ABSTRACT DEPARTMENT STORE EXPANSION, 1945 - 1959 Certain Aspects of the Extent, Means, and Results of Expansion in Selected Publicly Owned Firms by Marie E. Dubke In the early 19508 there was some doubt about the future of department stores. Much of the concern was based on population exodus to suburban areas, inner city deterioration, and increased competition from discount houses and other retail outlets. The department stores met the challenge successfully. Beginning in 1945, but especially since 1950, there has been almost continual physical expansion. Examination of the annual reports of the fifteen largest department store firms for the fifteen-year period 1945 - 1959 indicates that this expansion has been a three-pronged attack. First, existing properties have been remodeled, modernized, and expanded. Second, new stores have been built (or old stores relocated) primarily in suburban areas or shopping centers near new population concentrations. Third, there has been a tendency toward concentration in the industry. Existing stores were acquired by thirteen of the fifteen firms. Both in construction of new units and purchase of existing units, the firms utilized the name and good will of major stores by cir- cling them with suburban satellites. Marie E. Dubke Another important eVidence of growth was the increase in accounts receivable, occurring primarily in multiple payment con- tracts; by the end of the period the percentage of installment contracts to total accounts receivable was considerably greater for each of the firms. Physical growth and increased accounts receivable resulted in increased demand for capital funds. Not all the firms borrowed; moreover most of the borrowing firms used various types of debt instruments and more than one source. Borrowings were from banks, insurance companies, and institutional investors. Both stocks and bonds were privately placed, issued publicly and sold through syn- dicates. All of the firms utilized retained earnings; seven firms used common stock, preferred stock, or both to acquire existing unitms. Nine firms sold accounts receivable, nine used the sale and leaseback plan to finance new units. The source of capital most.<3ften used for both traditional debt instruments and sale and leaseback was the insurance companies. Physical expansion and credit extension resulted in increased sales during the period. Total department store sales kept pace with neither gross national product nor personal con- sumptitnn expenditures; this is undoubtedly due to a change in mix of consumer expenditures. While combined sales of the fifteen firms increased as a percentage of total department store sales, two fijnns :failed to maintain their positions. In each firm, sales t4 /I~ Marie E. Dubke and accounts receivable moved together much more than did sales and profits. Profits for each firm were compared with their sales and their average assets. Various adjustments were necessary to make the income figures of the selected companies consistent both among years and among firms. Since some companies owned prOperties While others used subsidiaries to hold their properties, the net income of the subsidiaries had to be incorporated with the income of the parent firms. Adjustments were also made to reflect the clean surplus reporting method and to offset changes in what has been generally acceptable reporting standards during the years of the study. Changes in equity reserves which did not appear as adjustments of surplus were reversed. Tests of profit indicate that subsidiary companies set up to nunnage real estate or to purchase accounts receivable acted as leverrs on the profits of the parent firms. Over the period, the combined profits of the fifteen firms increased as a percentage of prtxfits from all retail trade corporations. When sales are compared, it is noted that firms late in beginning expansion tended to lose position in the industry; they also had extended periods of declining profit percentages. fiflue annual report for each selected firm which includes most of the months of 1959 indicates that the period of physical exPansion in these department stores has not ended. Although Credit plans now appear stable, another cycle of revision may be Marie E. Dubke necessary as more variety chains offer their new credit plans. Currently, managements are planning operational changes to better serve the customer. So long as department stores thus continue to respond to changes in consumer desires they will remain dynamic and continuing institutions in the economy. DEPARTMENT STORE EXPANSION, 1945 - 1959 Certain Aspects of the Extent, Means, and Results of Expansion in Selected Publicly Owned Firms BY Marie E. Dubke A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Accounting and Financial Administration 1961' H. I} v'“ H z.” .6 /.:3.'~;' [32... l Acmowggsncmms I am greatly indebted to each of the fifteen firms selected for the study who delved into their archives to obtain for me copies of their annual reports dating back fifteen years; to Sears, Mont- gomery Ward, Aldens, and Hecht who loaned me library copies; and to Federated and City who sent photostats of various of their reports for the early years of the study. Without their active co-operation, this study would not have been possible. I would also like to express my sincere gratitude to the following persons associated with Touche, Ross, Bailey & Smart: John W. McEachren, executive partner, who suggested the topic; Kenneth P. Mages, New Ybrk partner and outstanding authority in retailing, who read the draft critically and made many helpful suggestions; the Detroit partners who graciously granted me several blocks of time to work undisturbed on the thesis and who made the facilities of their office available for the preparation of the final draft; each member of the proofreading, typing and office service departments of the Detroit Office, all of Whom made valuable suggestions regarding smoothness and consistency of detail; and Phyllis Peters who served as friend, critic, and sounding board. I am also especially indebted to Donald Taylor who helped me reorganize the material and bring the hypothesis into sharper focus; and most of all to Mom who encouraged and supported me, and Dad, whose attitude that I could not conceivably fail to complete the thesis was a constant goad leading to its completion. -ii- TABLE OF CONTENTS Page ACKNOWLEDGMENTS ........ ....... ....... .............. ......... 11 LIST OF TABLES .............................................. vi LIST OF GRAPHS ............. ...... ........................... viii Chapter I. THE PROBLEM DEFINED ........... ..... ................. 1 The proposed study ................................ 1 Relationship of the study and academic disciplines. 3 Sources of data ................................... 4 The department store defined ...................... 6 The firms selected ................................ 9 The year defined .................................. 10 Chapter outline ................................... 12 II. PHYSICAL EXPANSION IN SELECTED FIRMS ................ 14 Introduction ...................................... 14 Marshall Field & Company .......................... 23 The Hecht Company Stores .......................... 26 Gimbel Brothers, Inc. ............................. 29 R. H. Macy & Co., Inc. ............................ 31 Associated Dry Goods Corporation .................. 34 The May Department Stores Company ........... ..... . 38 Federated Department Stores, Inc. ................. 42 City Stores Company ............................... 47 Allied Stores Corporation ......................... 53 Mercantile Stores Company. Inc. ................... 59 Spiegel. Inc. ..................................... 65 Aldens, Inc. ...................................... 70 Montgomery Ward & Company. Inc. ................... 74 J. C. Penney Company ... ..... ...................... 75 Sears, Roebuck and Co. ........... ..... ............ 76 Summary .......................... ..... ............ 84 III. CREDIT EXPANSION IN SELECTED FIRMS .................. 86 IntrOduCtj-on ......OOOOOOOOOOOO0.000.0...0.0.0.0... 86 Receivables for selected firms .......... .......... 86 -iii- _iv_ Chapter IV. V3 VI. VII. Receivables as a percentage of sales ... ...... ..... Total department store credit ..................... Terminology used in annual reports ................ Various credit plans .............................. Summary .............................. ............. MEANS OF FINANCING THE EXPANSION ........ . ..... . ..... Introduction .... ........ . ......................... Cash purchases .................................... Sale of fixed assets .............................. Sale of receivables ............................... Borrowed funds .................................... Bank loans ........................................ Notes to insurance companies ...................... Sale of debentures ................................ Sale of equity securities ......................... Exchange of stock for new properties .............. Stock options ..................................... Miscellaneous forms of financing .................. Sale and leaseback ................................ Subsidiary companies .............................. Retained earnings ................................. Summary ........................................... THE FIFTEEN YEAR SALES PATTERN ........... ....... .... Introduction ...................................... The over-all economic picture ..................... Retail department store sales, 1945 - 1959 ........ Sales for the selected firms ................ ...... Sales and receivables ............................. Summary ....................... ..... .... ........... PATTERNS OF PROFITABILITY ... .................... .... Introduction ........... ...... ..... ..... ........... Adjusted income defined .. ......................... Profit for selected firms vs. profit for retail trade corporations ....... . ............ .. ........ Profits relative to sales ......... ................ Profits measured by assets utilized ... ........... . Profit summary .. ..... . ..... ............. .......... Growth over the period ....... .......... . .......... SUMMARY AND CONCLUSIONS ........ . . . . . ............. . . . APPENDIXES 00.coco-0000’.coco-0.0.00... ooooooooooooooooooooooo A" LISTING ‘OF STORES “OPERATED, 1959 . ........ . .......... ‘Ewederated Department Stores, Inc. ................. Page 93 95 97 102 105 105 106 108 109 109 116 119 122 124 125 127 127 130 133 135 137 137 138 141 145 155 157 164 164 164 167 169 171 179 180 182 191 192 Page The May Department Stores Company ................. 194 .Allied Stores Corporation ......................... 196 R. H. Macy & Co., Inc. ...................... ...... 200 Gimbel Brothers, Inc. ....................... ..... . 201 .Associated Dry Goods Corporation ..... ............. 202 City Stores Company ............................... 203 Marshall Field & Company ..... ...... ..... .......... 205 Mercantile Stores Company, Inc. ....... . ........ ... 206 B. GRAPHS ...................... ..... ................... 208 Sales, Accounts Receivable, and Profits by Firm ... 209 Profit as Percentage of Sales by Firm ............. 224 Profit as Percentage of Average Assets by Firm .... 232 BIBLIOGRAPHY ............................ ....... . ....... ..... 237 Table 10. 11. 12. 13. 14. 15. 16. 17. LIST OF TABLES Page Increases and Decreases in Retail Outlets by YEar ..... l7 capital Expenditures ...OOOOOOOOOOOO......OOOOOOOOOO... 19 Minimum Annual Rentals of Long-term Leases Reported Payable in the Succeeding YEar ...................... 22 J. C. Penney - Physical Expansion ..................... 77 Sears, Roebuck — Physical Expansion in Foreign DiViSionS ......OOOOO..........OOOOOOOOOOOOOOOO...... 81 Sears, Roebuck - Physical Expansion in the United States 0.0.00.0...00............OOOOOOOOIOOOOOOO0.... 83 Year End Balances of Accounts Receivable .............. 87 Accounts Receivable as a Percentage of Base Year, 1945. 90 Year End Accounts Receivable as a Percentage of Sales for the Year Then Ended I00.0.00...OOOOOOOOOOOOOOOCOO 92 .An.Approximation of Total Department Store Consumer credit ......COOCOOOCCOOCOO.......OOCCOC......OOOOOOO 94 Percentage of Regular Accounts to Total Accounts Receivable .......O......OOOOOOOO......COOOOOCO0.0... 103 Innounts of Accounts Receivable at Year End Reported Sold to Banks,Institutions,or Financial Subsidiaries. 110 Vnarious Borrowing Indicated in Annual Reports ......... 111 Borrowing by Year by Firm ..... 113 trijes of Financing Used During the Period ............. 136 National Income Statistics and Estimated Department Storesales 00.0.0000......00.00....0.00.00.00.00...O 143 comparison Of sales ooooooooooooooooooooooooooooooooooc 147 "Vi' -vii- Table Page 18. Sales as a Percentage of Base Year, 1945 .............. 156 19. Growth, 1945 - 1959 ................................... 158 20. Each Firm's Share of Total Industry Sales and Profits . 160 21. Each Firm's Share of Total Sales and Profits .......... 161 22. Comparison of Profits ................................. 168 23. Comparison of Profits as Percentage of Sales .......... 170 24. Comparison of Profits as Percentage of Average Assets . 175 25. Profit as a Percentage of Average Total Assets for Unconsolidated Subsidiary Companies ................. 177 10. 11. 12. 13. 14. 15. 16. 17. 18.. 19. LIST OF GRAPHS Page National Income Statistics and Estimated Department Store sales 0.000.000.0000.0............OOOOOOOOOOOOO 146 Sears, Roebuck and Co. ................................ 209 J. C. Penney Company .................................. 210 Montgomery Ward & Co., Inc. ........................... 211 Federated Department Stores, Inc. ..................... 212 The May Department Stores Company ..................... 213 Allied Stores Corporation ............................. 214 R. H. Macy & Co., Inc. ................................ 215 Gimbel Brothers, Inc. ................................. 216 Associated Dry Goods Corporation ...................... 217 City Stores Company ................................... 218 Marshall Field & Company .............................. 219 Spiegel, Inc. ......................................... 220 Mercantile Stores Company, Inc. ....................... 221 Aldens, Inc. .................................. ..... ... 222 The Hecht Company Stores .............................. 223 Profit as Percentage of Sales: Sears, Penney, A11 Retail Stores ......0.0.0.0..........OOOOOOOO......O. 224 Profit as Percentage of Sales: Montgomery Ward, Federated, All Retail Stores ........................ 225 Profit as Percentage of Sales: May, Allied, All Retail Stores 0........DOOOOOOOOOOCOOOCOO00.......... 226 -viii- -ix— Graph Page 20. Profit as Percentage of Sales: Macy, Gimbel, All Retail Stores 0.0.0.0....0............OOOOOOOOOOOOOOO 227 21. Profit as Percentage of Sales: Associated, City, All Retail Stores 0..........OOOOOOOOOOOOOOOO0.0.0.000... 228 22. Profit as Percentage of Sales: Marshall Field, Spiegel, A11 Retail Stores ................. ........ . 229 23. Profit as Percentage of Sales: Mercantile, Aldens, All Retail Stores ......OOOOOOOOOOOOOOOOOOIOOOOOOOOOO 230 24. Profit as Percentage of Sales: Hecht, All Retail Stores ......OOOOOOOOOOOOOOOOO......OOOOOOOOOOO0.0... 231 25. Profit as Percentage of Average Assets: Sears, Penney, montgomeryward 0.0.0.........OOOOOOOOOOOOOOOOO0.0... 232 26. Profit as Percentage of Average Assets: Federated, may, Allied ......OOOOOOOOOO......OIOOOO.....OOOOOOOO 233 27. Profit as Percentage of Average Assets: Macy, Gimbel, ASSOCiated ......OOOOOOOOOOOOOOO.....OOOOOOOOOOOOOOOO 234 28. Profit as Percentage of Average Assets: City, marShall Field, Spiegel 00............OOOOOOOOOOO...O 235 29. Profit as Percentage of Average Assets: Mercantile, Aldens, HeCht ......OOOOOO......OOOOOOOOOOOOOOOOOO0.0 236 CHAPTER I TI-E PROBLEM DEFINED The proposed study. - Department stores have experienced an era of expansion in the post WOrld war II period. This study examines the extent,-the means, and the results of this expansion in selected large publicly owned department store firms. Expansion, or growth, is measured in many different ways. Two of the evidences of growth, physical and credit expansion, are discussed. The primary reasons for their selection are availabil- ity of the data and relative independence of the factors as causes, rather than effects, of the growth. Less independent factors vary as a result of changes in other factors which in turn are the result of management decisions. Some factors vary somewhat auto- matically with the growth of the firm. While physical and credit expansion are affected by other factors and by total growth, the major portion of their expansion is not automatic, but requires specific management decisions. Therefore, these two evidences of growth have greater independence. There has been extensive physical expansion during the Individual firms have acquired existing units, expanded period . Changes of existing units, relocated units, and built new units. this nature are one subject of the present study. -2- Credit also grew extensively during the period. Part of the expansion resulted from more intensive use of relatively new credit plans in the industry. Some of these plans are outlined in (mapter III. Credit is often measured by yearuend receivables. Ehnce, the extent of credit growth is illustrated by comparing these yearly balances for each firm and by relating them to the total receivables for all department stores, as compiled by the Department of Commerce. But because receivables are affected by fluctuations of the dollar, they are also compared with sales for the year then ended. Changes in this relationship indicate true growth, for both receivables and sales are affected by the chang- ing dollar to almost the same degree. Various means of financing were utilized by department store firms during the period. In the study various kinds of financing are discussed and supported by reference to selected firms which have used them. Expansion led to increased sales for department stores. Of course the sales factor is both a dependent and independent Sales may be motivated by the department store compa- Therefore variable. nies, lsut they are dependent on consumer decisions. this factor is treated in this study primarily as an effect rather than a cause. Sales for the firms selected are related to economic history, national income statistics, total department store sales as published by the Department of Commerce, physical growth, and credit growth. Expansion should also affect department store profit-"S. Hence profits of the selected companies are studied. Profits are -3- compared with sales and with total assets (or capital) utilized by the firm. Where possible. profits from specific nonretailing activi- ties are compared with profits for the total operations of the company . Relationship of the study and academic disciplines. - Several dis- cflplines are utilized in the study. Accounting is used to adjust 13m data for comparability. Methods of financing expansion and growth relate to the fields of economics, finance, and accounting. Firms in their expansion set up new financial units. The various types of lenders and instruments used to evidence debt and owner- ship are related closely to the area of finance. Although profit- ability concepts stem from the field of economics, in practicality they must be measured with tools developed by the fields of account- ing and finance. Operations of the department store, relationship of size to profitability, and trends in size and location of new facilities relate to economics and marketing. Mergers and credit expansion draw on finance and economics. Actually this study uti- lizes nearly every field of knowledge within the business area - economdcs, marketing, accounting, and finance. Much information is available on specific phases of the departnent store. Trade publications are filled with articles on cycle balling, kinds of charge accounts, inventory management, applications of electronic equipment to the firm, fashion merchan- dise, sales trends of particular groups of merchandise, to name but a few. Books have been written concerning the histories of famous department stores and the men who made these stores -4- outstanding. Retailers tend to concentrate on merchandising and operational problems of the department store or firm: marketing I experts deal with problems which affect the total retail industry: financiers compute price-earnings ratios and judge investment opportunities. Accountants talk and write of the retail inventory method, its lifo applications, cycle billing, and inventory con- trol. News commentators cover openings of new department stores in shopping centers, Thanksgiving Day parades, and special promo- tional stunts which are successful. Architects argue advantages and disadvantages of selected features in shopping center design. However the writer could find no study of the growth of a selected group of department stores in the postwar period, the means of financing this growth, or its effect on sales and profitability. Therefore the results of this study may be of interest to students of the various business fields. In addition, it is hoped that com- parison of the firms and the accumulation of available data in a slightly different manner will