Still crazy after all these years

By Andrew Gomes
Advertiser Staff Writer

The last three years have been kind of nuts for Rick Ralston. But the founder and driving force of Crazy Shirts Inc., a kama'aina business that has struggled with losses and misdirection since 1998, says he has regained his focus and once again has profitability in sight.

Crazy Shirts' store at Ala Moana is one of the company's 14 locations on O'ahu Eugene Tanner • The Honolulu Advertiser

Company President Randy Yeager, who returned to Crazy Shirts in September after an absence of nearly two years, said the initiatives are paying off and the company should be back in the black this year following three years of losses.

Of course, the future of the company and its 600 employees cannot be certain. But the developments are encouraging to Yeager and especially Crazy Shirts' 59-year-old patriarch, who has devoted 37 years of his life to the business.

"I kind of feel like it's a new beginning," Ralston said.

Since setting up Ricky's Crazy Shirts, a T-shirt airbrush stand in a converted gardening shed at Waikiki's International Market Place in 1964, Ralston has made the business grow over the decades — expanding to the Mainland in the '70s, exceeding $10 million in annual sales in the '80s, and reaching $90 million in sales with more than 50 stores in the mid-90s.

Success allowed Ralston to pursue his passion for collecting antiques and preserving historic property through Ralston Development Corp., a sister company to Crazy Shirts under parent firm Ralston Enterprises.

His investments and philanthropic endeavors included Island mansions, the Lahainaluna Hotel (now Lahaina Inn), David Paul's Lahaina Grill, 'Aiea Sugar Mill, and millions of dollars of collectables.

But in the late '90s, trouble emerged on multiple fronts. Crazy Shirts' local sales slumped with the Japanese economic crisis. Several Mainland locations suffered and were closed. Some at the company felt the brand had lost its edge. The business also lost its license to use the Kliban Cat image, something that had been a mainstay design.

Meanwhile, real estate investments soured. The sugar mill, which Ralston envisioned transforming into a grand manufacturing/retail sales outlet with sugarcane train tours, turned into a liability. Redevelopment costs spiraled as the company was falling short of cash. Unable to sell the property, Ralston was forced to demolish the historic site and turn it into industrial lots.

In the wake of the constraints, Crazy Shirts laid off 140 employees and moved its manufacturing plant and headquarters to California in 1997. The company also had to restructure near-term financing and hired a corporate turnaround consultant in 1998.

In 1999, lenders pressured Ralston, who up until then had only internal staff on the board, to appoint an outside slate of directors. And Bill Almon, former president of retailer Danskin, was appointed Crazy Shirts president. Also that year, Ralston sold the Lahaina Inn and Lahaina Grill.

The restructuring helped, but it also threatened to take Crazy Shirts in a direction that didn't sit well with its founder.

"I don't think the (previous) board of directors much related to our business," Ralston said. "They didn't relate to me, and I didn't relate to them. It was just oil and water — a nightmare beyond imagination."

Ralston, a board chairman with passionate ideas for Crazy Shirts, said directors loaded up on inventory, had different opinions on fashion trends and wanted the company to devolve to "Ricky's Crazy Shirts and grass shack."

Ralston says he was against all of it, but the most painful change was a board decision to raise cash by liquidating his prized collection of antique furniture, fixtures, appliances, books and toys.

Still pained by the experience, Ralston recalled how a couple of warehouses full of eclectic items he had accumulated since the 1960s were emptied, shipped to the East Coast and hastily sold at an uncataloged "garage sale" auction.

The book value of Ralston's collection — that is, the total of what he paid as long as 40 years ago — was $4.8 million. Ralston, who figures most items had appreciated, said the auction raised $2.8 million.

Ralston managed to keep 3 percent of his collection. All of it is displayed throughout Crazy Shirt's headquarters, which moved back to the company's Halawa Valley building in 1999.

Another casualty of the turmoil was the board, which resigned in August after 18 months of service and head-banging with Ralston. They were replaced by Yeager, who replaced Almon as president and serves as board co-chairman with Ralston; John Loevenguth, Crazy Shirts chief operating officer and chief financial officer; Cliff Slater, chairman and founder of Maui Divers of Hawai'i; Harold Johnson, former chief executive of Honolulu jewelry firm Sultan Co.; and David Auchterlonie, chief executive of the turnaround consulting firm previously employed by Crazy Shirts.

Ralston said the new board better understands the company. He describes his co-chairman status with Yeager this way: "I'm the idea man, and he runs the operation. He also keeps my crazy ideas from getting too far out of hand."

Yeager said Crazy Shirts is getting "back to basics" by jettisoning noncore real estate investments, and focusing on efficiency and growth of core operations.

Recently, Crazy Shirts raised $2.5 million by completing the sale of its retail building at 151 Ka'iulani Ave. in Waikiki.

Soon the company expects to begin selling pieces of the former 'Aiea mill property. Yeager anticipates completing infrastructure improvements within 60 days, at which time sales of 15 industrial lots can proceed.

The city is proposing to buy nine lots. Crazy Shirts has a contract to sell one more to a private investor. Five remain available.

As the mill debacle is put behind the company, not only will some of its investment be recouped, but a major distraction will be gone, returning the focus to designing, making and selling shirts.

The retailing side of the business, according to Yeager, has rebounded. He said earnings before interest, taxes, depreciation and amortization is positive.

Last year sales were flat, though revenue is expected to increase this year. To do that, Crazy Shirts has lowered prices of its basic shirts. It also is emphasizing its connection to Hawai'i with designs, including a new product appearing in stores these days: a cotton wash-and-wear aloha print polo shirt in five colors.

To push growth of its mail-order catalog/online business, which doubled last year, Crazy Shirts is purchasing mailing lists and redesigning its Web site.

The number of retail stores, 42, is about the same as last year, as the company closed underperforming stores in Hawai'i, California, Guam and Alaska while it opened stores in Waikiki, on Maui and in New Orleans. Among the closures were some factory outlets, where discontinued merchandise was sold at big discounts.

In general, Neighbor Island and Mainland stores are doing better than stores in Waikiki and Guam, Yeager said. Of Crazy Shirts stores, there are 13 on O'ahu, 13 on the Neighbor Islands, 13 on the Mainland and three in Guam.

He added that if the New Orleans store continues to perform well, Crazy Shirts will probably put another store or two there. Other new markets with potential continue to be sought, Yeager said.

To help finance growth — including new products, stores and catalog operations — Crazy Shirts has retained a boutique investment banking firm to raise capital.

"Right now we're just exploring options," Yeager said. Selling the company is not a goal, though it has not been ruled out.

Ralston joked that he's been talking about retiring for 30 years, but said no matter what happens, he wants to stay involved with the company. "It's my baby," he said. "It's been my whole focus in life."

Andrew Gomes can be reached by phone at 525-8065, or by e-mail at agomes@honoluluadvertiser.com.