A typical Saturday afternoon finds Frank O’Connell browsing the greeting cards displays in retail stores and calling one of his merchandisers by cell phone to ask why there are empty slots where the finest Gibson Greetings, Inc. products should be. Since he was named CEO of the Cincinnati-based company last August, it’s been a seven day-a-week job for the high-energy, hands-on O’Connell.
Gibson has a tiny 9 percent share of a market dominated by Hallmark (45 percent) and American Greetings (35 percent)-and a troubled history that includes an embarrassing accounting error resulting in a 20 percent overstatement of earnings in 1993, losses from a derivatives debacle in 1994, and a failed attempt to sell itself last year. Yet when headhunters came calling, O’Connell saw opportunity amid the challenges. He points out that although Gibson was selling below book value, the company had divested its unprofitable gift wrap subsidiary in 1995 and was generating a good cash flow. Besides, he adds, “the card industry is stagnant, and I love going in and revolutionizing industries that have problems.”
O’Connell already has an impressive track record in such situations, displaying a flair for marketing and strong organizational capabilities. As president of Reebok Brands in the late 1980s, he beefed up sales in a mature market by borrowing inner-city kids’ tastes for the popular “Pump” shoes. As CEO of SkyBox International, a trading card company, he engineered a dramatic earnings turnaround, bringing a 1991 loss of $81 million to a $21 million profit in 1994 by cutting costs, revamping distribution, and leveraging licenses.
Following the sale of Skybox, O’Connell joined Gibson to tackle what may be his biggest challenge-ending or curtailing the up-front fees card companies pay retailers for exclusivity, sums that run to millions, have resulted in price hikes and dwindling sales, and make it tough for Gibson to wrest market share from competitors with deeper pockets.
“It’s killing the industry,” says O’Connell, who contends that the arrangements cost retailers-and the card industry the effect of continual competition, which drives innovation, generating product turns and volume. O’Connell intends to produce cards so innovative that retailers will want them enough to forgo fees.
To fire up excitement, he plans to launch new product lines, such as cards featuring sports and entertainment-themes that were winners for him at Skybox. He is also accelerating licensing activity at Gibson, tapping into the power of exclusivity by signing on top properties, such as
Also on the drawing boards are cards for overlooked markets like Generation Xers, senior citizens, and even pets. O’Connell has already rolled out his first new line dubbed the “Ripple Effect” for its snappy verses and jazzy graphics. Designed for ages 25 to 34, the line was produced from research to market in just three months, a far cry from the 15-month industry average.
Gibson’s sales and merchandising groups are in for a shakeup as well. “They’re our single largest cost of doing business, but they haven’t been directed efficiently,” says O’Connell, who not only browses store aisles, but is known to walk the company’s warehouses to check out returns.
When O’Connell took the CEO helm at Gibson, The Wall Street Journal reported that he received options to buy more than 500,000 shares of stock. In exchange for that healthy equity package, the Journal reported, he accepted significantly less than the $500,000 to $600,000 salary one would expect from a company of Gibson’s size. “I put my money where my mouth was,” O’Connell acknowledges.
So far the decision seems an astute move. Fans of O’Connell’s earlier successes have already driven Gibson shares to $20 from $12.50 last fall. “He’s an energetic and inspiring leader,” says Bennett Notman, an analyst at H.C. Wainwright & Co. in
GIBSON GREETINGS, INC
Education: BS in economics, MBA,
Family: Wife, Barbara; sons, Shaun, 9; and Mack, 11.
Leisure: “Having been raised on a farm, I love working on my farm in
Hobbies: Motorcycle enthusiast; he owns five.
Favorite Harley: “A retrofitted Harley 1300 cc. Softail Springer. My wife rides too.”
Recent books: Men Are From Mars, Women Are From Venus, by John Gray. On business books: “My sense is that everybody’s reading the same book, so I speed-read them to find out what everyone else is going to do and then do something different.”