You can call Warnaco boss Linda Wachner, 55, lots of things, and within New York City's viper-lipped rag trade many do--ruthless, cruel, abrasive, self-serving, vulgar. And then there are the people who don't like her. But no one ever accused her of being lazy.
As a junior buyer at Foley's Department Stores in Houston in 1968, Wachner would spend her downtime patrolling the streets to spot trends. Early in her career, she revolutionized the lingerie business by merchandising bras on racks rather than hiding them in boxes. In the 15 years since she won Warnaco in a hostile buyout, Wachner has used that aggressive style to remake the dowdy $600 million manufacturer of women's undergarments into a $2.5 billion apparel powerhouse, owner of a stylish collection of brand licenses that includes Calvin Klein, Speedo and Chaps by Ralph Lauren. All that hard work helped make Wachner one of the first women to run a FORTUNE 500 company and a top-paid CEO. Her cozy board of directors has regularly awarded her millions of dollars in annual salary and stock. Everything she has got, Wachner could argue, she has earned.
But last week, in the eyes of her many critics, she got what she really deserved: a very public complete dressing-down. Saddled with some $3 billion in debt and liabilities from Wachner's acquisition spree and stock buybacks, Warnaco filed for bankruptcy protection. Wachner's collection of fashion brands suddenly doesn't look too flattering. The fallout from a tabloid-headlined legal tussle with Calvin Klein, not to mention a slumping retail economy, adds another wrinkle.
Last year, as Warnaco's share of intimate apparel fell before the likes of Intimate Brands (Victoria's Secret), Banana Republic, VF Corp. (Vanity Fair) and Sara Lee (Playtex, Wonderbra), the company lost $338 million. Trading in Warnaco's stock, which reached $44 in 1998, was suspended last week after it tumbled to 39[cents] a share; Wachner resigned from the board of the New York Stock Exchange. Her personal stake in the company has plunged from around $200 million to $1.8 million.
"She got greedy," says a senior executive at one of the many department stores that became increasingly disenchanted with Wachner as she expanded her brands from the stores' exclusive environs to the warehouse floors of membership clubs like Costco, B.J.'s and Sam's Club.
Creditors want to get paid, shareholders want her out, and the SEC is looking into the company's accounting practices, but in defending her turf, Wachner could well redefine tenacious. And she'll have help. Her circle of support includes such corporate heavyweights as former American Express chairman Harvey Golub, a new Warnaco board member, and Citigroup boss Sanford Weill, whose Citibank, along with J.P. Morgan Chase, is part of a collection of banks that will provide Wachner with $600 million in debtor-in-possession financing. That will buy her a few months to try to clean things up. "Under my leadership over the past 15 years, Warnaco has built the best brands in the apparel industry; I do not believe our current circumstances are a reflection on that vision," Wachner said last week in a statement to TIME.