also interest the practical retailer. Sources of data. - Many data are needed concerning the activities of department stores since 1945. Some of the material is found in books and periodicals. Services such as Moody's Manuals give yearly information concerning balance sheets and income statements, but detail is generally omitted. The particular department stores have all the information concerning their own firms. Publicly owned firms present much of this information to the stockholders in their annual reports which contain no.1; only financial data, accompanied by the opinion of a \ ‘5 ——~_—~ A“... mil -5- public accounting firm, but also written reports from management. ihere is a recent trend to include charts, graphs, pictures, fore- casts, highlights of the year, historical financial summaries, and lists, maps, or pictures of units owned. In most cases information needed for the study is found within the covers of these annual reports. Generally, each annual report contains only the latest year's information in detail. Even when comparative financial statements are presented, accompanying footnotes usually cover only the most recent year. This is a result of the common belief of both public and private accountants that the reader of an annual report is primarily interested in the current period. For example, details of a bond issue, outstanding last year but since elimi- nated, are considered of little interest to the current investor. While management discusses the new unit under construction or just opened, the number of stores opened last year or five years ago is rarely recorded in the current report. Even strictly financial data, in most cases, cannot be taken from the ten-year summaries. Each annual report purports to present fairly the current financial position and results of opera— ti‘ons of the firm for the year then ended in accordance with gener- ally accepted accounting principles. But accounting is dynamic, not static: and there have been changes in the past fifteen years in what is considered to be generally accepted. Consequently, for comparable statistics, the early reports have been adjusted to make them consistent with current year's figures. —6- Of necessity this study deals only with publicly owned corporations whose annual reports are available for the postwar pmfiod. Even some large department stores, such as the closely hehin L. Hudson Company of Detroit, are omitted, since the nec— essary reports are not available. The primary source of data for the study is the annual reports of selected firms for the years from 1945 to 1959. This anterial is supplemented by pertinent books, periodicals, and sta- tistics. Information is accumulated and summarized in tables and graphs to make trends (or lack of them) more evident. The department store defined. - Department stores are defined as retail stores carrying a general line of apparel, such as suits, coats, dresses, and furnishings; home furnishings, such as furniture, floor cover- ings, curtains, draperies, linens, major house- hold appliances, and housewares, such as table and kitchen appliances, dishes and utensils. These and other merchandise lines are normally arranged in separate sections or departments with the accounting on a departmentalized basis. The departments and functions are integrated under a single management. Establishments included in this industry normally employ 25 or more persons. This definition is suitable When we are examining indi- vidual units. HOwever, in order to compile information by firm, am must expand the definition. Many of the larger firms are com- posed of several stores. Some of these stores are full department stores according to the definition above: other units would be gassed as junior department stores because they carry an 7 1Standard Industrial Classification Manual, II, 74,cited in Federal Reserve Bulletin, XLIII (December, 155 ), 1324. _7_ nxmmplete line or assortment of goods. Also, some firms own units which are specialty shops. A specialty shop is a retail shopping institution organized into a number of selling divisions with consolidated ownership and management of many lines of merchandise in a single location. While conven- ience and specialty goods are carried, shopping goods are of chief importance, for the term is sel- dom applied to a departmentalized store handling convenience goods. A distinction is often made between department store and departmentalized spe- cialty store. The latter generally does Bot carry the variety of lines found in the former. It seems reasonable to include in the study as department stores only those firms which receive a substantial portion of their sales from department store units. For example, Bullock's is classed by both Standard and Poor's Industrial Surveys and Moody's Manual_0f Investments_ [Industrial Securities), 1959 as a specialty shop. While it is true that Bullock's original store is a department store, its six branches and the twelve I. Magnin & Co. stores are all spe- cialty shops. On the other hand, in 1959 Mercantile Stores Company operated thirty-nine branch stores and six small appliance stores. It also operated eighteen major department stores. Even if most or all of the branch stores are junior department stores, a sub- stantial portion of its sales are generated by department store units, despite the mixture of its units. Hence, our study will include Mercantile but will exclude Bullock's. if L 2John W. Wingate, Manual of Retail Terms (New Ybrk: mentice-Hall, Inc., 1931), p. 16. -8- Another type of problem is posed by mail-order houses Which are defined as retail establishments primarily engaged in selling merchandise by mail order. They may furnish their customers with a catalog describing and pricing their merchandise or they may receive their orders as a result of advertising in magazines, news- papers, and other media. . . . General mail order houses sell convenience, shopping, and specialty goods, largely in rural districts. To widen their market . . . in the face of improved transportation and growth of shopping centers, leading mail order houses are opening chain stores. These sell fast moving goods over the counSer, and take orders for all other goods cataloged. Without a doubt, the list of merchandise offered to the public by the mail-order house is identical with that carried by the defined department store. During the fifteen-year period, all four of the largest mail-order houses in the United States have operated retail outlets which would meet the department store defi- nition set forth by the government. One of the mail-order houses has announced intention to divest itself of its retail stores in favor of catalog offices. The catalog office is really a retail store in the sense that various merchandise (but not a full line) is displayed, clerks take customers' orders, arrangements for delivery or pickup are made, and credit terms are arranged. These functions are all performed by department stores. While the cata- log office itself may not employ twenty-five persons, inclusion of employees engaged in packing, delivery, and other service functions would bring the total 'to the required number. Inclusion of service Al 31bid., pp. 16, 22. ..- -9- employees is not inconsistent for Max Hess, Jr., President of a department store in Allentown, Pennsylvania, states that about seventy per cent of the employees of a large department store tOil "in the wings."4 Recently there has been an overlapping or crossing over of the lines between types of retail outlets by firms. Variety chains used to sell only small dollar items on a cash-and-carry basis. Furniture and rugs are now shown in many variety chain stores, and advertisements and signs suggest that the customer apply for the new charge account and pay only once a month. Department stores whidh were generally limited to several units now have formed "chains" of their stores across the country by adding branches, building new stores, and acquiring established department stores. As previously mentioned, the mail-order firms have been in and out of retail outlets in varying degrees during the period. This study excludes the variety chain firms since their entrance into department store merchandise began late in the period under consideration. Specialty stores are excluded by their limited.line of merChandise. However, mail—order houses are included because of their merchandise and activity in retail out— lets. Of course, firms whose units are primarily department stores are also included. The firms selected. - The largest publicly owned firms in the industry have been selected for study. Information on these firms flyw— v—— v fiYI 'r—w—vvr Y. 4Max Hess, Jr., Every Dollar Counts (New York: Fairchild Publications, Inc., 1952), p. 32. Q. \ \. -10- is readily available. Choice of the larger firms enables us to rmte any tendency toward concentration in the industry and rela- tionship of size to profitability. Also these firms have wider nethods of finance available to them because of their size and physical dispersion through the country. The study covers fifteen firms which satisfy the above conditions and which had sales in at least one year of the study in excess of one hundred million dollars. They are: a. Sears, Roebuck and Co. b. J. C. Penney Company c. Montgomery Ward & Co., Inc. d. Federated Department Stores, Inc. e. The May Department Stores Company f. Allied Stores Corporation 9. R. H. Macy & Co., Inc. h. Gimbel Brothers, Inc. 1. Associated Dry Goods Corporation j. City Stores Company k. Marshall Field & Company 1. Spiegel, Inc. m. Mercantile Stores Company, Inc. n. Aldens, Inc. 0. The Hecht Company Stores Since the initiation of the study3The May Department Stores Company'and The Hecht Company Stores have merged. Operations of the two are analyzed separately until the date of their merger, February 2 , 1959 . The year defined. - In 1945, the year that the war ended in both Europe and the Pacific, there were three dates used as end of the year by the firms in our study. The most popular date, January 31, 1946 (cu: the Saturday closest to that date), was used by nine of the fifteen firms. Penney, Spiegel, Marshall Field, and Aldens were on a calendar year basis, with their years ending December 31, -11- 1945. R. H. Macy and Federated had fiscal years ending on the Saturday nearest July 31. During the period of the study, three of the firms which were on a calendar year changed to the end of January closing. Therefore the annual reports for one year for each of these firms cover thirteen months. The change occurred on January 31, 1959 for Penney, January 31, 1955 for Marshall Field, and January 31, 1948 for Aldens. Federated Department Stores changed from a July 31 fiscal year to a January 31 closing on January 31, 1947. At the closing date of the study, January 31, 1960, the fiscal year end for all but two of the firms studied was January 31, 1960 (or the Saturday closest to that date). One (Spiegel) retained the calendar year closing, and one (R. H. Macy) ended its year on the Saturday nearest July 31. To combine figures from all the reports and to be consistent in referring to periods covered by annual reports, it is advantageous to define terminology at this point. All fiscal years are combined and referred to as activities of the year in which the majority of the months of the fiscal year falls. The first year of our study, the final year of the war effort, is 1945. Activities of 1945 include annual reports of Penney, Spiegel, Marshall Field, and Aldens, whose reports are dated December 31, 1945. Activities reported by the nine :‘firms whose fiscal years ended January 31, 1946 or the Saturday closest theretr>iare added to and included with the four above-named reports. (Eleven of the twelve months of these reports fall in 1945.) To this total are added the results of Macy's and Federated's fiscal years ended on the Saturday nearest July 31, 1945, since seven of V. .. ....A ... .n\ -12- twelve months covered in these fiscal reports are in 1945. In the same way, 1959 activities include Spiegel's calendar year, Macy's August 1, 1959 fiscal report, and the fiscal reports of the other twelve;firms whose years end on January 31, 1960 or the Saturday nearest thereto. (There was no separate report for Hecht.) With the exception of four years, the combined figures reported contain twelve months' activities for each of the fifteen firms. The four exceptions are: (1) 1946 includes eighteen months' activities for Federated Department Stores because of the change of its fiscal year from the Saturday nearest July 31 to the Saturday nearest January 31. (2) 1948 contains thirteen months' activities for Aldens. (3) 1954 contains thirteen months' activities for Marshall Field. (4) 1958 contains thirteen months' activities for the J. C. Penney Company. Chapter outline. - Chapter II examines the physical expansion of the fifteen selected firms for the fifteen-year period, 1945 — 1959, asidefined above. Specifically, attention is directed to the num- ber of units owned and operated at the beginning of the period, expansion of existing facilities, new facilities, and merger of existixug firms. The itemizing of these activities furnishes the baCkgrrnxnd of the study and supports the hypothesis that there has been substantial physical growth during the period. Cfllapter III deals with growth of credit. Accounts receiv- able are analyzed and compared with the individual firm's sales -13.. and with a governmental series of credit extended by all department stores. This chapter supports the hypothesis that credit expansion has been material. Methods of financing expansion are investigated in Chap- ter IV. Various types of long-term debt, new stock issues, sales and leaseback agreements, mergers, and subsidiary companies are discussed. Documentation indicates the extent to which each type of financing has been used. Chapter V reviews sales of the period. Sales of each firm are compared with the combined sales for the fifteen firms and vdth sales for the industry as published by the government. Sales and accounts receivable for each firm are analyzed. The result indicates that sales growth has resulted from expansion in the industry. In Chapter VI an attempt is made to evaluate the profit- ability of the firms and of the areas into which department stores have ventured recently. Profits are related to sales and to assets utilized. This tests the hypothesis that profits have expanded during the period. The future of the department store was debated vigorously througthhe 19505. Opinions varied widely. Some held the depart- ment store to be "one of the great pillars of the American econonuf."5 Others feared it would "follow the general store into merdharuiising limbo."6 The past is not always a good indicator of the fuinxre; however, analysis of past growth and expansion will provide a background of information and a starting point for any who then wish to predict into the 19608. ¥ SIbid. , p. 7164. 6Robert M. Bleiberg, "Merchant Princes," Barron's, XXXIV (March 8, 1954), 20. CHAPTER II PHYSICAL EXPANSION 31 SELECTED FIRMS Introduction. - Expansion in the fifteen selected firms during the fifteen-year period occurred in a number of ways. First, many existing department stores were merged into these firms. Some units were acquired through outright purchase, some through exchange of stock. Another form of expansion was the physical growth of units in operation at the beginning of the period. In many downtown areas, archways connected several buildings of one unit as a result of prewar expansion when department stores annexed building after building in a block. During the period of the study some of these older, less efficient buildings were demolished and replaced by newer, taller, more modern buildings. In at least two cases, older buildings were completely discarded and operations were moved to a new site, either in the nearby downtown area, or in a new shopping area in the same town. As the population migrated to the outskirts of the cities, some of the firms built branches in the shopping areas of these suburbs. With the pOpularity of the new shopping center, units of the top fifteen firms began to appear here too. In fact, lenders often ranuired a signed lease with a dominant firm before moneys were advanced for shopping center construction. In.this chapter we turn our attention to expansion in generaL -14- -15- including both shift in ownership Of existing facilities and expan- sion through addition of selling Space in the industry. New sell- ing Space results when (l) a unit is expanded, (2) a unit is relo- cated and the new unit exceeds the closed unit in size, or (3) new facilities are constructed. Some of the firms are discussed in more detail than others. When a firm owns a small number of units, it is able to include in its reports more information about each store. Location of each unit is given precisely; its picture is frequently featured; any expansion, improvement, or change in its activities or facilities can be discussed in detail. As the number of units increases, the information per unit must be limited or the annual report becomes prOhibitively bulky. Since the primary source of this study is the annual reports, information concerning units cannot greatly exceed.that furnished in the annual reports. The discussion of the activities of each of the firms favors the Inecent events. This is because the quality of annual reports has inmmowed perceptibly during the fifteen-year period. In the late JAJ4OS, many of the reports contained little more than the finan— cial estatements, the accountant's opinion, and a very brief cover- ing leatter from the president or board chairman. By contrast, the infornurtion given the stockholder in the 1960 reports contains not only unmat.happened in 1959, but also plans for two or three future years, a1nd.often summaries of the past five, ten, or twenty—five years. 111 each annual report, two dates are generally prominent. The first is the date of the fiscal year end. The second (a later N -16- date) is the date of the letter to the stockholders. In the writ- ten discussions, the phrase "the past year" is frequently used. Here the reader must try to decide whether the writer meant the past calendar year, the past fiscal year, or the year preceding the date of the present stockholders' letter. This looseness of usage may have produced errors in the study. Firms are more anxious to tell of pending future stores than they are to admit that a unit was sold or closed because it was not performing adequately. Often the only way the annual report reader can determine that a unit has been closed is through its absence from the list of stores operated. This list is generally found on the cover of the annual report. Where no other informa- tion was presented, I assumed that the closing date of the unit occurred during the year in which the name first disappeared from the.listing. Some annual reports include in their list of stores operated those which are under construction or even those on the architects' drawing boards. In Table l,I have attempted to place the addition or closing of a unit in the fiscal year when operations began or ceased. It is hoped that,despite the problems involved in determin- ing opening and closing dates of units, the tabulation is reason- ably accurate. Table 2 lists capital expenditures by firm by year for the period. Most of the annual reports list in the written material the amount so spent during the year. For the early years of the study, these figures are not always available. Occasionally, in the more recent years, the amount is omitted if there is a wealth ml Firm Sears Penney M. Ward Federated May Allied Macy Gimbel Associated City M. Field Spiegel Mercantile: Department ston Appl iance store Total Total End of 1958 1959 Changes Study a? 23 24 366 734 19* 18* 238* ..... 66 58 527 1,683 73* 62* 452* ..... 5 12 22 547 10* 14* 107* ..... l S 35 45 0.. 2* 4* 0.... 2 11 42 45 2* 0.. 5* 0.... l 1 45 85 2* 2* 29* ..... 1 1 31 34 .0. 0.. 3* 0.... 3 1 19 35 1 2 22 29 0.. 2* 4* ..... 1 8 79 71 1* 3* 14* ..... l ... 5 9 0.. 0.. 1* ..... .0. .0. 72 9 ... ... 163* ..... 1 2. 69 57 2* 2* 28* ..... ... ... 74 5 ... 1* 69* ..... .- Dov "u 9 l Firm Aldens Hecht Total increas Total decreas Catalog offices: Sears M. Ward Spiegel Aldens Net increases SOURCE: Annual r Year is defined 0 A - For most year catalog store or decrease i for catalog 0 Only net increas Total Total End of 1958 1959 Changes Study ... ... 16 13 2* ... 5* ..... l ... 9 0 4* 9* 17* ..... 107 125 1,433 3,401 115 115 1.139 ..... 46 64 647A 913 12* 0.. .0... 0.... 55 44 373A 568 3* 3* ..... ..... 12 22 187A 187 1* ... ..... ..... ... 5 65A 65 8* 0.. .0... .0... 89 132 1,272A 1.733 Year Total 5 City (a) M. F 1959 $ 225.473 $ 6 $ 4,248 E $ 2 1958 175,353 4' 4,300 5 1957 229,834 5 4,225c 3 1956 226,864 6 6,166C 12 1955 122,760 2‘ 1,998C 1 1954 107,331 2‘ 437C 4 1953 94,783 21 3,6670 3 1952 81,598 2} 664C 4 1951 168,857 41 2,255c 11 1950 142.086 3 .......r e 1949 136,124 3 5,934c 3 1948 160,544 5 3,360c 5 1947 188,542 7 3,0030 6 1945 128,121 6 2,979c 3 Total $2,188,270 $631 $43,733 $76 1 SOURCE: Annual reports Year is defined on page A - Figures do not incl which no figures on B - Source is Moody's M C - Total is approximat D - Figures are from Mo for real—estate sub E-Parent company figu of $34 for real—est F-Approximations resu n r. A. -. V- . one ‘o .