priced it at $15.50, which was virtually the cost."

But after selling some at a boat show he found he could get more than that, eventually enough to wholesale profitably to retailers.

"I never, ever believed that people would pay $70 or $80 just for a hat," he said. "But people will pay for quality once they understand it."

He gradually expanded to other types of recreational and travel wear, with an emphasis on durability and ease of care while on the road.

Tilley now has six stores in Canada (three in Toronto, two in Montreal and one in Vancouver), as well as sales through some 3,800 retailers in 18 countries, along with catalogue and online sales. Being privately held, company sales figures are not available.

Tilley’s vaulted to public awareness when it supplied hats to Canadian Armed Forces personnel deploying to the Middle East during the first Gulf War. The company is still a supplier to the military.

"Isn’t it an honour to have that?" Tilley said. "That makes me feel so proud that I can serve in some way."

Selling a company whose founder’s name is on the building (as Henry Ford II once famously said) can be a tricky business, said Alan Middleton, assistant professor of marketing at York University’s Schulich School of Business. The brand could suffer if it’s not done right.

"It depends on how they manage the transition," Middleton said.

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Founders often remain involved after selling out. Harland Sanders became remained the face of the Kentucky Fried Chicken franchise chain long after he sold the company in 1964.

Tilley could perhaps retain a seat on the new company’s board or, like Col. Sanders, be its spokesperson giving its customer base an assurance of quality, said Middleton.

"It’s pretty routine for a buyout that the entrepreneur continues to be associated and I would expect that to be things like using photography, using endorsements, things like that," he said. "If they don’t do that, the job is certainly harder."

The deal might also be structured to tie the ultimate size of Tilley’s payout to meeting set financial goals during the transition period, said Middleton, which would give him a vested interest in staying involved.

“You tie the purchase price that Alex gets over the three years to making sure that the business keeps thriving, and that could include continued use of him,” Middleton said.

Almost all Tilley products made in Canada

Uncommon in an industry where most clothing products now are made in low-cost countries, Tilley sources almost everything from Canadian manufacturers, something he hopes the new owner will continue.

"I would really hope the hats at least continue to be made in Canada," he said. "I think it would be a terrible marketing idea, too, to have them made elsewhere."

His relationship with Canadian suppliers also adds flexibility to be able to evolve products. For example, Tilley’s Intrepid bag has gone through four updates in three years, with another improvement now in the works.

"We can stop production in mid-track, so to speak, and rework the item," said Tilley.

Middleton said most Canadians generally aren’t as picky about where goods are made, compared with Americans, but Tilley’s Canadian sourcing is an important part of its brand image.

"It’s part of their positioning but it’s part of their positioning that links it to quality, so the quality thing is what they’ve got to focus on," he said.

But Tilley knows he has no control over what happens once the company leaves his hands.

"Things are so costly to make because there’s so much man hours that go into them," he said. "The competition’s pretty stiff but we do make the best."

Tilley has no idea who might end up owning his company or for how much it might sell. BDO Canada, a financial consulting firm, is helping arrange the sale, he said.

Nor is it clear who potential suitors might be, said Middleton. Will it be a big Canadian clothing retailer, a Lululemon or a Reitmans, or someone with in a similar market segment, such as Maine-based L.L. Bean?

“Tilley is very niche,” said Middleton. “It is casual, older and vacation.”

Whoever ends up with it, Tilley said he’d be quite happy to stay involved.

“The company is my child so I don’t want to go away from it,” he said.