Veteran Twin Cities businessman Paul Grangaard has walked iconic dress shoe manufacturer Allen Edmonds back to solid ground.

Retail sales are up almost 25 percent in 2010 at the Wisconsin-based shoemaker's nearly 30 company-owned stores open at least a year. And Grangaard, a longtime Piper Jaffray investment banker and executive who later went into the private equity business, expects this year to hire back more than the 50 folks laid off two years ago at the 550-employee company.

The company, one of America's few remaining domestic shoe manufacturers, also has reintroduced several classic lines of men's dress shoes. Under Grangaard, Allen Edmonds added "Rediscover American Workmanship" as a marketing theme and has added retail stores in downtown Minneapolis and several other cities in recent months.

"This is a good place and we laugh here again," said Sue Kultgen, a 26-year customer service representative at Port Washington headquarters a half-hour north of downtown Milwaukee. "We had our moments where we tiptoed around. Paul is an awesome guy. He sits in an open cubicle like everybody else. He's not afraid to take a gamble on bringing back some of our past bestsellers."

Kultgen said Grangaard "must be making some good decisions. We had a job fair here last week."

Grangaard, 52, credits a financial restructuring led by his former firm, Goldner Hawn, with creating the breathing room that saved the company in 2008. He also credits line workers in the stores and factory, who he says impress him every day with their skill, commitment and creativity.

"Our turnaround is ahead of schedule," said Grangaard, who commutes several days a week to Milwaukee. "This is a very intellectually stimulating and spiritually rewarding experience. As good as I've had."

$300 a pair

Grangaard picked a tough industry. He operates in the high end of the shoe business. A pair of Fifth Avenue or Park Avenue dress shoes can cost $300 or more. But loyal customers usually keep their shoes for decades with help from the factory.

"We think we're also the world's single-biggest cobbler," Grangaard said. "We'll sell 400,000 pair of shoes this year and 'recraft' 60,000 pair [with toe-to-heel overhauls] for about $100 a pair."

Allen Edmonds also opened a 150-employee Dominican Republic plant several years ago to make lower-cost boat shoes that compete with Chinese imports.

Part of the recovery includes Allen Edmonds sales of baseball-themed shoe trees, tie racks, socks and accessories. But dress shoes still drive the business.

"Allen Edmonds is expensive and high-quality," said Troy Duncan, who heads the manufacturing practice at Grant Thornton in Minneapolis. "My dad wore Florsheim. They are now made in China. They can make a good shoe in China. But the only dress shoe I buy is Allen Edmonds, and I just sent a pair to Milwaukee [to get rebuilt]. It's hand-sewn. I like saying that I wear a shoe that seems almost as old as some of the kids I hire out of college."

Allen Edmonds sales, which will top $80 million this year, peaked in 2005 at $90 million and slid to an undisclosed level for three years.

Goldner Hawn purchased the company from longtime owner John Stollenwerk in 2006, and an insider was named CEO as Stollenwerk retired. By the summer of 2008, as the economy collapsed, shoe sales plummeted and Allen Edmonds was headed toward insolvency. The CEO left. Grangaard, who was acting as interim CEO while he interviewed mostly New York executives for the job, decided they "didn't fit the company."

After consulting with his partners, Grandgaard resigned from Goldner and took over as chief executive. Goldner partners agreed to invest an unspecified amount to keep the company running, and a consortium of bankers restructured loans in return for a 25 percent stake.

To stop the bleeding, Grangaard laid off nearly 10 percent of the workforce. Management took pay cuts that ranged from 5 percent to 20 percent.

Back to the core

People don't buy dress shoes when they think they're losing their job -- especially at $300 a pair. But Grangaard and his troops believed in the brand and concluded, after consulting retailers and customers, that Allen Edmonds had taken on too much of a European theme.

"We had gotten away from our core customer," Grangaard said. "I had lived in the target market for 30 years. At Piper, I had guys' names attached to those classic dress shoes."

Allen Edmonds restored the "Timeless Classics" line of four American dress shoes in 2009, all of which proved top sellers. The business turned around in the second half of last year and has been growing steadily enough to require overtime in the plant and, recently, some hiring.

The average worker makes about $15 an hour, plus health benefits, a 401(k) retirement plan and a profit-sharing bonus.

"When Paul came in to be 'the guy,' things started to change," said Ed Pawlowksi, a 26-year veteran who works in engineering and shoe development. "He gave us direction but he let us do what we know how to do. He was willing to listen. He's got vision. Paul stabilized everything. He won't say that because he's humble and understated."

Grangaard retained several longtime executives in manufacturing, technology and elsewhere. He also brought in some new blood from Minneapolis. That includes Al Dittrich, a onetime Dayton Hudson executive who runs retail stores and e-commerce; and Mark McNeill, a longtime men's tailored clothing buyer at the former Dayton's and at Macy's.

Grangaard also has added a tag to the Allen Edmonds name: "The Great American Shoe Company."

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com