- up'u. .<.,~ . 'o‘o . coo— .q. n.” ..-.-. ‘y‘ 4 ‘1' V.‘.d‘ 'l‘ -A a p,‘ .H .‘ .. . . .- \ 5- .. an .‘ ‘ .-.. 7Q n 1" ."m‘. e g ‘ ; ‘u ~ - r ' \1 “ 4 ..- -~ ,1; -20- of other information considered more interesting to the stockholder. Several firms do not include these figures in any year. For the years in which a capital expenditure figure was not given by the firm itself, Moody's Manuals of Investments (Industrial Securities) were consulted. Moody's data are taken from reports filed with the Securities and Exchange Commission. Where the information could not be found in either source, this amount was approximated. Approximations are noted in the table. All annual reports indicate the net prOperties and depreciaa tion for each year. Therefore the approximation was computed in the following manner. If there had been no addition or retirement of prOperties during the year, the difference in net prOperties between the beginning and the end of the year should equal the depreciation. If there had been a capital expenditure, the difference between beginning and ending net property would be the capital expenditure less depreciation. Or, to express it another way, the unknown capi— tal expenditure for the year would be ending net prOperty less beginning net property plus depreciation. There is, however, the complication of retirements. If the retired assets were fully depreciated, no problem would exist, for the asset account and the allowance for depreciation account would each have been relieved (reduced) by the same figure. However, not all retired assets are fully depreciated. Where they were not, the asset account was reduced by an amount greater than that by which the depreciation account was reduced. During the period, this situation occurred frequently (see Chapter IV), especially through the sale and leaseback arrangement. Where such sales or disposals occurred, -21- the approximation understates the capital expenditures for the year. Our approximation, therefore, results in the minimum pos- sible amount of capital expenditures for the year and has been used only When the desired information could not be found else- where. Capital expenditures, of course, include amounts spent for warehouses, parking areas, fixtures, remodeling, major alterations, and land as well as for the expansion or construction of store buildings. However, they do not account for all the new buildings or expansions. Some of the firms in the study follow a policy of owning their own units only when they cannot find desirable land- lords. Penney, for example, has consistently noted in its various annual reports that landlords have Spent between $1 and $2 for each $1 which Penney has invested during the year. Therefore, Table 3 has been prepared to indicate the minimum dollar rental payable on long-term (over three years) leases to which the firm is committed. Minimum lease rental payable would presumably increase as a result of (1) an increase in the number of leases <1r (2) improvements made by the landlord for the benefit of the lessee which are reflected in increased minimum amounts due. Infor- matirni is given for each year for which these data are available in time annual reports. The procedure of reporting leases payable becanme generally accepted about 1954. Comparison of total leases in 1955 with those of 1960 indicates that leases have increased for each of the firms except Sears. The large decrease in dollar amount (Df Sears' leases, however, has more than offset the increases for the other firms. Year Spiegel Mercantile Aldens Hecht 1959 3' $1,372 B $06.00 1958 ...... ... 1,340 1957 ...... ... 1.500 1 1956 1 ...... ... 1,595 1955 1 ...... ... 1,190 1954 ...... o o a 1,050 1953 ...... ... 766 1952 ...... ... 806 1951 ...... ... 617 1950 1 ...... ... 335 1949 1 ...... o o o 296 Percentage = 1959/1955 C SOURCE: Year is def A -,Annuual. B - All lea Annual C - Percent -23- The balance of Chapter II contains a discussion of units added and major improvements made by the firms during the period. Since summaries of this information conceal as much as they dis- close, such analysis seems in order. Moreover, data in the annual reports concerning various units are not identical. For some units, size is not indicated; for others,location (downtown, suburb, shopping center) is not specifically identified; still others omit cost of construction. The extent of remodeling is difficult to evaluate except in descriptive terms especially when annual reports do not always indicate dollar amounts. Because the sources of the study give dissimilar information, any table or chart must of necessity be incomplete. While the narrative approach is weighty and somewhat dull, the reward is that the reader can get a better feeling of the growth which has taken place since 1945. At the same time, the various firms take on independent identities. How- ever, it is possible to read Tables 1, 2, and 3, omit the descrip- tive material by firm and turn directly to the Summary on page 84. As an aid to those who are unfamiliar with the components of theedepartment store firms which operate units under different names, a list of the stores operated in 1959 by Federated, Allied, May, Macy, Gimbel, City, Associated, Marshall Field, and Mercantile is provided in Appendix A. The stores which were in existence at the beginning of the study are indicated to further emphasize the extent of growth during .the period. Marshall Field & Companh - 0f the fifteen firms, Marshall Field -24- has opened the fewest number of units in the period under consider- ation. In 1945, the firm operated five stores - four in Chicago and one in Seattle. In August of 1946, Frederick & Nelson, the Marshall Field store in Seattle, opened its suburban branch unit, a leased store 20,000 square feet in size, in Bellevue, Washington. This was to be the only unit opened until 1955. Improvements were made during the nine-year period. In 1946 the main Frederick & Nelson store installed escalators, and the main Chicago unit relighted and air conditioned its first floor and the store for men. Two restaurants were opened at Midway air- port in 1948. During 1948, escalators were installed in the main Chicago store. Minor improvements followed until 1950, When the air con- ditioning was completed in the Chicago store and a cycle billing system'was installed. Fieldale Farms was opened to the public in 1952. This property is located thirty miles northwest of Chicago. and sportsmen are invited to use the shooting range and to select and fire various types of guns under simulated hunting conditions. Facilities are provided for practice and instruction in the use of all types of shotguns. Hunting apparel and accessories are also sold at the Farm. Also during 1951 and 1952, the Frederick & Nelscui store was enlarged and modernized. Heating, ventilation, and lighting were improved; fixtures were replaced. New windows and.enrtrances were provided. An additional four and one-half stories were added, increasing the floor space of the unit nearly fifty per cent. -25.. The first expansion in the Chicago area took place in March, 1955, when a 70,000 square foot unit was opened in a shopping cen- ter south of Chicago. This was to be known as the Park Forest Marshall Field store. This same year the restaurant in O'Hare air- port was opened. During 1956 a second Chicago suburban unit was added in a shopping center north of Chicago. Old Orchard,310,000 square feet in size,was the largest unit in a center which contained fifty other stores and parking for 6,000 cars. The Park Forest unit had been so successful that by November, 1956 it was enlarged to 100,000 square feet. This was scarcely two years after its initial opening. 0n the Pacific coast the Frederick & Nelson branch unit had also proved to be too small. The unit (opened in August, 1946) was closed, and a new 115,000 square foot store, five times the size of the closed unit, was opened in August, 1956 in a shopping center. During the next two years, there were additional capital expenditures in Old Orchard. In September, 1957, Crabapple Restau— rant was opened, and the following year, the parking area was enlarged to hold 7,400 cars. The last new unit of the period was Opened in fiscal 1958. Mayfair, a new division of the firm, opened its first unit,288,000 square feet in area. in suburban Milwaukee on January 5, 1959. This same year a new innovation, two automatic elevators, was introduced in the Chicago men's store. In its 1959 report, the firm announced that construction had started on a new shopping center to be known as oakbrook Ter- race. It would contain a store similar in size to the Old Orchard -26- store, and the center would also contain a Sears, Roebuck unit. At the end of the period, however, there were nine units operating: two in Seattle, one in Milwaukee, and six in Chicago. All units added during the period were new, and the only apparent error in judgment involved underestimation of the size required. The Hecht Company Stores. - In 1945 there were eight Hecht stores in operation. All but The Hub of Baltimore were known by the Hecht name. On February 2, l958,when the firm merged with May Department Stores, nine units were operated, but there had been considerable activity in the interim years. In 1946 The Hub opened an 18,000 square foot appliance store and a small unit at 10-12 East Baltimore. The small unit was apparently integrated with the main store shortly thereafter. The appliance store remained in operation until 1956. Also in 1946, two additional floors were added to the Hecht Washington building on E Street, increasing its operation by 28,000 square feet. An additional floor was also added to the parking building of this WaShington unit. The New York store was improved during the year, and Hecht's Baltimore store at Baltimore and Pine Streets expanded by 33,000 square feet. On November 1, 194% the Silver Spring unit of 160,000 square feet was placed in operation. Remodeling in that year was confined mainly to the Hecht Washington unit. The Hub was improved during 1949, and it was at this time that the small unit at 10-12 East Baltimore was apparently inte- grated with the main unit. On February 7, 1949, a small home -27- furnishings store was opened in Annapolis, Maryland. The firm later purchased the property on which the store was located. No units were added in fiscal 1949. However, renovations continued. Two floors were added to the Silver Spring, Maryland. store, increasing the Space by 56,000 square feet. The lessor paid the costs of this improvement. After a fire on March 10 which did considerable damage, the Howard and Franklin Streets store in Baltimore was reopened in September of 1950. Lease payments for) the store had terminated with the fire. The Hecht New York unit was also renovated. Hecht's first shopping center unit was opened in Parkington, Arlington, Virginia, in November of 1951. This 250,000 square foot store was situated on a fifteen—acre center at the intersection of two main highways. A five-level parking ramp connected with the unit, and entrances were available from every level of the ramp. Twenty-six other stores were located in the center. Hecht acquired an existing unit in 1952 when Abramson in Flushing became a member of its operation. Abramson was a forty- three year old store, with 60,000 square feet of selling Space and a 50,000 square foot warehouse. It was Hecht's first acquisition of a going business. Cash of $1,000,000 was paid for the unit. It was promptly modernized. The same year the small branch furni- ture store at Annapolis, Maryland.was enlarged by 25,000 square feet. The only activity during 1953 was the modernizing of sev- eral downtown units. In September, 1954, however, a second shop- ping center unit was opened. The Hecht-Northwood in Baltimore, a -28- 160,000 square foot unit, featured a rooftop restaurant, and roof- top parking for 200 cars. The twenty-acre site on which it was located contained twenty—seven stores and total parking capacity of 1,780. The Silver Spring unit in Maryland was expanded for the second time in 1955. The 40,000 square foot addition was opened on October 31. On October 15, 1956 a 160,000 square foot suburban unit was added in West Baltimore (The Edmondson) opposite a shopping center. Located on an eleven-acre site, it had parking facilities for 6,000 cars. During the year, three units were closed: Hecht on 14th Street in New York City in August, 1956, the appliance store at 126 West Fayette Street in Baltimore through merger with the Baltimore and Charles Streets store, the branch store at 412 South Broadway through merger with Hecht's Reliable unit at 517-528 South Broadway. There was no net change in number of units operated between 1956 and 1957, but the Easton, Maryland,store was relocated in the Talbottown shopping center. During 1958 a unit was added in November in a shopping center at Prince Georges Plaza, while the following four closed: the Abramson unit, purchased in 1952: the Broadway Reliable unit in Baltimore; the Hecht unit at Baltimore and Pine; and the Hecht Howard and Franklin unit. The over—all pattern of acquisitions and closings suggests that the appliance stores and small branch units proved unsuccess- ful, as did the only purchase of an existing operation. The firm's -29- sh0pping center units, on the other hand, seem to be more successful. Several of the stores.closed during the period were downtown units. Gimbel Brothers,;Inc. - Gimbel Brothers, Inc" operates stores under three names, Saks Fifth Avenue, Saks—34th, and Gimbel. This firm began the period with sixteen units and added nineteen more dur-- ing the ensuing fifteen years. Most of the expansion has taken place since 1954. Prior to 1954, three Saks Fifth Avenue units were added. The one in San.Francisco Opened in 1952; the Pittsburgh Fifth Avenue unit, added in 1949, and the Philadelphia unit, added April l4,l952,were both located in already existing Gimbel buildings. In 1954 a three-level 200,000 square foot branch of Gimbels—Milwaukee was opened in.the Southgate shopping center. The same year a 70,000 square foot unit of Saks Fifth Avenue waS' opened in White Plains. Also a men's store was added to the Chicago Saks Fifth Avenue on the first floor of the building adja- cent to the unit already operating there. With this expansion. the Chicago, Detroit, and Beverly Hills Fifth Avenue stores all carried a full line of accessories and men's, children's and women's apparel. The Detroit and Beverly Hills stores had been enlarged . in 1946 and 1947, respectively. Except for these enlargements, only occasional refixturing and improvements are mentioned in the annual reports. In 1955, two new Gimbel units were added. Gimbels—New York, a 200,000 square foot three-level unit, in the Cross County shopping center, opened on September 8. A few days earlier, on August 20, GimbelséPhiladelphia Opened its first suburban unit, -30.. 250,000 square feet in size. Saks-34th added its first unit at Massapequa Park the fol- lowing year. The same year, Gimbels-New YOrk opened its second shopping center branch at Green Acres. This was a unit approxi- mately the same size as the Cross County unit. On April 2, 1956 the firm purchased Lockhart's (a specialty shop) in St. Louis. This became a Fifth Avenue shop. Expansion quickened in 1957. The Great Bay Shopping Center unit of Gimbels at Bay Shore was Opened, giving Gimbels-New YOrk Division three branches, all at shopping centers. Gimbels- Philadelphia opened a branch in Upper Darby, and the Pittsburgh store added a 140,000 square foot unit in a shopping center in North Hills. This was its first satellite. Saks Fifth Avenue added two units during the year: one was in Springfield; the other, a University Shop, was in Cambridge, Massachusetts. Expansion continued in 1958 with the opening of the Mayfair shopping center unit by Gimbels-Milwaukee. (A Marshall Field unit is also located at this shopping center.) This was Milwaukee's second branch. Saks—34th opened its second branch at Stamford. Saks Fifth Avenue increased its shops to eighteen with the addi- tion of a unit in Skokie. During 1959, Saks Fifth Avenue was the only division to expand again, this time with a small resort shop in Palm Springs. At the end of the period, Saks Fifth Avenue had nineteen units plus the main store in New YOrk; Saks-34th had two branches in addition to the main unit. There were twelve Gimbels stores in operation. 0f the units added during the period, only one was an acquisition of an existing unit. ...: n..— ..., 5“ u ‘ ‘0 V‘. a ‘0“ -31.. R. H. Macy & Co., Inc. - Macy added thirty-one units and closed three during the fifteen-year period. It currently operates thirty- four units under six divisional names. At the end of the fiscal year 1944, the firm had six units in four divisions. During fis— cal 1945, the Davison-Paxon Company (Atlanta, Georgia) acquired branches in Augusta and Macon, Georgia. The same year, the LaSalle & Koch Company (Toledo, Ohio) acquired a branch in Bowling Green. On September 1, 1945 the O'Connor, Moffatt & Company was acquired through an exchange of stock. An old established firm, founded in 1866, it later became known as Macy's San Francisco. During fiscal 1947, two more units were added. Bamberger's (Newark, New Jersey) added a home appliance store in East Orange, New Jersey, and Cullum & Cullum's assets were purchased to start the Davison-Paxon branch in Columbia, South Carolina. The annual report for that year nOted that the firm was proceeding cautiously on its capital expenditure program due to high construction costs. Three additional units were added in 1948. Bamberger's acquired a unit in Millburn, New Jersey: Macy's New York opened its Jamaica, NeW'York,unit on September 2, 1947: LaSalle & Koch began operations in Tiffin, Ohio,on August 21, 1947. The JOhn Taylor Dry Goods Company, founded in 1881 in Kansas City, Missouri. was acquired for cash. This became the central store of Macy's Missouri-Kansas Division. During 1948, five new units were added and one was closed. The Davison Augusta, Georgia.unit was relocated on March 21, 1949. In addition new units were added in Flatbush, NeW'York,on Novem- ber 1, 1948 and in White Plains on March 21, 1949 by Macy's u..- ..32— New‘York: in Morristown, New Jersey,on April 1, 1949 by Bamberger's New Jersey: and in Columbus, Georgia.by Davison-Paxon on Febru- ary 14, 1949. During 1949, Bamberger's East Orange Home Appliance store, opened in 1947, was discontinued. The LaSalle & Koch division opened a unit in Sandusky, Ohio,on October 28, 1949. R. H. Macy & Co. was also active in nonretailing functions; the TV station WOR-TV was completed and operating regularly beginning on October 5, 1949. A 166,500 square foot addition to Davison's Atlanta store financed by the landlord was completed on August 16, 1949. Macy's San Francisco unit (O'Connor, Moffatt) added 200,000 square feet to its unit, which was opened to the public on October 10, 1949. Macy's Kansas City store (formerly John Taylor Dry Goods) completed a rebuilding program which added 264,000 square feet to its unit. There were no further changes in the retail Operations until fiscal 1953. Then Macy's San Francisco division acquired two branches. A 52,500 square foot unit was opened in San Rafael, and a 59,000 square foot branch was acquired in the Cross Bay area, north of oakland. The latter was enlarged by 27,000 feet. Davison-Paxon added another branch to its operation through the purchase of Michael Brothers, Inc.,of Athens, Georgia. This unit was 52,000 square feet in area. During the year several existing umits of the firm.were altered or expanded. Macy's New York Park- cheater was enlarged by 12,000 square feet, and two of Macy's San Francisco units were enlarged. The Richmond unit added 27.000 “mare feet; While the main San Francisco.units gained 25,000 square net through the addition of a basement store. -33— During 1954, expansion continued with the addition of 90,000 square feet to Macy's New York White Plains store. This brought the unit, acquired in 1949, to 200,000 square feet of space. This same year, Bamberger's opened a 110,000 square foot unit in Plainfield, New Jersey, on May 10, 1954. An existing department store was acquired in September, 1954. An 86,000 square foot unit, founded in 1890 and known as Christman Dry Goods Co. in JOplin, Missouri,became the newest of the Macy's Missouri-Kansas group. Bamberger's opened another 63,000 square foot branch in a shopping center in Princeton on September 9, 1954. The first Macy's unit in a regional shopping center was opened on November 17, 1954 in Hillsdale, California, a Macy's California division branch, 180,000 square feet in size. Three more units were added in 1955. LaSalle & Koch opened a 34,000 square foot unit in Findlay, Ohio,on August 15, 1955. On February 1, 1956 the Innes Store in Wichita, Kansas,was purchased from Younker Bros. Inc. This 296,000 square foot unit became a branch of Macy's Missouri-Kansas Division. This divi- sion also added another unit on July 26, 1956; the 68,000 square foot branch was located in a shopping center in Mission, Kansas. Three units were opened in shopping centers in 1957 in New‘York, New Jersey, and California. Bamberger's closed the lullburn, New Jersey,unit. Macy's New York opened its three-floor 320,000 square foot unit at Roosevelt Field, Long Island.on August 29, 1956. Twenty days before, Macy's California had opened a156,000 square foot unit in Valley Fair, San Jose. In May lhmberger's 340,000 square foot unit was opened in Paramus, New -34.. Jersey, at the Garden State Plaza. Macy owned the Roosevelt “ store, was fifty per cent owner of the Valley Fair shopping center, and was sole owner Of the Garden State Plaza shopping center (see Chapter IV). During 1957, according to the annual report, the modernization and redecoration of all the company's stores contin- ued on a rotation basis. Only one unit was added in 1957. This was Macy's Califor- nia branch at Bay Fair shOpping center in San Leandro. The 160,000 square foot unit was Opened in August, 1957. This shopping center, like the Valley Fair center, is owned fifty per cent by Macy. Again in 1959, only one unit was added. On July 30, 1959 Davison-Paxon Opened its newest branch in Lenox Square ShOpping Center in the Buckhead area of Atlanta, Georgia. This unit is 120,000 square feet in size. Since the close of the 1959 fiscal year, another unit has been added. On September 1, 1959 the Menlo Park shOpping center in Middlesex County, New Jersey, was com- pleted, and Bamberger's Opened a 270,000 square foot branch there. Macy has expanded both through new units and through acquisitions of existing units. At least eight Of the thirty-one additions were established units. However, the more recent stores increasing the firm's operations have been built in shopping centers. Associated Dry Goods Corporation. - This firm began as an associa- tion of several department stores in various parts of the country. In 1945 eleven units were Operated under eight different names; by 1960 twenty-nine units were in Operation and the number of names .