The stretch of beach at 94th Street in Ocean City could be described as South Moon Under's original headquarters. In the 1960's, this is where Frank Gunion would regularly paddle out on his longboard to catch waves, battling a beach break prone to dangerous currents. Every so often, he'd surf elsewhere—the Indian River Inlet or Assateague—but 94th Street was the place you'd go first if you were looking for Gunion, who still refers to that era with reverence and nostalgia, as "back then."
"Back then, surfing was relatively new to the East Coast," says Gunion, 59. "It wasn't well known or understood. Now it's a professional sport with a huge following."
Four decades later, the now bespectacled Gunion sits in his office at South Moon Under's Eastern Shore headquarters in Berlin, salt and pepper scruff covering his jowl. On this day, he's keeping a close eye on a tropical storm heading up the Eastern seaboard, thinking, perhaps, that the resulting squalls might bring some nice swells. But he also has more important things to do these days than wax his board: His local clothing chain has 11 successful stores across the mid-Atlantic that have taken four decades of cautious, deliberate planning to establish.
Since the first location opened in 1968, South Moon Under has slowly but surely become a staple of Maryland's fashion and retail scene. Not only that, it is a chameleonic business that shifted its focus midstream, changing from surf shack to sophisticated fashion boutique without a glitch. It has succeeded through boom and recession. And over the past couple of years, it has grown, while some national retailers have downsized or folded. Linens 'n Things, which filed for Chapter 11 bankruptcy protection in May, planned to close 120 of its 589 locations, but now will liquidate by Christmas. Foot Locker reported its income was down 78 percent in 2007, and said it would close 414 of its 3,785 stores, though so far this year it's rebounded slightly. Sales for Ann Taylor were down more than 9 percent last December and 7.7 percent so far this year. The chain plans to close 117 of its 900 stores in the next two years.
And yet here is South Moon Under, a fashion boutique without a national presence, planning to open seven new locations within the next five to six years. Gunion will not disclose the privately held company's revenues, but does say that "We've been in this business for 40 years and never lost money. We're in a recession, and we're still up 5 percent from last year."
Forty years ago, Gunion may have known what he was doing in the Prussian blue waters of the Atlantic, but onshore, he often felt a bit over his head. "If you had asked me then what I wanted to be, I would have said, 'I don't know,'" says Gunion. "I was studying international relations at George Washington University, but quickly abandoned that as I adopted the Ocean City area as my own."
He decided to open a surf shop—his parents offered up the initial investment—giving it a name that came from Marjorie Kinnan Rawlings' fictional tale of a family living near starvation out in the Florida scrub. Sandwiched between Minute Market and a couple of motels, South Moon Under was a one-story cedar box; the name arced over the door, with two words flanking it on either side: "surfboards" and "swimwear."
"We had a lot of fun in those early days," he recalls. "I knew nothing about the business, so I didn't know when to worry. The operation was so small, I learned as I went along." When asked how the store did financially that first year, he says, "I would characterize it as eking it out. We didn't lose money and things came out fine. But really, it was more about establishing a way of life than a business."
Gunion didn't accept that this was his calling until the early 1970's. "Back then, while we were a steady business and growing, there were a number of national issues that firmed up my belief in pursuing this lifestyle," he explains. "This was a time defined by the Vietnam War, and the assassinations of John Kennedy, Robert Kennedy, and Martin Luther King Jr. For our generation, there was a high level of disregard for the establishment. We didn't want to be part of it. We wanted to be independent of that." And so the kid who studied international relations and even considered foreign service chose to stay where he was, on a spit of sand, out in the scrub, selling bikinis and 10-foot Bing surfboards.
But something happened after the second store opened in Rehoboth Beach: The surfboards began to disappear and clothing moved to the front of the shop. By the time the first mainland location opened in Bethesda in 1980, the hibiscus-printed board shorts and bikinis had given way to contemporary fashion and accessories.
"I'm fairly laid back, so as more people were employed at the company, we became a consensus organization," says Gunion. "The consensus was there needed to be more clothing. We made a gradual transition where clothing was added to the surfing, and then the surfing was slowly subtracted."
Of course, a lot of stores sell clothes, right? Perhaps, but what makes South Moon Under work may be Gunion's business philosophy: Slow and steady catches the wave. He's even described the pace of South Moon Under's expansion as "glacial."
"We could have chosen to have 100 stores by now," he explains. "But we do business with a number of small, largely unknown brands that can't supply a company with 100 stores." He adds that each fashion label sold at South Moon Under is "cherry-picked," and a major effort is made to find companies in Maryland and the mid-Atlantic region.
Jeannette Cowan, South Moon Under's vice president of merchandising, has been with the company for 29 years (she was hired right out of college in 1979). "Slow and steady is the perfect description for Frank's vision," says Cowan. "He's a private owner who has spurred growth from the inside out. Unlike The Gap, which gets outside funding so it can grow very quickly, we've never chosen to do that."
Another obstacle that has caused problems for other growing chains (and of which Gunion is acutely aware) is maintaining high-quality customer service even as the company expands, because when things get big too fast, management tends to lose control over the details. "We have a high level of customer allegiance," notes Gunion. "They know we're really on top of the clothing world and are finding the best-priced, best-made stuff."
"This company was founded on finding merchandise that's different," adds Cowan. "We have seven buyers who look at thousands of vendors every year." As a result, South Moon Under's 11 stores receive new merchandise—not just fashion, but jewelry, accessories, and home décor—every day. The clientele, described by Cowan as "educated, fashion-forward, upper income men and women," are loyal because of it. "It's very different from a larger company that gets new stuff every two months," she says.
One other difference: "We are anti-mall," Gunion states emphatically. South Moon Under is not a chain where the same sign with the same font rests over every door. In fact, South Moon Under makes a concerted effort to give each location the feel of an independent, locally owned store, one that mirrors the aesthetic of the surrounding neighborhood. For example, the Ocean City location features weathered cedar shingles and white-trimmed windows. In the retro-modernist nook of Baltimore City's Harbor East, the South Moon Under sign beams in baby blue neon.
Gunion's personal life, too, has come a long way since 1968. He's married with five children, ranging in age from 16 to 34, and lives on the Eastern Shore near South Moon Under's offices in Berlin. His rotator cuffs have worn thin from the many years of paddling, so for now he's content bodysurfing. While he thinks about the company's direction, of course.
He's very excited about the newest location at National Harbor, the super-sized mixed-used project on the Potomac River (South Moon Under will happily neighbor other local companies including Govinda Gallery, Occasions to Remember, and CakeLove). There's even been some chatter about expanding into Los Angeles, Miami, or New York. But Gunion is taking his time figuring it out all out. Just like he did "back then."
"There are people who have been with the company for a long time," he says. "They want and deserve growth."