Bridget Foley’s Diary: The COVID-19 Impact — Amy Smilovic Invokes ‘Capitalism With Sensitivity’
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Amy Smilovic has long been a standard-bearer of independent American fashion executives. She stealthily built her Tibi brand into a contemporary powerhouse with staying power, even after a dramatic shift in creative direction about a decade ago, from sweet girliness to a cleaner, more urbane look. In her two-plus decades in business, Smilovic had navigated major upheavals — 9/11 and the 2008-09 recession — without every laying off a single employee. That run ended last week, when fallout from the coronavirus pandemic forced her to terminate a full 30 percent of her 85-strong work force. It devastated her, and her goal is for the company to emerge from this crisis strong enough to bring those people back. “I believe in capitalism that has sensitivity to it,” Smilovic said.
WWD: This is all stunning, isn’t it?
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Amy Smilovic: It’s stunning when you’re measuring time and minutes, when you can’t believe where your head was on Monday versus the previous Friday. It’s insane.
WWD: No one knows where it’s going.
A.S.: No one knows where it’s going. You are left to horrific imagination on how bad it could be. The health stories are devastating, when you read that hospitals are turning away people over 60 in countries like Italy. You can’t even fathom that you’re in a world that’s having to do that. It’s so devastating.
And then, I’m a small business and I’ve got basically 85 children that I’m looking after. And you see what happens when the engines of the world’s economy grind to a halt. It makes you realize how critical companies are to the survival of its people. We are a country that generates wealth, and that’s how people survive. So from a whole other perspective it scares me to death. You see China having a massive decrease in private companies and state-owned is what’s surging. I don’t ever want to find ourselves in that situation. I believe in capitalism. But this is so systemic.
When people call me and say, “well, screw the landlord, don’t pay your rent,” I’m thinking, OK, but we’re also a landlord, I have an office in SoHo that we rent out. Landlords are real people, too. Everyone is a real person here. There’s no bad guy other than this disease. Of course, there are bad reactions, but it’s weird to be in a place where you can’t just push [blame] off on someone.
WWD: You talked about the speed of change, and where your thought process was on Monday versus Friday.
A.S.: We’re global. We’ve always done a large percentage of our business in Asia, so we had a lot of visibility into what was going on and what could happen if [the virus] were to expand out. Even knowing that, not understanding how horrific it was going to get is what’s shocking to me, that I couldn’t see forward even that far.
WWD: No one did.
A.S.: The situation is so fluid. Working with our team, we’re trying very hard to grapple with the concept that our word on Monday may not be our word on Wednesday. I thank God for the team that we have, because we had to make some horrific phone calls yesterday to team members. The response has been incredibly sad. In my 23 years, I have never laid off one person, I’ve never done a pay decrease, ever. I’ve terminated employees for cause, but I have never laid off anyone.
WWD: You laid off for the first time yesterday?
A.S.: We laid off people yesterday.
WWD: How many people did you have to lay off?
A.S.: We laid off around 30 percent of our team. We are being very clear right now that those are layoffs, and that we’re taking measures to make sure that we’re around so that those people can get back to their desks as soon as possible. We made it through 9/11, we made it through ’08. My husband escaped from communism [in Czechoslovakia], his mom was in a concentration camp; they were fighters. I need to make sure that the company is here so that those people can get back to work.
WWD: The 30 percent you laid off, is that 30 percent of the 85?
A.S.: Yes.
WWD: Are you paying the remaining people during the closure?
A.S.: Yes.
WWD: I appreciate your honesty. It’s moving to hear you and others express such concern for your employees. Phillip Lim told me that he added an Archive Sale component online specifically to fund the company’s health insurance costs. Are you grappling with issues like that?