- .,. u ‘ ‘nn an,‘ ... 'v.. . “- -35.. used was ten. In 1946, the Stewart Dry Goods unit in Louisville was enlarged by the addition of a seven-story building plus basement adjacent to the existing unit. Two units were added to the opera— tions of Associated in 1947. Lord & Taylor opened its Westchester unit, and the William Hengerer Company of Buffalo, New York,opened a'branch in nearby Batavia. During the next two years there was expansion, but no new units were added. The Hengerer unit expanded through the addition of a building adjacent to the existing one; Powers Dry Goods in Minneapolis built a foundation which would hold six floors next to its existing unit. The basement was completed, and the street level area was used as parking facilities for a time. During 1949, escalators were installed in the main Hengerer, Power, Stewart, and McCreery stores. The J. N. Adam & Co. store in Buffalo, New YOrk, was enlarged. Lord & Taylor added another unit, 88,000 square feet in area,On an eight-acre site in Millburn on February 9, 1949. It was erected by and leased from the Prudential Insurance Company. During 1951 two new stores were opened. The first branch of the Stewart Dry Goods Co. (Louisville), in Lexington, Kentucky. began operations in September.* It was a modern air-conditioned unit, featured escalators, and was 60,000 square feet in size. Hahne & COJs branch store in Montclair, New Jersey,en1arged its operations by moving a portion of its activities across the street oanebruary 20, 1951. This has not been included in the totals on Table l as a relOcation because the old location was utilized -36.. for a budget shop which Operated under the same name. On August 24, l951,as a result of the favorable votes of a majority of stockholders of the corporation, the corporate struc- ture of Associated was simplified. The firm became a single opera- ting corporation, instead of a holding company of nine Operating companies as it had previously been. The simplified corporate structure was designed to make it easier to acquire existing stores in the succeeding years. During 1953, one store was sold, another branch was added. Lord & Taylor Opened its largest branch to that date - a 125,000 square foot unit in West Hartford on February 25, 1953. The James McCreery & Company store in New YOrk was sold on Decem- ber 19, 1953. Addition of new units was stepped up in 1955. Associated's common stock was exchanged for all the outstanding stock of the J. W. Robinson CO. department store of Los Angeles. This firm had branch operations in Beverly Hills and Palm Springs. The exchange took place in July, 1955. On February 8, Stewart & Co. (a Balti- more operation) opened its first branch at YOrk Road, in a shopping center owned by the company. The center had eight other tenants. On the 22nd of February, Lord & Taylor increased its branches to five with the opening Of Bala Cynwyd near Philadelphia. The Powers Dry Goods Company of Minneapolis added its first suburban branch in St. Louis Park, a shopping center. The total new units acquired during 1955 was six. The following year, Lord & Taylor's sixth branch, in Garden City, opened February 29,and The Diamond department store of -37- (marleston was acquired when all its outstanding shares were exchanged for Associated common and preferred stocks. Another year of rapid expansion followed in 1957. Hengerer opened its 100,000 square foot Amherst branch on March 20, 1957. Built on three levels, it was in a prosperous new suburban section of Buffalo. The same year, the Batavia branch Of Hengerer was eliminated. The bulk of new units added to Associated's operations that year was through the acquisition of 99.4 per cent of the stock of Sibley, Lindsay & Curr Company of Rochester. This firm was the largest Rochester store and had branches in Eastway, Irondequoit, inwark,,and Southtown. The Sibley operation was acquired through payments Of cash and common stock on September 25, 1957. In 1958, the Lord & Taylor Westchester store (opened in 1947) was expanded. In May, 1958 the J. W; Robinson Co. increased its branch operations from two to three with the addition of a 167,000 square foot unit in Pasadena which featured three levels of parking area. Lord & Taylor again Opened a branch in 1959. The Chevy Chase unit, 130,000 square feet in size, was Opened in suburban waShington in September. In May, the Erie Dry Goods Company was acquired through an exchange of stock. This firm had been owned partially by Sibley of Rochester. At the time Sibley was acquired by Associated, it had owned forty per cent Of Erie's common stock, and controlled its voting shares. The remainder of the stock was acquired through a pooling of interests. A major addition,l45,000 square feet in area,was completed in.l959 at the Stewart Dry Goods Company in Louisville. It \ K -38- increased the size of the store nearly fifty per cent. The J} N. Adam units in Buffalo and Niagara Falls were closed during 1959. Consequently, the company was operating twenty-nine units at the end Of the period. The 1960 report indicated that several were branch stores were in the planning stage and that expansions of both parking facilities and store units were inevitable in the near future. About half the new units added by Associated during the period had been through acquisition of existing units. The Mavaepartment Stores Company. - The May Department Stores operates units under various names. In 1944, five May, two O'Neirs, and one Famous-Barr units existed. By 1959, forty-five units operated under ten names. There were acquisitions nearly every year, but large numbers of additions occurred in 1948, 1957, and 1959. The first acquisition was O'Neil's in Massillon, Ohio, dur— ing 1945. During 1946, Taylor's became a majority-owned subsidiary when enough additional stock was purchased by the firm to give it control of fifty-two per cent of the total stock outstanding. Kaufmann's Pittsburgh store was acquired through a stock exchange on October 1, 1946. During this same year, the O'Neil's division added stores in Coshocton and Mansfield, Ohio, and the Wilshire Boulevard unit of May-Los Angeles was enlarged. May-Los Angeles opened a new 155,000 square foot branch with six acres of parking area in CrenShaw in October, 1947. The Bahfinore May store was closed eleven days in 1947 by a fire on -39- February 24. The main M. O'Neil Co. unit in Akron was enlarged to 475,000 feet during the year. In 1948, six units were added to the operation. Strouss- Inrshberg was acquired through a stock exchange on May 10, 1948. 'fifis firm had a unit in Youngstown, Ohio, branches in New Castle, Fennsylvania, and warren, Ohio, and Operated the Griswold Co. in. .Warren, Ohio. .‘ Famous—Barr CO. acquired a branch in Clayton in cmtober, 1948, and O'Neil's added another unit in Barberton, Ohio. During 1949, Strouss-Hirshberg acquired a branch in Salem, (mio, and another stock exchange brought the T. S. Martin Company into the May Department Stores operations. The latter store was sold in 1956. During August, 1951, Famous-Barr opened a new 301,000 square fOot.four-floor unit in Southtown, St. Louis. It had parking facili- ties for 2,000 cars. During 1952, assets of the SpringeHolzwarth Co. in Alliance, Ohio,were acquired and became part of the O'Neil's division of the company. May-Los Angeles opened a 350,000 square foot unit in a new development known as Lakewood in Long Beach. The develOpment, at the time the store opened, contained 11,000 homes and forty stores, and had parking facilities for 5,300 cars. The shopping center contained 2,300 feet of tunnel through which incoming and outgoing merchandise could pass without conflicting with the cus- tomer traffic. When complete, the development was to contain 17,000 homes, seventeen churches, twenty schools, twenty-seven Playgrounds, 300 miles of streets, 100 shops,and parking for 10.000 cars. -40- During 1953 remodeling was begun on the Pittsburgh Kaufmann store. There was no other activity of a capital nature. O'Neils and Strouss-Hirshberg each acquired one new unit in 1954. The 95,000 square foot Sharon Store in Sharon, Pennsylvania, was acquired by Strouss through an exchange of common stock, in November, 1954. O'Neirs Sheffield branch,between Elyria and Lorain, Ohio‘was opened in May, 1954. This 148,000 square foot unit was located in a fifty-five acre shopping center containing thirty— eight stores and parking for 3,000 cars. O'Neil's in downtown Akron more than doubled its parking garage to accommodate 1,100 cars. In 1954, May's Denver unit opened its first branch in Uni- versity Hills. This 107,000 square foot,three-floor unit featured the LeadVille Restaurant decorated with murals of gold and silver to commemorate the mining town. May-Los Angeles opened the largest suburban store Operated by the firm to that date in September, 1954. The five-floor unit boasted 453,000 square feet of Space and park- ing was provided for 2,300 cars. Famous-Barr in St. Louis in August opened a 357,000 square foot,four-floor unit in the North— land shopping center. It was the dominant store of forty located in the sixty-two acre center which provided parking for 5,000 cars. Expansion of existing units was well under way during 1954. The Sharon store added 48,100 square feet by remodeling two floors and adding to its warehouse. In Cleveland, the May store's third floor was remodeled, and Taylor's was air conditioned. Strouss- Hirshberg in Youngstown was also air conditioned, and the mezza- nine was enlarged and remodeled, adding 8,000 square feet. In November, a thirteen-floor addition to Kaufmann's downtown store -41- vnm completed, increasing the space forty per cent from 484,000 square feet to 684,000 square feet. Two additional parking garages Mere leased for the Kaufmann's store; one directly across the street from the store would hold 860 cars, while the unit two blocks away “muld accommodate an additional 530 automobiles. Remodelings continued in 1956, but no new units were added. May Company, Denver, redecorated its fashion floor and constructed double-decked stockrooms tO increase floor space for selling. The May store in Los Angeles remodeled the second and fifth floors and the restaurant. The Wilshire Boulevard unit also remodeled its fashion floor. The tearoom at Kaufmann's was redecorated and the kitchen enlarged. By contrast with 1956, 1957 was a year of many additions. May of Cleveland opened University Heights, a four-floor unit of 349,000 square feet, with parking provided for 2,300 cars. Daniels & Fisher Stores Co. of Denver was acquired. It operated a downtown unit and a branch at Colorado Springs. The Erlanger Dry Goods Com- pany was acquired through an exchange of stock. This firm had a unit at Canton, Ohio,and branches at Canton, Massillon, and Alliance. The main Canton store was remodeled; the branch was refurbished for operation as a soft goods junior store. The Alliance branch was cLosedd and the Massillon unit became the home furnishings Store.for the existing unit of O'Neil's in Massillon. The T. S. Martin Com—. pany of Sioux City, Iowa, acquired in 1949, was sold during the year to Younker Bros- of Des Moines. In Denver, the downtown Daniels & Fisher store and the downtown May store were closed and the joint operation was relocated -42- nia new 420,000 square foot building on August 4, 1958. The new lHdt had undergound parking for 1,200 cars. The same month, Taylor's opened a new 200,000 square foot three-story branch in Southgate shopping center in Cleveland. The shopping center con- sisted of eighty stores with parking for 6,000 cars. The major acquisition of 1959 was the Hecht Company stores, nine in number. In addition, Cohen Bros. of Jacksonville, Florida, was also acquired on February 2, 1959. This unit was purchased, while the Hecht stores were acquired through an exchange of stock. On February 9, a 351,000 square foot unit was Opened by May- Ios Angeles in a forty-store shopping center in the Redona Beach - Torrance-Gardena area of California (Eastland). During the period, forty-two units were added. Of these, at least twenty-five were existing units. Many of those added were in downtown areas of large or medium-sized cities. Federated Department Stores, Inc. - Federated Department Stores, Inc. is another association of various department stores Operated under various names throughout the country. In 1960, the firm operated forty-five units under ten different names. At the begin- ning of the period, only fourteen stores were in Operation. On August 1, 1945 the Foley Brothers Dry Goods Company of Houston, Texas,was acquired. Earlier in the fiscal year (which ended August 4, 1945) the firm had sold the assets of the R. H. White Corporation, a subsidiary of Filene's Of Boston. Therefore, both at the beginning and end of fiscal 1945, Federated Operated- fOurteen stores. -43- During 1946, the F. and R. Lazarus and Co. store (Columbus) purchased and remodeled an unused auditorium.‘ The building,.diago— nally across the street from the main store, was utilized for house- wares and appliances. During 1947, John Shillito Co. (Cincinnati) Opened a ramp- type garage with a capacity in excess of 1,000 cars. wm. Filene's Sons Company doubled the size of its branch stores located in Worcester, Winchester, Belmont, and Wellesley. The following year Abraham & Straus, Inc" completed its eight-story,two basement build- ing. This was constructed on the site of an old five-story build- ing, erected in 1879, a part of the former store. The moderniza- tion and expansion increased the total size of Abraham & Strauss by 147,000 square feet (eighteen per cent). Bloomingdale Brothers, Inc. of New York City moved portions of its nonselling departments across the street from the store to a newly erected Office build- ing. This converted 17,000 square feet of space formerly utilized for nonselling purposes into selling Space. Perhaps the most exciting activity of the year was the opening of the new Foley's store in the fall of 1947._ The new store, 500,000 square feet in size, was two and one-half times as large as the old store. The new unit had six floors and basement, and was connected by tunnel with a six-story customers' garage located in the next block. Conveyor belts, chutes, and lifts were all utilized to transport incoming merchandise. The new building was heated by radiant heat and was completely air conditioned. Selling areas were supplied from perimeter stock rooms lOcated on the sane levels. It was one of the first major department stores -44- constructed after WOrld War II. During 1949, four new units were added to the operations of the firm. On November 1, 1948 the Boston Store (Milwaukee, Wisconsin) and its two branches at Manitowoc and Oshkosh were acquired. A branch of Bloomingdale's New York was opened in Fresh Meadows, Long Island,in May, 1949. The following year Filene's added the Chestnut Hill branch in August, while Abraham & Straus's Garden City, Long Island,branch opened in October. Sanger's of Dallas, Texas, was acquired in September, 1951. This firm also had branches located in Highland Park and on Preston Road in operation at the date of acquisition. During the year, the Fedway Division of the Federated Department Stores was established.‘ Federated felt that the south and west sections of the country were growing rapidly. The Fedway plan was to determine the small, rapidly growing cities in this area and establish in-these cities a dondnant store, which would carry a full line of department store merchandise and provide department store services. During 1952, the first two Fedway stores were established. Both the Wichita Falls and Corpus Christi units opened in October. Abraham & Straus opened a 226,000 square foot unit on February 28 :Uifflampstead, Long Island. This unit provided parking facilities for 1.,200 cars. Meanwhile, Lazarus (Columbus, Ohio) remodeled its first; floor, Shillito's installed escalators from the basement to the Siixth floor, and Filene's remodeled its main store by construct— ing'rmodern facilities on the site of a pOrtion of an older building which.liad been demolished. -45- During 1953, five more Fedway stores were opened. The Amarillo and Longview, Texas,units were established in February, 1953; the Albuquerque, New Mexico, and Westwood Village, California. units, in August, 1953; the Pomona, California,unit in January, 1954. The pilot group of Fedway stores was completed with the addition of the Bakersfield, California,unit on February 1, 1954. During 1954, Abraham & Straus's Hempstead branch increased its space forty per cent by the addition of another floor. Lazarus completed its garage, adding capacity for 500 cars. On February 17, 1955 Bloomingdale's opened its Stamford, Connecticut,branch. During the ten—year period from 1945 to 1955, floor Space of The Federated Stores had increased from 5,625,000 square feet to 10,699,000 square feet; parking space was increased from 65,000 to 2,528,000 square feet. Additions in 1956 came through acquisition of existing stores for common stock. Burdine's of Miami, with its branches at Fort Lauderdale, Miami Beach, and West Palm Beach, was acquired on July 28, 1956. Another branch of this company located on 163rd Street in Miami was opened on November 1, 1956. The Lazarus store in.Ck31umbus acquired another parking garage bringing the total parking facilities available to 5,000 cars. In Texas, Foley's added four floors (250,000 square feet) to the 500,000 square fOOt building which had been completed in 1948. During 1956, three units were added to the operation. Samger”s Oak Cliff unit was Opened in Dallas, Texas,in July. In Septenflmmy Filene's added a unit in the North Shore 100 acre shop- ping cyanter in Peabody, Massachusetts. The following month, ~46— Iumaham & Straus established a new 180,000 square foot unit in a shopping center in Great South Bay, Babylon, Long Island. These three units increased Federated's operations by 395,000 square feet. In March, 1958, the Boston Store (Milwaukee) added a new 100,000 square foot unit in Bay Shore, Milwaukee. Lazarus opened the first areas of the 278,000 square foot addition to the down- town Columbus store. Expansion increased in pace during 1959. Five new units were acquired, while two existing small branches of the Milwaukee Boston Store were sold on August 1 for cash in excess of the investment in them. Three of the acquisitions were new units. In February, Sanger's 103,000 square foot store was opened in the Big Town shopping center. Bloomingdale's added its Bergen County 188,000 square foot unit in October. In November, Milwaukee Boston's 30,000 square foot branch in Point Loomis, Milwaukee,began operations. The remaining two new acquisitions were existing department stores whose assets were acquired for stock. On August 1, 1959, Goldsmith's joined the Federated group. This 366,000 square foot department store in Memphis, Tennessee, founded in 1870, is the largest department store in the Mid-South area. The unit has both parking lot and parking garage facilities. On October 3, Rike-Kumler Co. of Dayton, Ohio,became a part of Federated in a pooling of interests. In addition to its 650,000 square foot main store, the firm, founded in 1853, has a 280,000 square foot service building which was constructed in 1955, two downtown warehouses, a downtown parking lot, and a 600—car garage. Federated also expanded its existing units considerably during 1959. ‘va uni u. M. -47- Burdine's remodeled and enlarged its Fort Lauderdale unit to 151,000 mnmre feet. The Abraham & Straus parent store added a 26,500 mnmre foot annex store, a 600-car parking garage, and 50,000 square feet to its stock storage Space. Its Hempstead,Long Island,unit expanded 50,000 square feet through the addition of a fourth