Talk about sibling rivalry. Since joining the family business in early 1991, Joan M. Johnson has clashed with her brother Eric G. Johnson over her role at Johnson Products Co. Vainly demanding a much bigger say in company decisions, the newly minted MBA chafed at her job as head of market research while her 40-year-old brother called the shots as president and chief executive of the Chicago hair-products manufacturer.
Now, she's getting her way: In a surprise Mar. 9 announcement, Eric resigned. And his 27-year-old sister is poised to take on much more responsibility at the $38 million outfit, one of the largest black-owned companies in the U.S. She'll be one of four executives in a newly created office of the president. Joan and Eric's mother, Joan B. Johnson, who owns 61% of the company, will continue as chairman.
The reason for the abrupt management change? "Joanie knows how to get to her mother," says her father and company founder George E. Johnson, who resigned as chairman and gave up his stake in Johnson Products as part of a divorce settlement with Joan in 1989. Although a written statement from the company says Eric left "to pursue personal business interests," Johnson insists that his son was ousted: "Whatever you're looking at is the will of the chairman." Joan Johnson, her daughter Joan, her son Eric, and company executives did not return repeated calls seeking comment.
Whatever the reason behind it, Eric Johnson's departure clouds the company's outlook. During his two and a half years as CEO, Johnson executed a sharp turnaround at the struggling manufacturer, which had posted four annual losses since 1983. He slashed production costs, pumped up Johnson Products' presence in beauty salons as well as in the Caribbean, and acquired several well-respected product lines. The leaner organization allowed Johnson to undercut rivals' prices with such brands as Ultra Sheen and Gentle Treatment without squeezing profit margins. "I've seen him definitely increase his shelf display and market share, but he has been very profitable in so doing," says Comer Cottrell, chairman of competitor Pro-Line Corp.
SOARING SALES. A look at the books supports Cottrell's view. Earnings in fiscal 1991, ended Aug. 31, grew 23%, to $3.2 million, on a sales increase of 14%, to $38.4 million, says Timothy Ebright, a portfolio manager for Eagle Asset Management, which holds a 3.25% stake in Johnson Products. In the firstquarter of fiscal 1992, sales rose 19% from a year earlier, to $8.6 million, and net earnings were up 27.5%, to $714,000. Last December, the company
declared an annual dividend ef 28~ a share, the first since 1980. And the stock has taken off: Since falling as low as 4 5/8 in late 1990, it has more than quadrupled in value. On Mar. 9, the stock closed at 19 1/2.
Yet the company still has a long way to go before regaining its dominance of the $1.5 billion black health-and-beauty-care market. Sales at No. 1 Soft Sheen Products Co., a crosstown rival, are more than double those of Johnson Products. The long slide at Johnson Products began in 1975, when the Federal Trade Commission forced manufacturers to put strongly worded warning labels on products containing lye. Only after competitors had made serious inroads with no-lye products did Johnson formulate its own versions. The company continued to respond only slowly to market trends until Eric took charge.
The question now is whether Johnson Products can continue its comeback without Eric. Not suprisingly, George Johnson, who's still a consultant to his old company, characterizes the four-person office of the president as "a joke." But people with less of an emotional investment in the company share his doubts. Says Ebright: "I will keep a very wary eye on the company over the next six months." Adds Cottrell: "Frankly, I think the timing may have been bad."
Worse than the timing, perhaps, are the hard feelings. Cottrell says the Johnsons had seemed "very happy" when they shared his box at Texas Stadium in the fall of 1990. They had come to watch Joanie's husband, Dennis McKinnon, play for the Dallas Cowboys. McKinnon and Johnson are now in the midst of a divorce. Even if the company prospers after this latest management shakeup, the Johnson family may have fractured for good.