A multitude of small businesses suffered through the recent credit crunch, but J.W. Hulme Co. found a special niche: Its travails, including a 40 percent sales decline and a barrel of red ink over a two-year-period, were detailed on the front page of the Wall Street Journal.

As it turned out, however, the article published in January 2009 helped the St. Paul manufacturer of luxury luggage mount a recovery that was heralded in a follow-up WSJ article published a year later.

In the process, there was a load of pain and suffering surrounding the company's roller-coaster ride, including a second home mortgage, some maxed-out credit cards and the forced sale of a valued collection of antique automobiles.

Chuck Bidwell, 65, and Jen Guarino, 48, who met as consultants at a Twin Cities software company, bought the century-old Hulme in 2003. At the time it was grossing just $450,000 and losing about $150,000 a year manufacturing leather and canvas backpacks, gun cases, duffel bags and other outdoor sporting products.

They promptly began adding a growing line of high-end luggage, briefcases and handbags and embarked on an ambitious growth path that more than tripled annual sales to $1.5 million by the end of 2007.

It was a logical transformation, given Guarino's 10 years of experience in product development and brand management for several major handbag manufacturers.

"She immediately saw the vision that is the company today," said Bidwell, a chronic entrepreneur who once co-owned a clean-room manufacturer serving medical and electronics clients, was a partner in the old Red Owl supermarket chain and also founded a chain of corporate fitness centers.

Trouble was, they tried to grow too fast with borrowed capital that added up to a $1 million inventory and $2 million of long-term debt by the time the credit crisis began to build in late 2008.

While conceding they might have been over-reaching with their borrowing and inventory, however, Bidwell argues that there was a rational strategy involved.

"Our core sales growth supported our projection that 2008 sales would approach $2.9 million," he said. "It was not a mythical invention."

Nonetheless, with a debt-to-equity ratio of 5.5 to 1, high enough to rattle even the most cooperative loan officer, their bank delayed a decision on their request for a $200,000 operating loan for nine months before finally rejecting it.

Meanwhile, as cash reserves dwindled, suppliers began demanding upfront payment for raw materials. Guarino loaded herself with credit card debt and Bidwell took a $100,000 second mortgage on his home. But it was hardly enough.

'Blood in the water'

Bidwell and Guarino, who relied on frequent catalog mailings to create sales, were forced to slash their 2008 mailings to 175,000 copies, from 600,000 the year before. That cut sales to $1 million in 2008, and to $890,000 in 2009. Worse, they were forced to lay off 14 of their 19 employees in January 2009, a month after the two of them quit taking salaries.

That's when a dose of serendipity intervened. Seeking a focus for an article on the growing credit problems of the nation's small businesses, the WSJ found Hulme through WomenVenture, a St. Paul nonprofit business incubator of which Guarino is a member.

The ensuing article cleared the path to recovery. After fending off several unacceptable bids from would-be investors "who smelled blood in the water," as Bidwell put it, the owners were contacted by New Jersey-based Olympus Capital Investments with a reasonable offer.

In September 2009, Olympus bought 49 percent of the company, thus hastening a recapitalization that Bidwell and Guarino had already begun.

Bidwell shouldered yet another painful decision when he decided to sell his collection of antique Buicks accumulated over 20 years; that trimmed the bank debt by nearly $800,000. The Olympus connection also persuaded private lenders to convert $450,000 of debt to a 15 percent share of the company.

The upshot: Long-term debt is now less than $1 million, the debt-to-equity ratio is a comfortable 2.1-to-1 and, with the Olympus infusion padding the working capital account, Hulme will be mailing upwards of 350,000 catalogs this year.

Equally important, the Olympus presence helped Hulme close a deal in January with New York-based Steven Alan Showrooms to act as a sales agent in North America, Europe and Japan. So far, Hulme bags have been sold into 30 Barney's men's and women's fashion shops across the country and into Ships department stores in Japan.

And the payoff: With sales topping $1 million by the end of August, and the busy hunting and Christmas seasons coming up, Hulme is on track to gross about $2.4 million this year, Bidwell said.

Better yet, with Olympus' help, Hulme has automated its manufacturing and sales systems to broaden profit margins significantly.

Oh, yes, and Bidwell and Guarino have rehired their laid-off employees and added four more to the roster. They also have started paying themselves salaries again.

Dick Youngblood • 612-673-4439 • yblood@startribune.com