AMERICA'S MOST SUCCESSFUL BUSINESSWOMAN Linda Wachner, the CEO of Warnaco, cut the debt, took the company public, and boosted the stock price 75%. Any wonder her holding is worth $72 million?
By Susan Caminiti REPORTER ASSOCIATE Jennifer Reese

(FORTUNE Magazine) – GOOD MORNING. What do we have for me to look at today?'' Linda Joy Wachner, the chief executive of Warnaco, breezes through the small ''stitch room'' on the 12th floor of her headquarters at 90 Park Avenue in Manhattan. Her question is directed at the eight seamstresses who are bent over their sewing machines, busily turning out samples of the bras, panties, and other lingerie that Warnaco will eventually manufacture in its factories and sell to the department and specialty stores. Even though she strides through the room nearly every day snatching up pieces of whatever fabric, lace, or trim the women happen to have on their tables, some of the seamstresses seem awed in the presence of the boss. One, enjoying a homemade lunch, nearly drops a chicken leg into her lap as Wachner sails by with her gaze riveted on a leopard-print bra and panties across the room. ''These are to die for,'' Wachner declares as she holds up the garments with a supremely satisfied smile. ''Beautiful. Just beautiful.'' The only female CEO of a FORTUNE 500 industrial company, Wachner is America's most successful businesswoman. At 46, she is in the forefront of a new generation of women in the upper echelons of American management (see table). Part mogul and part Jewish mother, Wachner has injected a once sleepy apparel maker with energy, focus, financial discipline, and fashion flair. Since she took over Warnaco in a hostile leveraged buyout in 1986, Wachner has cut the debt by 40% to $338 million, pumped up operating cash flow from $50 million to $92 million, and brought the company public. The stock price has risen about 75% from the initial offering last October to $35 a share, vs. 7% for the Standard & Poor's 500-stock index. Wachner has worked her magic in a brutal economic climate that has seen growth in white-collar employment evaporate, pinched consumer spending on apparel to virtually nothing, and driven many of her department store customers straight into bankruptcy. Despite some signs of a business turnaround, the Nineties aren't going to get much easier for the American retailers that buy Warnaco's goods. So like other managers who prosper in difficult times, Wachner has learned to run her company with a near-fanatical devotion to three guiding principles: Stay close to the customer, keep on top of the business, and watch the till. ''We think that we're going to be known as innovative marketers and great product people,'' she says. ''But we're also going to be known as people who really understand how to manage the cash.'' Speaking of cash, Wachner's base salary and bonus of $3 million a year make her one of the nation's highest-paid businesswomen and put her behind all but a handful of male chief executives. And like some of her male counterparts, Wachner has attracted criticism for her financial package. In the months before Warnaco went public, she was permitted to buy the equivalent of 1.3 million shares for $4.67 a share, $15.33 less than the initial offering price of $20. All in all, she owns 10% of the company, worth $72 million. In 1990 Wachner sold 95% of Warnaco's activewear division, including Speedo bathing suits, for $85 million to a management group of which she and some Warnaco executives were a part. She is now planning to take this business, called Authentic Fitness, public at $14 to $16 a share. If the offering is completed, her holdings in Authentic Fitness will be worth at least $12.3 million. WACHNER'S DRIVE to strengthen Warnaco is unrelenting, and it has left her open to stinging criticism about her management style. The chief complaint is the familiar rap on any tough boss: She expects more than human beings can consistently deliver. Though he had heard all the stories about how difficult she was, Alan Pfeifer joined the company from Calvin Klein in 1989 to run Warnaco's Christian Dior men's business. ''I went into it thinking, 'I can handle this,' '' he says -- and then resigned after eight months. Now he says guardedly, ''I think she's weak in managing people correctly.'' Another executive was blunter: ''A lot of people have been run over by Linda. She will do anything, just anything, to get to the bottom line.'' At one meeting, recalls Angela Ahrendts, who was president of the Geoffrey Beene division before she left Warnaco in 1989, about 40 top executives were gathered in the boardroom. Says Ahrendts: ''One of the guys got up and started listing problem after problem he was having in his division without ever offering Linda even the slightest hint of how he was going to solve them. She got furious, and she screamed at him something like, 'Don't you know it's a given that businesses are going to have problems? I pay you to fix those problems!' '' Says Bernard Olsoff, Wachner's first boss at Associated Merchandising Corp. in 1966: ''If something is black, Linda will not say it's a darker shade than gray. She gets right to the point, and I think her frankness scares people.'' But scary or not, Wachner's manner is helping to make Warnaco a formidable contender in an unforgiving environment. Kathy Van Ness, who worked for the company as president of White Stag sportswear until 1990, echoes