floor. At least fourteen of the thirty-five stores added by Federated during the period were acquisitions of existing units. The firm sold one unit at the very beginning of the period, two the last year of the study. One store was relocated. Units opened were established in both downtown areas and suburbs. A portion, but not all, of the suburban branches were to be found in shopping centers. City Stores Company. - At the beginning of the study, City Stores was comprised of six stores; Lit Brothers in Philadelphia, Penn- sylvania; Maison Blanche Co. of New Orleans, with its branch at West Carrollton; B. Lowenstein & Bros., Inc., of Memphis, Tennesssee; Loveman, Joseph & Loeb of Birmingham, Alabama; and Kaufman-Straus Co., Inc" of Louisville, Kentucky. At this time, and until 1950, the annual report contained not only statements for the consoli— dated City Stores but also statements for each of the subsidiary organizations. On December 19, 1944, the assets, merchandise, accounts receivable, fixtures, equipment, and property of R. H. White Corpora- than in Boston were purchased by City Stores. (This unit, a former subsidiary of Filene's, was sold by Federated.) The same year howenstein Opened its Home Service unit, a five-story building -48- fluee blocks from the main store. On August 23, 1946, another existing company was purchased, the Richard Store Company of Miami, Florida. Beginning on Septem- ter 11, 1946, City Stores also began purchasing shares of Oppenheim, Collins & Co., Inc.'s common stock. By the end of the year, it Owned about sixty-six per cent of the outstanding stock. This com- pany, which had begun business in 1901, had its largest unit on West 34th in New York City, on a site which had been enlarged five times by 1946. Established stores were located in Brooklyn, Philadelphia, and Buffalo, and suburban branches were Operated in Garden City, Long Island, and White Plains, NEW’YOIK. The firm was also engaged in mail-order business to a considerable extent. City also added a unit at East Orange, New Jersey,before year end; the Morristown, New Jersey,unit opened in 1947. This brought the number of units controlled by City Stores to seventeen. In 1948 four units were acquired. Maison Blanche opened a second branch in Gentilly; Oppenheim.Collins added a unit in Germantown, Pennsylvania. Two already existing units were pur- chased by the firm. Wise, Smith & Co., a sixty-year Old operation in Hartford, Connecticut, was operated only until May of 1954. The other unit, Swern's was acquired January 5, 1949 and became known as the Lit Trenton unit. Founded in 1885, it was still openmflng in 1960. During the four-year period, the firm expanded and modern- ized its various controlled units. A new front was added to Lowen- stein's Home Service unit in 1947, Lit Brothers was refixtured in 1946, and the White Boston store's fourth and fifth floors were modernized. The Oppenheim Collins unit at Garden City was enlarged -49.. n11948, and Maison Blanche, Carrolltown,was relocated so that it cmuld expand from 8,000 square feet to 25,000 square feet. Expansion and improvements continued in 1949. Elevators mere improved and escalators added to the Kaufman-Straus store; a restaurant, beauty shop,and men's store were added at R. H. White (Boston). Loveman, Joseph & Loeb expanded 33,000 square feet in a five—story building adjacent to its location. Oppenheim.Collins- relocated its East Orange unit in enlarged quarters on September 7, 1949. The firm acquired more than 175,000 of the 219,000 shares of the outstanding stock of the Franklin Simon chain. This sub- sidiary had eight stores, and seven of these were continued in Operation at the end of the year. The Bridgeport unit was closed, as was the White Plains unit of Oppenheim Collins. In April, 1949, Lowenstein's East was opened. It proved to be too small and was tripled in size by 1954. In October, 1949, Lit opened its 69th Street (Upper Darby) unit. By year end twenty-nine City Stores units were in operation. Expansion slowed in 1950. Only two specialty shops were opened, one each by Oppenheim Collins and Franklin Simon. Oppenheim, Hackensack, New Jerseypwas added in September, seven months after the Newton, Massachusetts,Franklin Simon began Operations. Lit Trenton (formerly Swern's) was modernized and new escalators were added. Loveman, Joseph & Loeb opened a new warehouse in 1950; Kaufman-Straus in Louisville was modernized. The Richard Store, acquired in 1946, was expanded by 60,000 square feet. During 1951, Oppenheim opened its Huntington, New York, unit and Franklin Simon its westport, Connecticut store. Then on -50- ,mmust 20, 1951 the firm purchased all of the common stock of Iansburgh and Brothers of washington, D. C. Lansburgh's owned a 280,000 square foot store and operated two warehouses. Oppenheim Collins was responsible for the only new acqui- afidons in 1952. Its Haddonfield, New Jersey,unit was opened in August and its Wilmington, Delaware, unit on November 20. The flflJowing year it added the Cross-County Center at‘Yonkers. Franklin Simon purchased Lousel, a ladies' Specialty store in Philadelphia.in February, 1953. The important announcement of the year, however, was that Lit Brothers planned to develop a Shopping center in co-operation with Food Fair. During 1953, Lowenstein's East was expanded (tripled), and lmison Blanche opened its Budget Annex in September. The front of the main Maison Blanche store was modernized during the year. Franklin Simon closed its Newton, Massachusetts, unit and opened one in Boston. Oppenheim Collins added a unit in Greenwich. Lit Northeast, 152,000 square feet in size, was opened in February, 1954, and White established a branch in Wbrcester on March 17, 1954. Loveman, Joseph & Loeb added two new units during the year. The first,an acquisition, was Erlick's Department Store in Bessemer, Alabama. This fifty-year-Old firm began the Operation of its two-story 24,000 square foot store under the Loveman name in March, 1954. In October the 100,000 square foot, two-story, plus basement,Montgomery branch of Loveman's was completed. Opera- tions at Hartford (Wise, Smith & Co.) were terminated on March 13, 1954. At this time, the firm consisted of eighteen department stores and twenty—two specialty shops. -51- In October, 1955, Lit Camden Opened. The three-story-bwfldr ing and basement of 145,000 square feet capacity had been built on the Site of the former courthouse. The City of Camden had agreedtn provide parking facilities for the unit. Lansburgh opened its unit in Langley Park shopping center in October also. Another existing firm joined the City Stores group in March of 1955. This was Bry—Block, a store in Memphis, Tennessee,which had been founded in 1902. Franklin Simon Opened two stores (in Memphis, Tennessee,and Miami, Florida) during the year; Oppenheim Collins-Brooklyn closed. The number of units Operated by City Stores increased from forty-four in 1955 to fifty-four a year later. Franklin Simon added stores in Baltimore; Seven Corners, Virginia; Cincinnati; and Manhasset, Long Island. Oppenheim Collins added units at the Thruway Plaza, Buffalo, New York; Willow Grove, Pennsylvania; and Hicksville, New York. In August, B. Lowenstein's Whitehaven Plaza, 72,000 square feet in area, began Operations and, in November, the Maison Blanche opened at Airline Highway. Hearn's Bronx was added to the firm when controlling interest in the Hearn Department Store 'was acquired on October 27, 1956. Expansion was even more rapid during 1957. Richards North .Miami, 88,000 square feet in size, opened, and about the same time Lit Brothers established a 30,000 square foot Store at a Morrisville, Pennsylvania,shopping center. The West Side Store, a 65,000 square foot branch of Maison Blanche, opened in January, 1958. Oppenheim Collins sold its Greenwich store but opened three others, units in Bay Shore and Valley Stream,'NeWhYork, and Paramus, New Jersey. -52... R. H. White Boston was closed, although the branch at WOrcester, opened in 1954, was operating successfully. Major addition of the year, however, was the acquisition of the Kline's stock. This company Operated a junior department store at Kansas City, Missouri, and six specialty shops in St. Louis, Clayton, and Cincinnati, Ohio; and in Detroit, and Eastland and Northland centers in Michigan. The St. Louis unit was closed in 1958 and the Cincinnati unit in 1959, but the others continued with apparently successful opera- tions. At the end of 1957, City Stores was comprised of twenty-six department stores, one junior department store, and thirty-eight Specialty shops. Expansion again slowed in 1958. Oppenheim.Collins in Harundale, Maryland, Opened and Kline's in St. Louis closed. The net total Of units Operated remained unchanged. Major alterations were also undertaken in 1957. Oppenheim Collins' main store at 34th Street, New York, was overhauled and an escalator installed. Lit added a fourth floor and 30,000 square feet to its 69th Street unit. Lansburgh's (Washington) added a new Specialty shop on the street floor and refixtured its first floor lighting. Hearn's Bronx store was air conditioned. Perhaps the biggest alteration was the remodeling of Maison Blanche, New Orleans, which.resulted in the addition of 78,000 square feet of space. During 1959, both expansion and modernization continued. Lansbmrghki Washington,was renovated, modern lighting was provided, and escalators installed. Richards of Miami was improved. Nine new'units were added. Franklin Simon closed the downtown Cincinnati store (formerly Kline's) and Oppenheim Collins' Garden City, Long -53- Island, and downtown Baltimore units were closed. Newer, larger units took the place of these last two in shopping centers. Roosevelt Field shopping center opened on Long Island, and the Towson Plaza, Baltimore, store was completed. In addition, Franklin Simon Opened units at Crestwood Plaza, St. Louis; Lenox Square (a regional shopping center) Atlanta; Charlottetown at Charlotte, North Carolina; and Las Olas Center in Fort Lauderdale. These additions increased the number of specialty Shops operated to forty-one. Two department stores were also added during 1959. Kaufman-Straus opened a 60,000 square foot suburban store in Dixie Manor, and Lansburgh's.added a 150,000 square foot unit in suburban Shirlington, Virginia. Twenty-nine full line department stores and one junior department store were in operation in 1959. City had grown from six units to seventy-one units during the fifteen-year period. Of the seventy-nine stores added during this intervaL,nine existing stores were acquired and three chains with a total of twentybtwo units were purchased. The other stores were new Operations. Two of the nine purchased units were termi- nated within the fifteen-year period: the R. H. White Boston Store, and the Wise, Smith & CO. Hartford unit. Allieui Stores Corporation. - This firm's acquisitions, terminations, new properties, and disposals are difficult to compute. First, there are many units Operated by the firm. The multiplicity alone makes the task of accounting for units difficult. Moreover, the liatingermf stores owned found On the covers of the.report represents locations, not units. Therefore, it does not, in most years, agree -54- with the number of Stores operated shown in the statistical section of the report. For example, a count of the stores listed in the 1958 report totals eighty-three; however, statistics in the same report indicate eighty-six as the number Of stores operated. The situation is further complicated by the existence of several chains. In most years locations of these chains are not given; only the number of units in each of several States is indicated. In the earlier years, the number of units operated by the chains did not agree with the units listed by states. Also, from time to time, some of the units have changed names or shifted between independ— ent and chain categories. In addition, there is the usual problem of units Which have Opened between the fiscal year end and the date of the issuance of the letter to the stockholders. Despite these difficulties, I have endeavored to compute changes in the number of stores by year for the period. Undoubtedly the tabulation could be improved; however, I feel that the correction would not materially alter the general picture. In 1945, sixty-nine stores were Operated by the firm. Dur- ing 1946, the Anderson's chain purchased three units- Laubach's in Easton, Pennsylvania,was purchased for cash, as were A. M. Jensen of walla walla, WaShington, and an unidentified unit in Harley, Idaho. The Bon Marche SpOkane unit was Opened in 1947. Thiswsame year, Herpolsheimer's (Grand Rapids) added a small unit in Muskegon. The wm. D. Hardy and Co., a large department store in Muskegon, had burned in 1946. Herpolsheimer's (Grand Rapids) purchased the Ir -55- working assets and good will of the company and undertook to con- struct a building which would merge the older firm with the new unit. This merger produced Hardy-Herpolsheimer, which is still in operation in 1960. Troutman's, another chain owned by Allied, purchased the capital stock of Metzger-Wright in Warren, Pennsylvania, and this became another of its chain Stores. It was to operate until 1958. The Fashion Co. in Columbus was acquired through an exchange of capital stock in September. It was later merged in 1950 with Morehouse-Martens, a firm already owned and operated by Allied. A similar merger was being prepared in Cleveland. In 1948 the Linden Co., a women's Specialty shop, and W. B. Davis, a men's Shop, were acquired. The first was a cash transaction, the second an exchange of Davis stock for Allied Preferred. These two were merged and later merged again with the Sterling-Lindner Co., which was acquired in 1949. Allied also opened two new units in 1948: the first, Maas of St. Petersburg, the other, JOske's of Houston. Bon Marchefi Everett, was Opened in 1949. This and the Sterling-Lindner acquisition were the only additions that year. About this time, six of the Anderson units were terminated. Expansions of existing stores had not been neglected over this period. In 1947 Gertz of Jamaica added 130 per cent more space to its existing unit, while Rollman's (Cincinnati) and Polsky's (Akron) were expanded and improved. Donaldson's in Minneapolis, Golden Rule in St. Paul, and Bon Marché in Spokane were modernized. The following yean construction was reported under way at Jordan Marsh, Boston; Herpolsheimer's, Grand Rapids; -56- and Meyer's, Greensboro. A new building was completed for Maas, St. Petersburg. In 1949, improvements and modernization continued in Minneapolis, Seattle, Tampa, and Lowell. Five stores were refixtured. In 1950, Bon Marché at Longview, Washington,was opened, and Northgate was completed on April 21. Two more Anderson's units in the West were closed this year. Major additions were completed at Dey in Syracuse, Pomeroy's in Reading, Pomeroy's in Harrisburg, Peck's in Kansas City, Laubach's in Easton, Donaldson's in Manne- apolis, and Sterling-Lindner in Cleveland. Three more stores were refixtured that year. Modernization continued at seven stores in 1951, and an additional seven Anderson's units closed. Three stores were aamflred through exchange of stock. Troutman's acquired the New Castle Dry Goods CO. in Pennsylvania, and Stern's of New York became a sub- sidiary on April 10, 1951. The Palace in Spokane, washington/was acquired for cash. It was to be merged with the Bon Marché Spokane unit the following year. In addition, Gertz opened a branch at Flushing, New York. With the completion of the first major shop— ping center in Framingham, the JOrdan MarSh store there opened as the dominant unit in the plaza. This major event will be further discussed in Chapter IV. Another Anderson's unit was closed in 1952, and the firm acquireni three small units: Robinson-Schwenn at Hamilton, Ohio; mfluilmoss in Middletown, Ohio; and.wren's in Springfield. A small unit was also purchased and merged with an existing unit in Washington . 3". -. "' -57 ... In 1953, Allied acquired the Jordan Marsh unit at San Diego, Imt this unit was terminated in 1957. Read's in Bridgeport, Con- necticut, and Donaldson's in Rochester, Minnesota,were also acquired that year. Another two units of the Anderson's group were eliminated. and the total stores operated, according to the Allied annual report, was seventy-three. In 1954, the Joslin store was modernized and enlarged and opened in March as Jordan Marsh, Malden, Massachusetts. Levy's of Savannah was enlarged to triple its former size. Bon Marche-Russell's in Eugene, Oregon,was added in September, and Maas in Sarasota in November. In addition,on February 1, 1954, the firm acquired the assets of an existing store, Kennington's, in Jackson, MissiSsippi. The O'Neill store in Baltimore was closed when its leases terminated in 1954. This same year, a major addition was completed at the Gertz, Jamaica,store, and the Titche-Goettinger's addition, which had doubled its size to over oneehalf million square feet, was com- pleted. Pomeroy's Pottsville unit was enlarged and modernized. In the fall of 1955, PolSky's Canton was added to Allied's list of firms, and Cain-Sloan, with a long record Of pro- fits, was acquired. Stern's Opened a branch at Great Neck in September, and Pomeroy's unit at Levittown began operations in March. An additional floor was added to the Paris of Montana store, and.four floors were added to Bon Marche, Seattle. Field's of Jackson, Michigan,was expanded, and Quackenbush in Paterson, New Jersey,was refixtured. Six units were added in 1956, and these brought an additional -58- 1J30,000 square feet to Allied's existing space. Shopping center snues were Opened in Swifton (Rollman's); Gulfgate (JOske's); anmhdale, Minnesota (Donaldson's) and Hicksville (Gertz). Branch saues were opened by Maas at Sarasota and Jordan MarSh at Miami. 'flm Miami store, a three-floor unit, was leased. Plans called for finnre expansion, and by 1958 two additional floors were added. 'Hm shopping center unit at Hicksville was also planned for expan— sion. However, the full five floors were built in 1956 though only four'were used initially. The fifth was fixtured and placed in operation in 1959. In 1956 another Anderson's store was termi- nated. Anderson's at Boise was modernized with escalators, and Black's in waterloo was enlarged. JOske's at Las Palmas opened in 1957, and Bon Marché at Bellington, WaShington,was placed in Operation. In November Stern's opened its 315,000 square foot branch at Paramus at the Bergen Mall shopping center. Cain-Sloan moved into a new building of 350,000 square feet, with a parking garage of 175,000 square feet. An addition of 106,000 square feet was added to Bon Marché Spokane. In Boston, JOrdan Marsh completed the third section of its five- section rebuilding program. Jordan Marsh SanLDiego was closed. In 1958, for the first time since 1951, more units were closed.than were Opened. ’The warren store acquired by Troutman's in 1948 was closed, and another small Anderson's unit in Ogden, Oregon, terminated. A Jordan Marshunit, 250,000 square feet in size, Opened ‘in theflNorthshore shopping center at Peabody. This’brought the number of stores Operated by Allied to eighty-six. -59.. In 1959, two junior department stores were liquidated, and only one unit was added. The firm acquired the assets of an exist- ing junior department store, Missoula Mercantile in Montana. The firm expanded over the period from sixty-nine units to eighty-five units. Twenty-nine units were closed, but of these, five were the result of mergers of two or more stores in one city. An additional two were regular department store units, named indi- vidually in the listings by Allied. The remaining twenty-two were Troutman's or Anderson's units. These apparently are smaller units. Apparently all the Anderson's units and most of the Trout- man's stores had been owned at the beginning of the period. The firm has followed a policy of acquiring existing units when available and has also established downtown, branch and shop- ping center units. Of the forty-five stores added, at least twenty-one were units which had been in operation before their acquisition by Allied. Mercantile Stores CompanyI Inc. - In its 1945 report, Mercantile announced that its expansion program, begun in 1944, was being accelerated. The 1944 report was very brief, and it is difficult to separate the activities which took place into the two years. The 1945 report indicates that twenty-five department stores were opened in the two-year period and that fifty-six appliance stores had been leased. For our table purposes, we shall group all Of these as being acquisitions of 1945. Major department stores were operated under sixteen different names. -60- Mercantile's expansion program was initiated to take advantage of the pent-up demand for appliances which had not been available during the war. The build-up of appliance stores was to smove none too profitable, for by the end of the period all but five units had been eliminated. To arrive at the totals indicated in the 1946 report, we must conclude that five of the appliance stores and two of the junior department stores acquired in this first surge of expansion were temporary ventures. In October, 1945 the company Opened a new department store in Greenville, South Carolina; this store was in operation less than ten years. Fourteen appliance stores and five junior department stores were added to the operation during 1946. The Mt. Vernon, washington, unit operated until 1957; the Orangeburg, South Carolina,unit closed in 1956. Jones in Pittsburg, Kansas; Montgomery Fair in Opelika, Alabama; and Joslin in Lakewood, Colorado,however, are still in operation. The percentage of stores Opened which have had success in operations was about as small in 1947. Of seven junior depart- ment stores Opened, only four were to survive. These were Bacon's in Jeffersonville, Indiana; Peoples in both South Tacoma and Port Angeles, Washington; and Right House in Brantford, Ontario. The shortest-lived store was the Carbondale, Pennsylvania,unit which opened in July, 1947 and closed in 1951. The Shamokin, Pennsylvania, unit, Opened in December, 1942 closed in 1954.’ An additional two of the junior department stores which were acquired or Opened in ..61- h1the 1944 - 1945 period also closed during 1947. The last Of the appliance stores, four in number, were opened during 1947. Thereafter, the annual reports indicate only terminations of these unprofitable units. Expansion slowed in 1948. Five of the junior department stores initially acquired were eliminated, as were two of the appliance units. The percentage of successful Openings climbed, for only one of three junior department stores opened in 1948 was not in operation at the end of the period. The Pittston, Pennsyl- vania,unit was terminated in 1958, but Jones at Muskogee, Oklahoma, and Root's at Robinson, Illinois,have apparently been successful. During 1949, nineteen Of the appliance stores were termi- nated, bringing the total in operation at the end of the year to forty-Six units. This contrasts with the peak of 1947 when sixty—seven units were in Operation. Three junior department stores must have closed, for the total of the departmentand junior department stores remained constant in the two years while the annual report informs us that three new stores were added. All three, Jones at Kansas City, Missouri (which opened in March, 1949), J. B. White at Columbia, South Carolina, and Joslin's junior department store in Aurora, Colorado,remain in operation today; Two warehouses were added in 1950, one at Louisville, Kentucky, a second at Tacoma, washington. The firm also Opened a new junior department store at Fremont under the Lion name in November. During the year a major department store was added through acquisition of its stock. The unit, C. J. Gayfer's in Mobile, Alabama,was established in 1879 and is a leading department store it; -52- hithat area. Real estate next to Gayfer's was purchased a few unnths thereafter, and major expansion was begun. Upon completion cf the expansion at the end of l951,Gayfer's was doubled in size. Three more Of the appliance units closed in 1950. Additions in 1951 were fifty per cent successful. A new tmilding erected in Independence, Missouri,for a Jones store con- tinued through 1960; a Lazarus unit, opened in a leased building in.Nanticoke, Pennsylvania,operated but seven years. Eighteen appliance stores and the Carbondale, Pennsylvania,junior depart- ment store were closed in 1951. In 1952, seven more appliance units and a junior department store in Bozeman, Montana,were terminated. Joslin's in Merchant Park, Denven opened in March and the Right House Operation acquired an existing junior department store in Galt, Ontario. In 1953 the appliance stores were reduced to thirteen with the closing of five more units. In August Bacon's in St. Matthew's was added. Another existing unit located inParis, Illinois,was purchased and Opened under the Root's name in OctOber upon comple- tion Of remodeling. The Right House in Galt was remodeled in 1953, and a new warehouse was acquired in Kansas City, Missouri. By the end Of 1954, the appliance units Operated had decreased to nine. In November, MoAlpin's in western Hills, Ohio. This is the first mention of a shopping center loca- was Opened. tion, Two Denver, Colorado,junior department stores were moved that year to larger locations. The Greensville, South Carolina, unit of J. B. White, Opened in 1945, and the junior store in Paris, Kentucky, opened in 1947, both terminated by the year's end. -53- In July, 1955, another major unit, 0. J. DeLendrecies, in~ downtown Fargo, North Dakota, which had been founded in 1879, was acquired by Mercantile. Castner-Knott added a shopping center branch in Nashville in August, and Peoples acquired a new unit in the suburbs in May. The Fair Store of Cincinnati, Ohio terminated in November. This was the only store closed during the period of our study which was large enough to be listed by name in the 1946 report. Merchantile Operated in Cincinnati both a McAlpin downtown unit and its new western Hills shopping center branch; these two were much more profitable than the Fair store and would benefit from its closing. In addition, there were plans at this time for the open- ing of another suburban unit of McAlpin. Two major units were air conditioned during 1955, and JOnes in Kansas City, largest of the Mercantile units, was modernized. During 1956 five new units were added, one store was relocated, and two junior department stores were closed. Bacon's in Jeffersonville moved from a suburb to a shopping center, and its capacity was doubled. The units terminated were those at Orangeburg, South-Carolina (opened in 1946) and Chehalis, washing- ton (apparently one of the 1944-1945 acquisitions). Another well—established and well-known department store, Crews-Beggs, in Pueblo, Colorado, which had been founded in 1888, was acquired in 1956. McAlpin's second shOpping center Opened in September in Kenwood. The market potential of this unit had been tnumerestimated for in March Of 1959 it was necesSary to enlarge it 13] 30,000 square feet. A Gayfer's Pensacola branch Opened in a shopping center. -64- In August Bacon's completed its twelve-acre shopping center branch in Shively, Louisville. Not all the new units, however, were in shopping centers. JOslin's downtown Boulder, Colorado,unit was completed in November. The total number of units Operated did not change from 1956 to 1957. A Lion branch was added in westgate, a suburb of Toledo, and Montgomery Fair of Alabama opened a shopping center branch. Two junior department stores acquired in 1946 and 1947 (Mt. Vernon and ShamOkin) closed during the year. In 1958, the units at Pittston (Opened in 1948) and at Nanticoke, Pennsylvania (opened in 1951) were eliminated. In Octo- ber of this same year Jones Prairie Village was established in a shopping center. In September, 1959, the MbAlpin's division added its third shopping center branch in Cherry Grove. Two months later, the McAlpin's Middletownrunit was relocated from a downtown area to a shopping center. Capacity of the unit was doubled. During the year, a branch store in Bellingham, washington (MacDougall's) was eliminated, as was an appliance store (Bacon's) in Elizabethtown. At the end of the period, only five appliance stores were in Operation. Three new stores and a major expansion are planned for the future. Mercantile has expanded during the period both through new facilities and through acquiSitions of existing units. At least five established firms were purchased during this period, and the early'reports indicate that at least some of the twenty-five ini- tial junior department stores added had been previously Operated. -65- Appliance stores have been unprofitable, for had they been success- ful, more of them.would exist today. About sixteen of the twenty- five junior department stores acquired in 1944-45 were eliminated by the end of the period. Several more added in 1946, 1947, 1948, and 1951 also closed before 1960. Perhaps this firm was just too anxious to grow rapidly,and purchased or established units without adequate investigation. Its recent choices of locations appear to have been more successful. New units used the name, and trade on the reputation of, the established downtown stores. The trend Of Mercantile seems to be to acquire established firms in areas where it has not penetrated and to add branch units around its present dominant stores. Spiegel, Inc. - In 1944, Spiegel announced in its annual report that initial steps had been taken in its five-store plan. This plan called for the eventual establishment of five chains of stores: fashion stores, boys and girls stores, stores for men, stores for the home, and hardware, farm.and auto stores. This plan was never to be realized by the firm. In fact, by 1955 the firm announced intention to diSpose of all remaining stores as soon as possible and to continue operation of only the catalog units. In April, 1944, a chain of forty-six fashion stores, the Sally Stores, was acquired. An additional chain of twenty-six fashion stores, the Beverly Stores, was purchased in December and placed under the Sally management. Two retail units were opened during 1944, initiating the boys and girls division. In August the firm acquired the Federal chain of twenty stores in the west -66- (California and Nevada). These units sold home furnishings, cloth- ing,and jewelry. Five one-price dress shops with catalog order desks were opened in the Chicago area. These acquisitions total ninety—nine units, but the annual report states that one hundred were Opened or acquired in 1944. While I cannot reconcile the unit difference, we shall proceed from Spiegel's indicated total; The first of the home stores was opened in January, 1945 when the firm acquired the Straus and Schram chain of five furni- ture stores in Chicago. Three more existing home furnishings stores were acquired later during the year: Harbour-Longmire of Oklahoma City; DorriSAHeyman of Phoenix, Arizona; and Morrison-Neese of Greensboro, North Carolina. One of the five Straus and Schram chain was apparently closed during the first year of operation, for the 1945 report refers to four stores rather than the five mentioned in 1944. During the year, various catalog order desks were installed in the retail units, and the names of some of the Sally and Beverly stores were changed to Spiegel. Under an unusual arrangement .made at the time the Whitney Department Store in San Diego was acquired, Mr. Clement D. Ryan, President of the store, continued ‘with.the unit and held an option to repurchase the store after March 1, 1948. Spiegel felt sure that in the interim time it would receive a "substantial return on its investment."1 Acquisitions continued at a rapid pace in 1946. Four new home stores were acquired: the Robert Keith store of Kansas City, 1Annual Report of Spiegel For the Year Ended December 31, 1945 ’ p0 SO ' -67- Missouri; Sydnor & Hundley of Richmond, Virginia; Stoehr-Fister of Scranton, Pennsylvania; and Miller Brothers of Chicago. In April, 1946, the J. & R. Motor Supply Company chain of fifty-five stores was acquired and these became the first units in the hardware, farm, and auto division of the Spiegel Co. These acquisitions brought the number Of units Operated by Spiegel to 167. Efforts were directed to consolidation and improvement in 1947. Two stores were closed. The Whitney Department Store acquired with its peculiar repurchase contract was lost by the com- pany in this year. Mr. Ryan died on October 24, and his option reverted automatically to the original owners of the store. They exercised the Option on December 31, 1947. Spiegel reported that the firm had "realized a sizeable return on the Whitney invest- ment."2 The first separate catalog stores, eight in number, appear in the 1948 statistics although many of the 164 retail units operated at this time also had catalog order desks. By 1949, the catalog units increased to twenty-six, and an additional two were Opened in 1950. In 1950 the retail stores numbered only 153. There ‘were in Operation seventy fashion stores, fifty-two hardware, farm, and auto stores, eleven home stores, and twenty Federal stores. 'Fhis would indicate that in the period since 1946 the two boys and ‘girls stores had either closed or changed in character. In addition, 2Annual Report, Spiegel, For the Year Ended December 31, 1947, p. 4. -68- eight fashion Stores and three hardware stores had been eliminated.3 In 1951, a net of six catalog Stores were Opened, and eight retail stores were closed. Three of the retail stores were Federal units located in California. In addition four fashion stores and one auto-hardware store were eliminated. In 1952 both catalog and retail store units increased in number. Thirty-two new catalog stores and four auto-hardware units were opened. However, three fashion stores were closed. Some reclassification also took place about this time. There is a dis— crepancy between figures reported in the 1953 and 1956 annual reports. The 1953 report shows sixty-six catalog stores for 1952 and seventy-five for 1953. The same year, 146 retail units are reported operating in 1952, while 139 retail units are indicated for 1953. In the 1956 report, a summary of stores going back a number of years is listed: it Shows catalog units of 110 for 1952 and 120 for 1953. It was during this period that Spiegel decided to abandon the retail divisions and its five-store plan. We can conclude from the comparison of the figures that forty-four of the retail units in 1952 were relocated or changed to catalog units, and.an additional unit was so relocated the following year. If this assumption is correct, then an additional nine catalog units (exclusive of transfers) were opened in 1952. The 153 report indi- cates that eight retail units were closed that year, and (following our assumption) seven of these were discontinued, while the eighth was repdaced by a catalog unit. we would then have ninety-four 3The fourteenth store is the unit unreconciled when the firm repOrted 100 units, but I could account for only ninety-nine. 52— 794 ...);- —69— retail units at the end of 1953. Various ones were sold in 1954 and 1955. Seven furniture stores and the fashion chain were sold in 1954, and the remaining furniture stores and the auto chain were eliminated in 1955. Only the Federal group on the West Coast remained in operation and this group had been reduced to twelve units. By 1958, the chain contained but nine stores. No informa- tion is available concerning the remainder of these units. The catalog stores, however, were increased beginning in 1955. There had been a net reduction of three units between 1953 and 1955. Then the reports indicate additions of twenty-five units, twelve units, twelve units, and twenty-two units in 1956, 1957, 1958, and 1959, respectively. One unit was closed in 1958. All of the catalog units at present are within a 300-mile radius of Chicago. However, the firm announced that areas outside the present perimeters are being tested. Expansion plans call for an additional thirty-five to forty units in 1960. Spiegel's expansion had been primarily through the acquisi- tion of existing chains and individual units. We know that one department store, ninety-two fashion units, fifty-five auto-hardware innits, and twelve home furnishings stores were purchases of exist— ing units. These total 160 of the 172 units acquired. we do not know the character of the one unit unaccounted for prior to 1945. 13113 unit, the two boys and girls shops, the five one—price shops, and the four auto-hardware shops added in 1956 could have been new facdlities. However, even if these were new units, the greater jpartLOf the expansion in the retail outlet division was through acquisition. On the other hand, the catalog units are new units. -70- And it is these new units which have proved to be profitable for the firm. Aldensyggnc. — Aldens is a story of policy reversal during the fifteen-year period. The 1945 report indicates that the firm closed all catalog order stores in 1944 and intended to have order depart- ments only in its retail units throughout the country. No more is mentioned of the catalog office until 1949, when the firm reported that it had two catalog Offices and fifteen telephone units through- out the country. By 1950, telephone and catalog offices had increased to fifty. Two catalog offices and four telephone units were Opened in 1951. The following year, the number of these com- bined units was reduced to fifty-two. No mention is made Of the units in 1953, but by 1954 there were seventy telephone and catalog Offices listed in the annual report. For the next three years, a breakdown of units is available. Seven units were added in 1955, and at the end of that year there were fourteen catalog offices and sixty-three telephone units in Operation. In 1956, twelve catalog offices were opened, while twenty-five telephone units were closed. The following year ten more telephone units were eliminated, and fourteen catalog units were opened. The 1958 and 1959 reports do not distinguish between the tmm> types of units, but only indicate a net decrease of eight for 1958 and an increase of five for 1959. At the end of the period, then, Aldens had sixty-five telephone and catalog offices in opera- tion, as Opposed to none at the beginning of the period. 'Fhe most interesting innovation in catalog order offices -71- was put into effect in 1957. At that time, Aldens entered into an agreement with National Tea Company whereby six units were installed in their stores (National Food Stores). In 1958 there were five such units operating successfully, and the 1959 report listed four. The 1958 report indicated that the firm felt that the "super-market traffic and parking facilities offer good sales potential."4 The 1959 report did not comment on the National Food Store units, and the decrease in units may mean that this has proved less successful than anticipated. However, the company is following a policy of increased catalog offices. Their expansion plans for this division include "the opening of additional loca- tions at the rate of one each month, which we have found to be at as rapid a pace as profitable sites can be found and personnel properly trained."5 In 1944, when the catalog stores were closed, the firm embarked on a program of acquiring retail stores. At that time two such units were owned and Operated by the firm. One was the Aldens store in Chicago; the second unit was the Aldens Famous store in Springfield, Illinois. The latter unit was sold in December, 1945 soon after the September purchase of Gebhard- Gushard Co. of Decatur, Illinois. The Gebhard-Gushard unit was terminated early in 1949. Of the five purchases made in 1946 four are operating in 1959. The five stores acquired were Merkel Co., Mason City, Iowa 4Aldens Annual Report, 1958, p. 7. 