A.S.: That’s what’s made this so unbelievably difficult. My sister is my head of h.r. Her job was always just to process paperwork. Every single person who’s been laid off we have to treat differently. We had to lay off some people who have health issues. I am not terminating their health insurance; there’s no way. I mean, I will sell my house. I’m not going to let these people be put in a precarious, life-threatening situation. The game-changer is that you have to treat every single situation individually. Some people have two people in their household working so it’s clear they’re going to be fine being laid off. Some people are the head of their household and no one else is working. I need to give them an extra severance payout bonus because they’re going to need to have something to hold them over. The goal is that no one is being pushed toward a life-threatening situation.
WWD: Not every employer looks at layoffs that way. It’s just, OK, here’s whatever the rote severance is. And certainly not with the health insurance. That’s very good, that’s amazing.
A.S.: There are people going over to Cobra, people who are 30 and healthy. So every single person is being treated individually.…I put in an Instagram post, I feel like I have always been Undercover Boss times 1,000. I know exactly who was sleeping in a car before we hired them to work. We own our warehouse so we have a range of employees from different financial backgrounds and situations. The employees in my sample room have been with us for 15 years. So I know way too much about these people.
WWD: You obviously care as much as you know.
A.S.: I know too much. Part of me wishes that I was on another planet and didn’t know all this. But like I said, I believe in capitalism that has sensitivity to it.
WWD: Is there particular symbolism in closing the store? After the layoffs, it’s likely not the most difficult part.
A.S.: To be honest, our last day of having this store open, it was $1,000. So it didn’t make sense to have it open.
WWD: When did you close?
A.S.: Monday they went in to just batten down the hatches. I haven’t wanted to leave anyone without hope. I feel that the mistake many people [in this industry] make is that hope is their strategy. You cannot just hope for the best. You’ve got to take action. By taking this action now and refocusing the core team on the areas of the business that make sense, we are doing it so that we can survive. If I don’t do it, I am 100 percent certain that in a month we would be filing for bankruptcy. So this is about doing what we can do to survive right now so that we’ve got a place for these people to come back to.
WWD: Are you experiencing fall cancellations?
A.S.: We’re in production on fall. Those commitments are far out. For spring, it’s devastating to know that the bulk of the merchandise that you paid for back in October and November — you ship it in January and February. We will not be paid for the bulk of that merchandise from our U.S. and European partners. And we’ve already bought pre-fall and fall on their behalf. We don’t get deposits; we don’t get paid in advance. So we buy the inventory in October, we purchase it from the factories to get production started. When we ship it in January, we have paid our factories in full for that inventory.
WWD: What about fall — cutbacks on fall orders?
A.S.: My assumption is that anyone who is just trimming back right now, they have no knowledge of what’s going to happen. I have to prepare for the worst. I am assuming that whoever is open for business can take some fall. If they are not open for business they will not be able to take fall. Those are the realities. I mean, if someone right now can’t pay us for spring because their stores are completely shut down, they can’t pay us for spring. These are just realities. People do not have the funds to be able to pay for things. It is just cut and dry. So when my own salespeople are saying, well it’s good, they’re not canceling pre-fall yet, I’m thinking that none of this means anything right now; they don’t know what’s going to happen.
WWD: Are you working on resort or will you cancel the season?
A.S.: I have cut resort down to one sample line. I’ve already placed the orders with the factories; they’re already on the machines. We will see when that comes in if there is a season. We’ll just see. I have put all spring development on hold. The way I look at it is if the clouds lift and we are all able to commute in New York and get back to business, then we’ll put something together and it will be great, but…
WWD: If the clouds lift, you’ll get back to spring?
A.S.: We’ll get back to it. Normally we have worked a six- or eight-month lead time to develop it. Now if we have to do it in a month we’ll do it, we’ll do whatever we have to do. As of right now, people feel very much that we’re all in this together, we’re doing what we have to do.
WWD: Do you feel hopeful?
A.S.: I feel hopeful in that I have a husband whose mother was in Auschwitz for six years. I feel hopeful that they escaped Czechoslovakia and that life goes on. She said they escaped Germany; this is terrible but people survive. And so I’m hopeful that we’ll survive. As long as people [stop dying], then I’m hopeful.
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