the sentiments of many former and present employees when she says, ''You cannot bullshit Linda. Be straight with her because she will always be straight with you.'' Wachner makes no apologies for her ways. ''Have I yelled at meetings? No question. Do I think I've ever hurt anybody? I hope not. Look, I just want people to be good, and I apply an enormous amount of pressure to get everybody moving this company in the right direction,'' she says. ''I know I push very hard, but I don't push anyone harder than I push myself. Last year I traveled 200 days, visiting stores and plants and so on. I've passed the time of feeling hurt over whatever negative things people say about me.'' Then, after a beat: ''It does still hurt, but it hurts a lot less.'' Warnaco employees felt the effects of that let-'er-rip style immediately upon Wachner's arrival in the spring of 1986. She lost no time paring down the portfolio of businesses from about 15 weaklings to two main cash generators: intimate apparel, as lingerie is known in the rag trade, and menswear. Out went the $25-million-a-year women's apparel business, consisting mainly of White Stag and Geoffrey Beene sportswear and Pringle of Scotland sweaters. With the brands' measly returns and stiff competition from other sportswear giants, Wachner knew it would take years -- and millions of dollars -- to get them into fighting shape. ''Rather than hope that times were going to get better, we got out of the businesses that we couldn't afford to grow and still be able to pay our debt,'' she says. ''We didn't get emotionally attached to the women's business.'' Last year intimate apparel produced 60% of Warnaco's $562 million in sales, and 69% of the $195.4 million in gross profits. In addition to its Warner's and Olga bra brands, which sell in the stores for $14 to $30, Warnaco has licensing agreements with top fashion designers Valentino, Ungaro, Scaasi, and Bob Mackie to produce high-priced ($40 to $50) bras under their names. The company also makes private-label goods for Victoria's Secret. In 1991, Wachner signed an agreement to manufacture bras under the popular Fruit of the Loom label, which Warnaco began shipping to Wal-Mart last month and will ship to Kmart in the summer. The bras, retailing for $7.50 to $9.99, give the company the benefit of offering products across a wide range of prices. The menswear division, which accounts for 32% of sales, manufactures and sells dress shirts, neckties, sportswear, sweaters, and accessories under such names as Christian Dior, Hathaway, Chaps by Ralph Lauren, and Jack Nicklaus. Though the division is making money, Warnaco and other menswear makers lost business for several years when department stores went full tilt into producing their own private-label dress shirts. Now Warnaco is slowly regaining some of those sales as the stores, disappointed with private-label profit margins, are returning to branded goods. Wachner has pretty much completed Warnaco's reorganization, but she shows no signs of easing up. Every week she pores over the selling reports that come in from many of her retail accounts. And she shops -- roaming store aisles around the country, shooting the breeze with the salespeople, picking up firsthand intelligence on which products folks are buying and why. Says Leslie Wexner, chairman of the Limited: ''Linda's strength is that she is constantly in touch with customers in the stores and her retailers.'' She works hard at building solid relationships with the merchants who stock her wares, spending countless hours with them to find out how she can expand her business within their stores. Says William Dillard II, president of Dillard Department Stores in Little Rock, Arkansas: ''I probably talk to Linda more than any other CEO I do business with.'' Wexner recalls that Wachner was in Hong Kong on Warnaco business early in the spring but took the time to meet with a group of Limited executives on a buying trip there. She wanted to hear from them how Warnaco and the Limited might work together better. Says Wexner: ''Linda is always willing to go the extra mile. I can't get some of my vendors to fly from Pittsburgh to Columbus.'' TO HELP TRANSLATE information into action, Wachner devised her weekly president's letter program seven months ago. Every Friday night the seven heads of her divisions fax her a one-page memo outlining any problems that might have cropped up in shipping or delivery that week, or why things went better than expected. ''This doesn't replace the monthly sales projections they have to produce,'' she says. ''I just want to have an overview on Friday night so we can attack any problems on Monday morning.'' For example, the company was waiting for some special laces to complete a new bra for the Warner's line. A Friday fax alerted Wachner there might be shipping delays, so she got right on the phone and the laces arrived on schedule. Says she: ''We don't wait 30 days to handle things.'' Spend any time with Warnaco's top managers and you'll see that she doesn't want them waiting even 30 seconds. Says Stanley Silverstein, 40, general counsel for the company: ''The words 'When you get around to it' are not part of Linda's vocabulary.'' That's why each of the top executives, Wachner included, carries a well-worn spiral notebook -- like you used in high school -- with the words DO IT NOW embossed on the cover in big black letters. Executives use the books