5Aldens Annual Report, 1959, p. 7. -72- (closed in 1955);.Elmwood Park Department Store, Inc., Elmwood Park, Illinois; StrubAWareham, Inc., Iowa City, Iowa; Windmiller's, Inc., Chicago, Illinois; and the Herz Store,_Inc-, Terre Haute,nIndiana. The following year, Breeden and Co., Bloomington, Indiana, was acquired, and it too is still in operation. No new stores were added from 1947 to 1949. Then Aldens opened three stores in two years. These, unlike the prior acquisi- tions, appear to be new Stores. At any rate, the annual report speaks of remodeling and "ready for occupancy" in connection with these units. In subsequent reports, no firm name is associated with these locations, although some of the prior acquisitions carried the prior name beside the city location. In 1952, the firm leased a store in Lansing, Michigan. This unit continued in opera- tion until April, 1958. The Rockford unit, added in 1950, was eliminated in February, 1958, but the Bedford and Frankfort units have apparently been successful. From late 1954 through 1956 another group of stores was acquired. The Gimbel and Bond store in Vincennes, Indiana. was added in October, 1954; followed by MoAtee's in Owensboro, Kentucky. in March, 1955; N. Kaufman's of Uniontown, Pennsylvania in August, 1955: and in 1956, O. T. Johnson Dry Goods, of Galesburg, Illinois. and the Young Dry Goods unit in Alton, Illinois. The greatest number of retail units operated was in 1955 after these last two acquisitions and the Merkel termination. Fifteeen units were continued until 1958, when the Lansing and Rockford units were eliminated. All thirteen units Operated in 1959 were classified by the company as junior department stores. -73— In various years the firm has indicated that catalog units and retail stores were refurbished and modernized. Occasionally relocations are also mentioned in connection with the catalog units, but no Specific details are given. The firm indicates that it plans expansion in the retail division, and that this expansion will take place through the "acquisition of additional well established businesses, as stores which meet our requirements are made available to us."6 In summary, this firm opened 112 telephone and catalog offices, and closed forty-seven; it added sixteen retail stores, and terminated five during the period. The catalog offices repre- sent a reversal of policy initiated in 1944, when the firm decided to locate catalog stores only in its own retail units. Of the six— teen retail stores added, twelve were existing units. Two of the four units opened initially by Aldens were closed during the period, while only three of the twelve purchased stores were found to be unprofitable. Therefore it is not surprising that the firm has decided to expand its retail Operations through acquisitions in the future. In 1955 the building at 5000 west Roosevelt Road, Chicago. was conmfleted. It now houses the executive offices, and the ware- housixng, buying,and operating functions which had been scattered throughout six buildings in the Chicago area. The location covers twenty—five acres and provides 650,000 square feet for office, warehouse, and service use. Ibid. -74- Montgomery ward & Co., Inc. - ward began expansion late in the period compared with any of the other firms. This was due to its colorful Mr. Avery's7 fear of recession. Ward had 632 retail units in 1945. From 1947 until 1956 seventy of these units were closed. In March, 1957, Ward opened its first retail unit in sixteen.years in POrtsmouth, Ohio, replacing a smaller unit. This same year twelve units were closed and Ward purchased ninety-ninerper.cent of the common stock of The Fair in Chicago. The acquisition added four retail units to Ward's operations. Major alterations were completed in six units, ninety-five stores were redecorated, and twenty-five stores were air conditioned. Large capital expenditures continued in 1958. Five units were built and ten were closed. Ward rehabilitated and expanded sixteen units, ninety-seven stores were redecorated, and sixteen air conditioned. A major distribution center was completed. During 1959 twelve new units were placed in Operation, five of which were relocations of existing units. In addition to the five stores relocated, nine units were closed. Two more distribu- tion centers were completed. Precise data are not as available for the catalog units. There were 195 such units in operation in 1945, and for the years until 1955 only net increases or decreases in these units are avail- able. Units were added in 1945, 1947, 1949, 1953, 1954, and 1955. In 1950, 1951, and 1952 there were net decreases in the number Of units Operated. By 1955.301 units were operated. One hundred and 7Mr. Avery was Chairman of the Board of Directors. -75- thirty-two new units were opened and eighteen closed in 1956 alone. The next year sixty additional units were opened, and in 1958 and 195% fifty-five and forty-four new units were added. Three units were closed in each of these last two years. Eleven of the cata- log stores that opened in 1957, five of those in 1958, and six of those in 1959, were replacements for retail units which had been found to be unprofitable ventures. Ward ended the period with 568 catalog units, an increase of 291 per cent over the base period. However, its retail units had decreased from 632 to 547, or about thirteen per cent. Capital expenditures reported by the company for construction from 1955 until 1959 were just short of $98 mil- lion. J. C. Penney Company. - At the beginning of the study, Penney had 1,608 units in operation. In the 1945 report, it announced a policy of selective expansion. Six units were closed in 1945, and an additional two in 1946. The latter year one unit was opened. There was a net increase of two units in 1947 and a net decrease of two in 1948. During this two-year period, however, 300 units ‘were enlarged, renovated, relocated, or refixtured. In 1949 more complete statistics are available in the annual report. Seven new units were opened, and thirty—three were relo- cated, for a total of forty new units. One store (other than the relocations) was closed. The same year major expansions were com- pleted in fifty units, and seventy-four units underwent either small alterations or improved fixturing. In 1950, eleven stores 'were opened in new areas, and twenty-three units were relocated, -76... for a total Of thirty-four new units. The same year six stores were closed other than those which were relocated. Improvements, enlargements, or refixturing took place in 175 additional units. This same pattern continued from 1951 until 1959. Each year, until 1958 stores opened exceeded stores closed. In 1958 and 1959 total units in operation decreased. Over the period many stores have been relocated, and over 100 stores each year have been enlarged, improved, or refixtured. Since the easiest way to Observe the growth and activity of this firm is through a summary, Table 4 has been included. Penney has long followed the policy of having a Penney- trained employee open a new unit. None of its stores have been acquisitions of existing units. Its growth represents new or expanded facilities in the community. Sears, Roebuck and Co. - Sears has expanded in several directions. There are units in the United States, in Latin America, and in Central America. Sears also has an interest in the Sears-Simpson stores in Canada, and in WaltonS-Sears, Limited, in Australia. In 1959 Sears sold the Sears Roebuck Australian Pty. Lindted's interest of twenty-four per cent in Waltons-Sears, Limited. to the other stockholders. A capital gain of seventeen per cent ‘was realized at the time. In 1958, waltons—Sears operated twenty- xaine retail units, nine catalog offices, and one mail order plant in Australia. These units are not included in this report, since the Sears interest was only a partial ownership, and did not extend to the end of the period. TAE J. C. PENNEY - I New Tota Year Location Relocations Ur 1951 12 27 1952 14 21 1953 8 17 1954 18 28 1955 33 26 1956 30 31 1957 26 35 1958 19 47 0 1959 22 36 E Total 182 268 4! SOURCE: Annual reports. Year is defined on pages 10 - 12. A - Represents units enlarged, improvq B - Annual report indicates that in e: improved during the year.' -77... " n. u e '- -73- In January 1953, Sears purchased an interest in Sears- Simpson of Canada. Sears and Simpsons, Limited of Canada each own oneehalf of the venture, and have equal representation on the board. The purpose of the venture is to build Sears-type units in all cities except the five where Simpsons Operates retail stores. The new company took over the four mail order plants already existing in Canada, but in 1952 no retail outlets of the Sears-type existed. By 1954, eleven units were in operation. In 1955, an A unit was Opened in Ottawa, B units were completed at Port Arthur and St. JOhn, and six other small units were placed in operation.8 This was the first report which mentioned mail-order units. These numbered 355 at the close of 1955. During 1956, eleven additional retail stores were Opened and fifty-four mail-order Offices were eliminated. One large retail store and three small ones were added in 1957. Units were added in Calgary, Alberta,in 1958 and ‘Winnipeg in 1959. During this period eighteen additional mail- order houses were added. By the end of 1959 Sears-Simpson had thirty-seven retail outlets, 319 catalog units, and four mail-order jplants in Canada. The Latin American Sears story also has some incomplete areas. The 1952 report is the first which mentions total number of stores in Operation. .At that date, twenty-one stores existed. Of these, at least seven stores had Opened in 1952. These were a large unit in Maracaibo and two smaller ones elsewhere in Venezuela; 8Sears groups its stores into three categories; the A store is its largest unit located in metropolitan areas; the B store, its medium-sized department store unit; the C store, its smallest unit, the specialty hard—line or appliance store. -79- units in Santiago, Holguin, and Havana, Cuba; and a unit at Puebla, Mexico. In 1951 a medium unit had opened in Puerto La Cruz, Venezuela, and two small units in Mexico. Units had been added in Caracas, Venezuela,in 1950, and in Sao Paulo and Rio de Janeiro, Brazil, in 1949.‘ Mexico City's unit opened in 1947, and in that same year a unit in Havana was enlarged. This accounts, however, for only fifteen of the twenty-one units. The reports of 1953 and 1954 are also incomplete. Five units were Opened in this period, but only the units at Bogota, Colombia; Ciudad Bolivar, Venezuela; and Barranquilla, Colombia,are mentioned by name. 'In the same period five catalog offices, also not identified (but believed to be in Mexicoh'were placed in operation. In 1955, ten retail stores were established. Large A units were completed at Lima, Mexico City,and Sao Paulo, and B units were placed in Operation in Culiacan, Mexico,and Valencia, Venezuela. Five sales offices in Mexico (perhaps those established in 1953 - 1954) were converted to retail units. An additional nine sales or catalog offices were Opened. In 1956, one unit in Cuba was enlarged and a second unit ‘was relocated. In addition twelve new units were operating by the end of the year. These included a medium unit at Cali, Colombia; «one small unit each in Colombia, Brazil, and Six in Mexico. The (other three units were not identified, nor were two additional sales offices. Five new units were opened in 1957; three small 1H11t8 in Brazil, and medium units in Medellin, Colombia,and (:hihuahua, Mexico. Four sales Offices increased the total to :fifteen. In 1958, additional units were located in campinas, cps» g tr ~,JJ——— -80- Brazil,and Lima, Peru. Over the two-year period,five stores had been relocated and enlarged: one in Venezuela and two each in Brazil and Mexico. Expansion ceased in 1959 when six of the existing retail units were closed. Seven sales offices, one in Venezuela and Six in Mexico, also were eliminated. In 1959 forty-nine retail units and eight sales offices were Operated by Sears. The annual report for 1955 mentions the Central American stores for the first time. In this year, units were opened in Panama City and San Jose, bringing the number of units operated at the end of the year to three. In 1956, the number of units was doubled by additions of stores at Panama City and Colon, Panama,and in El Salvador. A small unit was closed in Panama in 1958. A medium store was opened in 1959 in Panama City to replace two small units. .At.the end of the period, three small and one medium B store were in operation in this area of the Americas. The above statistics are not included in Table 1, since sales and income totals for these stores are not consolidated in tine Sears annual reports. It is the consolidated totals which are useui in the balance of the study; therefore,greater consistency results from total exclusion of these units. Because the other department stores being studied do not have units located outside the IInited States, Table 1 presents a comparison of expansion in the limited States. Information on these units is summarized how- ever'.in Table 5 to illustrate the extent of Sears' expansion in the Innericas, outside of the United States. Like Penney's and‘Ward's, Sears' expansion has been SEARS, ROEBUCK - PHYSICAL EXPANSION IN FC TABLE 5 Year 11W Units Added Units Closed Total Units SIMPSON SEARS -81- 1953 .. . 0 1954 ll . 11 1955 9 . 20 1956 ll . 31 1957 4 . 35 1958 l . 36 1959 l . 37 ‘_LATIN AMERICA. 1947 2A . n.a. 1948 .. . n.a. 1949 2 . n.a. 1950 l . n.a. 1951 3 . n.a. 1952 7 . 21 1953 3 . 24 1954 2 . 26 1955 103 . 36 1956 13C 1C 48 1957 6C 1C 53 1958 6D 4D 55 1959 41C 79 49 CENTRAL AMERICA 1954 .. . n.a. 1955 2 . 3 . 1956 3 . 6 1957 .. . 6 1958 .. l 5 1959 1E 2B 4 SOURCE : Annual reports. gear is defined on pages 10 - 12. Amount is net increase or decrease; only total stO 11.3- - Information is not furnished in annual repor A.-— One store added, one enlarged. 13 — Figure includes 5 sales Offices converted to re C -— Figure includes one relocation. I) — Figure includes four relocations. E -— One medium unit replaced two small units. .‘ 'a ‘- eszw .fi' -82.. so great that reiteration of the number of stores operated at new locations, the number of relocations, the number of stores closed, and enlargements, would make for monotonous reading. Therefore, the results of the expansion of Sears is summarized in Table 6. Little is reported about catalog order offices opened in the United States. The number of stores in operation each year is indicated in the statistics, and from these we are able to compute the net new units opened each year. For two years, when the actual number Of units added is given in the report, we are also able to compute the number of catalog stores closed. (See Table 1.) When an operation as large as Sears is examined, much of the detail must be omitted, for to include it in annual reports ‘would expand the report to book size. Sears has chosen instead to highlight certain phases of its operations each year. Often cap- tions beneath illustrative pictures do not identify the location Of the store shown. Some of the recent Special features in annual reports have been Merchandise Testing in the 1952 report; Sears, the Citizen, 1953; Allstate Insurance Progress, 1954; Expansion and.Improvement, 1952 - 1955, 1955; The Buying Story, 1956; The Latin American Story, 1957; Buying on Time, 1958; and The Sears Laboratory, 1959. Each of these special features includes much of interest to the reader and investor, but does not furnish any specific information on units which we can include here to dress ‘up the cold statistics of growth. Even the Special features on growth do not always agree with the summary tables here presented. This is especially true for the relocations. Where data in each «of the summary issues (covering a period of four or five years TABI SEARS, ROEBUCK - PHYSICAL EXP New ‘Totali Year Location Relocations Unit 1945 4 ... 4 1946 6n n.a. 6 1947 15n 38 53 1948 22 n.a. 22 1949 22 17 39 1950 11 16 27 1951 22 12 34 1952 14 6 20 1953 11 2 13 1954 11 14 25 1955 10 13 23 1956 ll 15 26 1957 10 17 27 1958 10 13 23 1959 8 16 24 Total 187 179 366 SOURCEh Annual reports. §ear is defined on pages 10 - 12. Amount is net increase. . n.a. - Information is not furnished in a * -'Fhese represent only major enlargemd -83- in... -84- with no breakdown by year) varied from data presented annually, I utilized the information from the annual reports. In each instance, the summaries indicated greater growth than that presented by the yearly statistics. Sears' growth, with the exception of the few units acquired in the Canadian venture, represents new facilities in the community. Summary. — An examination of the various expansion patterns of the fifteen firms leads to the following conclusions: (1) All Of the firms except Aldens and Spiegel have had programs of expanding the units which existed at the beginning of the period. In some cases many thousands of square feet Of sell- ing space have been added through these expansions. (2) Penney and Marshall Field alone have added no existing retail outlet to their Operations. Gimbel purchased but one out- let, and the Sears' purchase was the result of its Canadian venture. .Macy and Hecht acquired fewer than half their new units through acquisition of existing firms. Aldens acquired three—fourths of its new units through this means; nearly all Of Spiegel's retail units (exclusive of catalog Offices) were units which had previously been in Operation. In the remaining firms, existing units accounted for roughly one-half the total units added. (3) Many Of the firms are trading on the name and reputa- tion of large established units in their organization when adding new'units. The Older established firm is treated as a parent firm, and the "branches" which ring the older firm are associated closely ~85- with the Older firm in advertising and customer relations. This tendency is especially noted in Marshall Field, Gimbel, and Macy. The tendency is less pronounced in Associated (Lord & Taylor), Mercantile, and May. (4) Catalog units are important in the operations of all the mail-order firms. These units require little investment and are easily relocated. They represent the fastest, least expensive ‘way to expand. However, three of the four mail-order houses are placing heavy reliance in their expansion on full department stores. (5) Purchases of existing stores has not always proved profitable. Some of these units have been so well patronized that major expansion was required; other units purchased in the period were disposed of before 1960. (6) Parking facilities have been greatly emphasized by the firms in their annual reports. (7) Units added have been located in downtown areas. How- ever the greater number of stores were established in suburbs and in shopping centers. Most of the firms Operate the dominant store in the shopping centers, and some firms established the shopping centers themselves. CHAPTER III CREDIT EXPANSION IN_SELECTED FIRMS Iggggduction. - During the fifteen-year period, expansion occurred not only in number and size of physical units, but in volume of credit extended to customers. Since volume is measured by amount of accounts receivable, the totals reported at year end by each of the fifteen firms are summarized. These receivables are then stated for selected years as a percentage Of the base year 1945 and as a percentage of sales for the year then ended. An attempt is made to relate accounts receivable for the fifteen companies to charge and installment accounts for all department stores. Finally, various types Of credit plans introduced by the firms during the period are discussed. Receiyables for selected figms. - Accounts receivable for each firm for the fifteen-year period are presented in Table 7. These totals include all the various types of trade receivables, both accounts and notes. The amount shown is the year—end balance before deductions for accounts sold to banks and the allowance for uncol- lectible accounts. Since some of the companies in the study have not sold accounts to outside organizations during the period while other firms have used this method of financing to a great extent, meaningful comparison is possible only when these amounts are ...86— YEAR E Firm 1959 1930 Sears $1'489'729 $ 540,089 s Penney 22,651 1,517 M. Ward 356,590 206,195 Federated 167,076 71,501 May 157,203 64,614 Allied 127,239 84,989 ”acy 73'006 38,271 Gimbel 80’437 44,612 Associated 50,538 19,978 City 66’563 36,630 M. Field 29,909 29,783 Spiegel 168,415 53’727 Mercantile 27,713 21,284 Aldens 47,037 14,368 HECht ’0' 23,952 T°ta1 $2'864'106 $1,251,510 3 SOURCE: Annual reports. Year is defined on pages A — Amount is after deduc «an .035 o 1.“: “Hub uAO it» - "3,. ‘Mb. ‘I‘Q 0:15.. . .R'A hi. ' .15 by. 1.: ol- -88- included in the total receivables of each company. It should be noted that the receivables for Sears, Roebuck in 1945 and 1946 do not include the total of accounts sold. These amounts were not disclosed in the reports for those years, and Sears does not include five- or ten-year summaries in its annual reports. There- fore when the company changed its method of reporting receivables in 1948, the comparative balance sheet showed a revised accounts receivable total for only 1947. Prior years' revised totals were not indicated. Sears' accounts receivable in each year since 1947 have been more than one-third of the total accounts receivable for the fifteen firms; consequently there is a seriOus omiSsion in the total accounts receivable for the years 1945 and 1946. This omission makes the Sears'and total accounts receivable figures for the fifteen companies for these two years meaningless for purposes of comparison. However, from 1947 to 1959 total accounts receiv- able increased from $743,378,000 to $2,864,106,000, or approximately 270 per cent in thirteen years. Generally, accounts receivable for each of the firms increased each year over the preceding year. Increases and decreases in receivables for Penney are unimportant until 1958, the first year that credit was extended by this firm to customers. Prior to 1958 receivables represent miscellaneous amounts due. Credit Operations were initiated in twenty-four pilot stores in Septemben 1958. During 1959 the pilot group was expanded to 193 units. From 1948 to 1949 accounts receivable decreased for Aldens and Marshall Field. Decreases are noted for Marshall Field, v ,- -89- Spiegel, and Mercantile in 1953, and Associated, Marshall Field, and Mercantile in 1954. Allied shows a decrease in 1957, and Macy in 1958. Each of these years was in a period of general economic recession (see Chapter V) and it is probable that the decreases in receivables noted above are attributable to this cause. Montgomery Ward's receivables decreased in 1950, 1951, 1953, and 1954. Table 1 (Chapter II) shows that during this period the company was closing stores. Hecht's decrease in receiv- ables in 1958 may be attributable to the termination of four stores in that year. Net decrease in number of units may also account for the decrease in Allied's and Mercantile's receivables in 1951. Aldens' one half of one per cent decrease in receivables in 1957 was due to its decision to hold expansion of time payment accounts to the level which could be financed within its available money supply. In addition, decreases in accounts receivable are noted for Sears, May, and Gimbel in 1951, for Allied in 1956, and for Macy in 1959. These decreases are not accompanied by decreases in sales for the above firms (see Table 17, Chapter V). The decreases cannot be attributed to a decrease in number of units operated, nor general recessions. These decreases are unexplained. Table 8 shows the accounts receivable for the years 1947, 1952, 1957, 1958, and 1959 as a percentage of the accounts receiv- able for 1945. The base year for Sears, Roebuck is 1947 rather than 1945 because comparable data for 1945 is unavailable. Penney. cxf course, shows the greatest increase because of its more recent TABLE 8 ACCOUNTS RECEIVABLE AS A PERCENTAGE OF BASE YEAR} 1945. Firm 1959 1958 1957 1952 1947 Sears 556.8 480.3 433.3 258.8 100.0A Penney 2097.3B 484.9B 214.43 223.93 150.23 M. Ward 639.5 578.1 525.9 359.8 298.3 Federated 1631.9 1376.3 1331.4 855.5 396.3 May 1422.8 926.1 901.7 615.4 330.7 Allied 609.5 591.7 561.8 452.7 221.9 Macy 782.7 864.3 874.3 460.3 243.9 Gimbel 419.5 388.2 369.4 230.9 185.6 Associated 587.7 512.8 488.0 263.3 216.8 City 739.1 722.6 713.1 510.7 181.4 M. Field 235.5 221.0 213.9 253.4 186.2 Spiegel 1278.8 861.4 762.3 562.2 259.6 Mercantile 860.4 741.4 732.3 629.2 320.0 Aldens 1278.9 965.1 902.5 506.2 267.0 Hecht ...... C 396.0 406.8 369.71 194.5 SOURCE: Annual reports. Year is defined on pages 10 - 12. A.