to jot notes about meetings or conversations with Wachner, business projections, or anything that needs to be acted on quickly. Wachner began using the notebooks in her first senior executive job, and says they've always helped her stay focused and organized. ''If you want to do something with all your heart,'' she explains, ''then it deserves your immediate attention, and that's what the notebooks say.'' But don't top-level execs bristle at having to carry around $1.35 spiral pads as if they were school kids? ''No,'' laughs Joseph Di Ponti, who joined the company from Sara Lee last October as president of the Olga division. ''At one of the first meetings I attended, I sort of scratched my head trying to figure out why all these people had the same exact notebooks. Then Linda told me about them. She doesn't check what's in them, but I think it is a sound way for everyone to keep on top of what has to be done.'' Never far from the top of Wachner's own do-it-now agenda is watching over the cash flow, a function that, for her, ranks a close second to breathing. ''I know every single day what cash I've received, and I know what it's supposed to be,'' she says. ''And if it's not within a couple of dollars, then I'm on the phone calling company presidents for checks. I tell them, 'I don't want to disturb you; however, I need the money because we can't continue shipping to you without it.' '' Controller William Finkelstein, 43, explains Wachner's philosophy about money: ''An LBO doesn't leave you much room for error, and Linda made it very clear that we had to watch every dollar.'' In the past several years some of the biggest chains in retailing -- including Federated Department Stores, Allied Stores, Carter Hawley Hale, and R.H. Macy -- have filed for bankruptcy, leaving trails of unpaid bills and out-of-pocket creditors. Wachner is not a lady who is willing to be stiffed. In the weeks before the Federated and Allied chains filed for bankruptcy in & January 1990, she sent four of Warnaco's financial executives to the headquarters cities of the chains' nine divisions. There they stood in line to collect the funds owed the company. Then they chartered private planes or helicopters to fly to the banks where the checks were drawn and cashed them. Wachner's reasoning: ''I knew if we deposited those checks in another bank, they would take three business days to clear, and then Federated would be out of money.'' She hit it right on the button, and Warnaco was one of the few manufacturers to collect the bulk of what it was owed. Wachner believes the rash of big department store bankruptcies is over, since the weakest chains, such as Alexander's, have already fallen. But she is feverishly trying to build up the business she does with stronger retailers like Dillard's, May Department Stores, the Limited, and J.C. Penney. Since 1989, Warnaco has increased its private-label manufacturing for Victoria's Secret to $30 million a year, with the aim of boosting it to $50 million within two years. The Victoria's Secret division has been a springboard into other parts of the Limited. By the end of this year Warnaco will be producing shirts for Structure, the men's store, and blouses for the Limited. Security analysts who follow Warnaco are upbeat about its prospects. As is true of many LBOs, the company has endured six years of net losses because operating income has been diverted to servicing the debt. But Alice Beebe Longley of Donaldson Lufkin & Jenrette figures the company will post a net profit of around $40 million, or $2 per share, on sales of $625 million to $650 million this year. Says Bruce Missett of Morgan Stanley, who is looking for similar gains: ''Linda has been able to deleverage this company while under a tremendous amount of pressure from the retail industry. She has strong brands in stable categories with a lot of repeat business. I see this as a growth company going forward.'' From the time she was 11 and growing up in Forest Hills, New York, Wachner knew she wanted to run something. That was the year she lay flat on her back, encased in a plaster cast from her head to her knees, the first step in a surgical procedure to correct severe scoliosis. Hardly able to move and facing the possibility that she would never walk again, Linda became determined that whatever she did in life, she would call the shots -- not doctors, or parents, or physical therapists. ''The focus I have today comes from when I was sick,'' she says. ''When you want to walk again, you learn how to focus on that with all your might, and you don't stop until you do it.'' That brand of determination was evident from the first day Wachner hit the job market in 1966. After graduating at age 20 from the University of Buffalo with a bachelor's degree in business administration, she landed at Associated Merchandising Corp., the New York City buying arm of Federated and other department stores. Her pay: $90 a week. Robert Nesbit, a divisional merchandise manager at the time and now a senior partner at Korn/Ferry, an executive search firm, remembers her: ''Linda used to come flying through my door every morning hitting me with ideas on how we could run the business better. She wanted to tell our manufacturers how they could do more business with the stores. It was the right move, but she was pissing people off because she was going about it so forcefully. I thought, 'Either they are going to run this girl right out of here or else she's going to be running the place.' '' WACHNER ran -- first to become an assistant buyer at Foley's department store in Houston, and then the bra and girdle buyer at Macy's in New York City. While she was at Macy's, she met her husband, Seymour Appelbaum, a man 31 years her senior, who was sitting across the aisle on a flight from Florida to New York playing gin rummy. She struck up a conversation by announcing, ''That's the wrong card.'' They got married anyway. Later she admitted to him that she didn't know much about gin rummy. ''My husband was the first person who told me that I could achieve whatever I set my mind to, and I believed him,'' says Wachner. But the ten-year marriage was difficult because Appelbaum had a serious heart condition, and, says Wachner, ''I felt like we were fighting for his life the whole time.'' He died in 1983 at the age of 71, and Wachner regrets now that they had no children. Many of the people close to her have died: first her father when she was 23; then her only sibling, Barbara, in 1981; next her husband; and finally her mother five years ago. Her customers have become her surrogate family. By 1974, Wachner was in marketing at Warnaco, the company she would buy 12 years later. When she was promoted to a vice president a year later, her boss, Philip Lamoureux, told her it had taken a woman 100 years to rise that high in the company. Wachner was not pleased. Says she: ''He knew how aggressive I - was, and I think he was telling me I had better not expect too much more.'' David Mahoney, the CEO of Norton Simon, recruited her in 1978 to run the money-losing U.S. division of his cosmetic company, Max Factor. She took the business apart piece by piece, figured out where costs could be cut, really listened to the buyers in the stores, and produced a $5 million operating profit in her second year. Says Mahoney: ''Linda is a problem solver. If she gave you numbers for the business, you could go to bed at night and be able to sleep because you knew she'd make them.'' WHEN MAX FACTOR was taken over by Beatrice, Wachner saw her chance to run her own show. She raised $280 million and tried to persuade Beatrice's management to sell the company to her. But Beatrice didn't want to part with Max Factor, and within a month she was forced out.

Not long afterward a friend introduced her to Andrew Galef, a Los Angeles investor who helped finance the Warnaco takeover. Wachner had read that Robert Matura, the CEO of Warnaco, was taking the company private. She wanted to jump in with a competing bid. ''I don't remember who called whom,'' says Galef, ''but I do recall Linda being very excited and asking me, 'Where else are you going to find that many great brands under one roof?' '' On March 17, 1986, Wachner and Galef offered $36 a share for the company, and a bidding war erupted between them and Matura. By the end of April, Wachner and Galef won with an offer of $46.50 a share. The total price: $550 million, of which $500 million was borrowed with the help of Drexel Burnham Lambert. When asked at the time whether Wachner planned to keep the former management on board, she replied, ''They put those golden parachutes in themselves.'' So she pulled the rip cord. In those early days at Warnaco, Wachner was a whirlwind, meeting employees and visiting plants. Recalls Jack Semrad, who retired as president of the Olga division last October: ''The pace before Linda was much slower because business was easier to come by. She totally shook things up.'' Though Galef remains a director of the company and owns 5.7% of the stock -- worth about $40 million -- he has little to do with daily operations: ''I talk to Linda maybe once a week, but she runs the show.'' Now that she's got it running smoothly, she claims she is going to make time for a personal life. Since the company's public offering, she seems more relaxed and looks rested. Leaving her office one day, she spun around to a visitor while tugging at the waistband of her green skirt. ''Look, it's loose,'' she said happily. ''I think I've lost a few pounds.'' Occasionally she spends time on weekends with friends like TV interviewer Barbara Walters; John Pomerantz, the chairman of Leslie Fay; and Primerica CEO Sanford Weill. Says Walters, who met Wachner three years ago: ''We've grown very close in the past few years. Look, I'm not a kid, and to be able to make such a genuine friend at this point in my life is very special.'' Wachner cares deeply about her friends. Recently when Wexner was in Manhattan on business, she called him with a question. ''I sounded terrible because I had a bad cold, and I told her I just wanted to go home and go to sleep,'' he recalls. ''She said, 'No, come over to my house for some chicken soup and ginger tea.' She wouldn't take no for an answer, so I had the soup and the tea and then she sent me home.'' But not one of her friends would bet that Wachner will slow down anytime soon. The reason why is evident on a warm spring morning. She is standing in her flower-filled office excitedly showing a visitor the Warnaco video she had made to explain the company to institutional investors before last fall's stock offering. The voice-over is not that of some dulcet-toned professional announcer, but Wachner's, with traces of her New York accent. When the video ends, she clicks it off and asks with a big smile: ''So, do you love this company, or what?''