- Base year for Sears is 1947. B - J. C. Penney did not offer credit until 1959. C - Hecht merged with May in 1959. -90- -9]_- entrance into credit operations. Federated, May, Spiegel, and Aldens show the next greatest increases in credit. Marshall Field and Gimbel are the only two firms whose redit increased less than four hundred per cent over the period. Receivables as a percentage of sales. - In Table 9 accounts receiv~ able for selected years are shown as a percentage of sales for the year then ended. Accounts receivable as a percentage of sales increased more than three times from 1945 to 1959 for Penney, Fed- erated, May, Spiegel, and Aldens. These are the companies whose accounts receivable increases exceeded 1,000 per cent for the same period. Accounts receivable as a percentage of sales increased less than 125 per cent for Marshall Field and Gimbel. These are the two firms whose accounts receivable increases were less than four hundred per cent for the period. All other companies had increases in accounts receivable as a percentage of sales from 1945 to 1959 of between 125 per cent and three hundred per cent. Table 9 shows that the trends in accounts receivable increases are not solely the result of chang- ing price levels or value of the dollar because in each year sales and accounts receivable are expressed in approximately the same purchasing power dollar. Virtually the same percentages as obtained in Table 9 would result if sales and accounts receivable figures were each deflated, or expressed in constant dollars,and then divided. Differences between the two sets of ratios would be the result of price changes during the year. To obtain a deflated series, one would divide sales by an average of twelve months' :- , p 1'. - I an» .«\ ~u ‘ , TABLE 9 YEAR END ACCOUNTS RECEIVABLE AS A PERCENTAGE OF SALES FOR THE YEAR THEN ENDED Firm 1959 1958 1957 1952 1947 1945 Sears 36.9 34.5 32.2 23.6 13.5 . .A Penney 1.6 .4 .2 .2 .2 .2 M. Ward 29.2 29.5 27.3 18.5 14.4 8.5 Federated 22.0 21.9 21.5 19.6 13.3 5.5 May 23.0 18.9 18.7 15.2 . 10.2 5.5 Allied 18.7 19.2 18.5 18.8 11.8 7.4 Macy 17.0 17.7 18.2 12.9 8.0 4.7 Gimbel 19.9 19.4 19.2 15.2 11.8 8.3 Associated 17.4 16.9 17.7 14.3 11.0 7.4 City 24.2 24.2 24.3 19.8 12.5 8.9 M. Field 12.8 12.9 12.4 14.2 11.2 7.8 Spiegel 77.6 68.8 67.0 47.0 25.4 117.5 Mercantile 16.5 15.1 15.3 15.7 9.1 4.4 Aldens 40.9 36.2 33.9 21.6 12.4 7.7 Hecht .... 30.3 30.8 28.5 21.2 16.2 SOURCE: Annual reports. Year is defined on pages 10 - 12. A - Accounts receivable figure on a comparable basis is not available. B - Hecht merged with May in 1959. -92- ..93- value of the dollar, while accounts receivable should be deflated by only the average of the number of months for which the account had been outstanding. However, since accounts receivable agings are not available in annual reports, the deflated series could only be approximated. The result would be little more accurate than the amounts shown in Table 9. This table certainly reveals that there has been considerable expansion in credit extended to customers in the postwar period. Total department store credit. - The Federal Reserve Bulletin pub- lishes figures for department store consumer credit. Separate totals are given for noninstallment charge accounts and installment accounts. The sum Of these two series should approximate total department store receiVables. The totals shown in Table 7, however, cannot be compared with this sum, because accounts sold to banks are excluded from the government series, but included in Table 7 totals. We do not know the extent of accounts receivable sold each year for all department stores. However, we do know that, at the very least, all accounts receivable sold by the fifteen firms in our study have been excluded from the government statistics. Therefore the government series should be increased by this total and some unknown amount more. The total department store credit before sales of receivables scheduled in Table 10 is, therefore, an approximation, an understatement Of the unknOwn actual total. If our total receivables for the fifteen companies are compared with this approximate series, we find that the fifteen firms have accounted for between sixty-five per cent and seventy-four per cent TABLE 10 AN APPROXIMATION OF TOTAL DEPARTMENT SI (Thousar Percentage Approximate Estimate it 15 Firms Total of Accounts Year to Total Credit Sold (A) 1959 68.0 4,040 782 1958 69.3 3,402 613 1957 73.3 3,103 834 1956 69.1 3,099 798 1955 67.5 2,791 418 1954 69.4 2,398 363 1953 68.7 2,290 454 1952 69.5 2,116 281 1951 66.3 1,828 206 1950 68.8 1,819 423 1949 67.8 1,492 309 1948 68.0 1,345 300 1947 65.5 1,135 224 SOURCES: Department Store Consumer Credit - £35 Bulletin. Estimate of accounts sold - Annual Re; Year for estimate of accounts sold is defined or Year for Department Store Consumer Credit is ca] A - Sum of all accounts which the fifteen select ..94- reported were sold at year end to banks and a u. 'r ‘A .b -95- of the series figure in each of the years from 1947 to 1959. In fact, except for the years 1947 and 1951 (in which the percentage was lower) and 1957 (when the percentage was higher), the fifteen firms have accounted for between 67.5 per cent and 70.0 per cent of the approximate series each year. If other department stores have also sold accounts to banks, the percentages should be lower. Also, if these other stores sold varying amounts Of receivables in the years 1947 - 1959, the range of percentages would be wider. However, it appears reasonable to conclude that the other depart- ment stores have followed the same general pattern of increased accounts receivable as that indicated by the companies in the study. Terminology used in annual reports. - Categories of receivables reported in annual reports have varied from year to year. In 1945 Aldens and Ward reported time accounts; May, Spiegel, Mercantile, and Sears referred to their accounts as installment accounts. Gimbel Brothers, AsSociated, Allied, and Hecht reported deferred accounts and Macy's reports listed a total for cash-time and other installment accounts. Federated has called its accounts thirty day and deferred since 1954. (Prior years' complete annual reports ‘were not available; photostats of portions of the annual report Obtained from Federated and other supplementary material did not contain analyses for accounts receivable for prior years.) Marshall Field and City Stores have not shown a segregation of accounts by type in.any year of this study. Hecht changed its classification of accounts from deferred and regular to installment and regular I O .- -96- in 1955. Macy did the reverse: accounts were classified as installment and regular until 1954; thereafter the terms deferred and regular were used. Associated called its accounts deferred payment until 1954; from 1955 to 1958 these accounts were called installment; in 1959 Associated returned to the title deferred payment. Allied used the title deferred accounts until 1956, when the categories revolving, installment, and regular were used. Gimbel Brothers introduced the category rotating accounts in 1951 and has continued its use through the end of the period. Associ— ated used the same title in 1954. In 1957, the term was changed to revolving accounts. This same description was used by Sears in its reports for the years 1954 to 1957. Aldens changed its classi- fication in 1959 from time to installment. Its report indicates that, in prior years, a service charge had been added at the time of the sale. Beginning in 1959, all Aldens' accounts were con- verted to revolving credit, wherein the service charge is added monthly on the basis of the unpaid balance. J. C. Penney, when it introduced credit in its pilot stores, offered two credit plans. Under the first, the thirty-day account, there was no interest charged if the balance was paid within thifty days. Thereafter, a charge of 1-1/2 per cent of the unpaid balance was added to the account each month. Its second plan, the time payment account, could be used only for units of apparel over $49, or for household furnishings priced at $30 or more per unit. An eight per cent charge was added to the purchase price. Payments were scheduled over a fixed period of time. Penney intends to extend credit to four hundred units in 1960 and have credit in all its units by 1963. -97- Macy has had several Special credit plans which involve its New YOrk store and Macy's bank. These plans have been pecul— iar to the one store in the firm and it is the only department store in the study which has a bank as an affiliated organization. Various credit plans. - Whatever the term used to describe the type Of accounts receivable, the fact remains that various types of accounts have been introduced, and older forms of credit plans have been expanded to cover additional types of purchases. As particular types of plans are utilized to a greater extent, the year-end balances in those kinds of accounts become material. Under acceptable reporting standards, these must be disclosed in the annual report. If the types Of accounts used had remained unchanged or if balances in each type had increased only in total dollars but not as a percentage of total receivables, there would have been no revision in balance sheet terminology in the annual reports. The extensive rewording indicates new buying patterns of consumers. Both the installment plan and open account are Old forms of credit, extending back to primitive societies.l By the close Of 1922 (in the United States) the principal techniques of consumer credit had been developed and the dramatis personae Of this volume was, for all practical purposes, complete. No technical developments comparable with the rise of the specialized cash-lending agencies or with the beginnings of insSalment financing occurred during subsequent years. 1Robert M. Cole and Robert S. Hancock, Consumer and Commer- cial Credit Management (Homewood, Illinois: Richard D. Irwin, Inc., 1960), pp. 38, 111. 2Ibid.. p. 92. -98- The nature of installment sales changed however, after 1922. World War I, price changes in 1919-21, and inadequacy of financing facilities had held down the volume of credit sales. In the period 1923 - 1938, a significant change took place: The growth of instalment sales of automobiles tended to remove the stigma which instalment sell- ing had acquired at the hand of low grade instal- ment merchants in the 1890's. All social and economic classes were represented among instalment purchasers of automobileg; hence instalment buying acquired respectability. Many department stores began to promote instalment sales of fur coats, jewelry and draperies. . . . Several mail order houses rapidly incieased their sale of clothing on instalment terms. Most rapid expansion of customer receivables occurred among mail order houses. These firms applied instalment plans to all merchandise from dresses to refrigerators to farm machinery. Under mail-order house sales plans, the consumer could purchase various soft goods, or a combination Of hard and soft goods, and pay for the whole order over a period of months. In 1938 Wanamaker's created a considerable stir in retailing circles by announcing its new credit service which it dramatically chose to call "revolv- ing credit“. This plan, which was quite different from the revolving credit plans commonly in effect today, called for the sale of soft goods to the customer on an account which would be completely liquidated in four monthly payments. No ser ice or extra charges were posted to the account. At the beginning of this study Regulation W was in effect. 3Rolf Nugent, Consumer Credit and Economic Stability (New YOrk: Russell Sage Foundation, 1939), p. 96. 41bid., p. 98. SIbid., p. 107. 6Robert M. Cole, Revolving Credit (Urbana: University of Illinois, 1957), p. 3. .I- -99- This regulation set forth minimum down payments and maximum length of installment contracts for selected items. It also froze ordi- nary thirty-day charge accounts on which a specific item had been purchased if payment was not made by the tenth of the second month following the purchase. Additional legislation removed charge accounts from this ruling effective December 1, 1946, and all restrictions on installment contracts were lifted from November 1, 1947 to September 20, 1948. Regulation W was reinstated until June 30, 1949, and again during the Korean conflict from Septem- ber 18, 1950 to June 30, 1952.7 Goods unavailable since June,1942 returned to the market place in late 1945 and 1946 (the beginning of the period selected for this study). Expenditures for goods and services rose sharply during this period. Personal holdings of liquid assets increased from $58.9 billion in 1942 to $138.6 billion in 1945. Neverthe- less, both installment credit sales and Open account sales increased in 1946, and department stores began reintroducing revolving credit plans about this time. As late as 1956, stores were altering and changing the terms and conditions of these plans, trying to find the one which would best fit their customers' wants and meet competitive situa- tions.8 The majority of the presently used plans call for a master contract signed by the customer, which spells out the terms and 7Robert Paul Shay, Regulation W: Experiment in Credit Control, University of Maine Bulletin, LV (April, 1953). 8Proceedings of the 1956 Controllers' Congress Convention, Cincinnati, Ohio, Wednesday June 6, 8:15 A.M., Retail Control, XXV (October, 1956), 3-37. -100- conditions for the original purchase and all add-on purchases. The maximum amount of credit to be extended is mutually agreed upon by the customer and the credit department employee of the store. The minimum payment per month is stated (generally $5.00 or $10.00), and the monthly payment is determined by the balance of the invoice at the billing date. The period of time over which the entire balance would be paid (provided there are no add-ons) varies from store to store. One-sixth, one-fourth, or one-third of the balance may be due within thirty days after the invoice date. With no additional add-ons, an initial bill of $150.00 payable one-quarter each month would be liquidated in just over eleven months, if a minimum payment of $5.00 was required. If the minimum payment were $10.00 per month, liquidation would occur in about nine months. Of course, the stores prefer to have the customer make purchases each month approximately equal to his monthly payment, thus maintaining an open balance rather than liq— uidating the account. Therefore the customer is allowed to pur- chase whatever and whenever he desires, without additional visits to the credit department. The only condition is that the purchases must not bring the account balance to a level exceeding the limit agreed upon when the master contract was signed. The service charge is assessed each month on the basis of either (1) outstand- ‘ing balance at the beginning of the billing period or (2) this amount leSs credits and payments. Initially, the rate charged was 1/2 to one per cent per month. In 1956, when credit plans were dis- cussed at the Controllers' Congress, those in attendance indicated that five stores were then charging 1/2 per cent; eight or nine -101- 1-1/2 per cent; ten were going to increase the charge from one per cent to 1-1/2 per cent. The majority of the group represented stores charging one per cent.9 Since that time, most of the depart- ment stores have increased the charge to 1-1/2 per cent. In a variation of this plan, the customer is furnished with a chart showing the minimum payment required depending on the bal- ance of the account. For a balance of $100.00 - $150.00, the required minimum payment may be $20.00; while if the balance is $70.00 - $100.00, a minimum payment of only $12.00 may be required. The customer may still add on as he desires. His required payment varies as he increases or decreases his debt. Other stores have introduced plans which are a variation of the traditional installment or deferred payment plan. These allow the customer to make one or many purchases, with no minimum dollar amount per purchase. He then takes his sales invoices to the credit department for revision of his contract. The credit department employee determines the service charge, adds it to the purchases and the outstanding balance. A new monthly payment is determined and agreed upon by the customer and the store. The amount of service charge is, of course, determined by the length of time the debt will be outstanding. At the time of the 1956 Annual Convention of Controllers' Congress, many of the stores had a ninety-day charge account with- out service charge. About one half of the stores were eliminating this credit plan and introducing instead a six-, eight-, or ten- month plan which included a serviCe charge. These plans are 91bid. lL’.‘ -. 7. x —102- variations of the basic plans described above. It was generally agreed, by those attending the Congress, that customers wished either to pay the entire balance monthly, or to have some kind of flexible plan by which the balance of the account would vary to meet seasonal needs. Most of the stores continued the traditional installment or deferred payment account for hard goods. However, seven or eight stores were encouraging customers to purchase hard goods on their revolving or rotating plans. Summary. - The increase in time allowed the customer to pay for his purchases is the primary cause of the increase in accounts receivable as a percentage of sales. Most of the firms in 1945 had percentages Of less than 8.33 per cent which is one-twelfth of the year's sales. By 1959, only three had percentages less than 16.66 per cent,which is one-sixth of the year's sales. Popu- larity of the extended payment plan is indeed obvious. This popularity has resulted in a need for greater working capital for the firms. Since they are now financing accounts for a longer period of time, more capital is tied up in receivables. It must be diverted from other purposes, or obtained from new sources. One solution, already noted, has been the sale of receiv- ables to outside organizations. This and other methods of finan- cing are discussed in Chapter V. Table 11 shows the percentage of regular accounts to total accounts outstanding for 1945, 1952, and 1959 for the various firms. Regular accounts have decreased for Sears and Ward to the point ‘where they are no longer stated separately in annual reports. TABLE 11 PERCENTAGE OF REGULAR ACCOUNTS TO TOTAL ACCOUNTS RECEIVABLE Firm 1959 1952 1945 Sears ..... B 3.21 6.86A Penney Not segregated No credit sales to customers M. Ward ..... B 4.56 7.37 Federated 32.00 32.06 77.38 May 35.81 65.90 82.97 Allied 43.97 42.96 76.28 Macy 18.39 20.65 Not segregated Gimbel 51.27 68.37 83.23 Associated 68.27 89.85 89.95 City Accounts not segregated in any year M. Field Accounts not segregated in any year Spiegel 1.25 4.66 18.71 Mercantile 35.91 29.02 65.01 Aldens 1.80 11.26 44.89 Hecht ..... C 28.78 26.93 SOURCE: Annual reports. Year is defined on pages 10 — 12. A - Percentage is for 1945. B - No regular account totals are shown in annual report. Accounts are principally installment accounts. C - Hecht merged with May in 1959. -103- -104- Macy's report in 1945 did not segregate deferred accounts because they were not significant. This table shows the importance of the extended payment plan offered to the customer during the period of the study. CHAPTER IV MEANS Qg FINANCING THE EXPANSION Introduction. - The expansion in the department stores discussed in the preceding two chapters has resulted in a demand for funds by these firms. This demand has been satisfied in a number of ways. In this chapter, some of the ways in which funds were obtained are discussed. Details of these transactions are provided where possi- ble. However, at times the annual reports present information in such a way that desired details cannot be extracted. Sometimes the sources and kinds of borrowings are so voluminous that it has not been practical for the firms to list details. Some of the companies have set up real-estate subsidiaries; properties, with their related debt, have been transferred to the subsidiary companies. In these cases, details are frequently omitted. Moreover, some sources may have been overlooked in error. Therefore, the information herein is presented as a survey of various types of financing used, not as an all-inclusive listing. Cash purchases. - As noted in Chapter II, some of the firms have purchased existing facilities totally or partially for caSh. The .I. a R. Motor Supply Company was purchased for $2 million in 1955 by Spiegel, Inc.; in 1945, Mercantile purchased Duluth Glass Block Co.: .Allied purchased Lindner Co. in 1948, Metzger-Wright in 1949, and ~105- -lO6- Palace (Spokane) in 1951. we will not dwell on this kind of acqui- sition for, of course, funds used to purchase these properties had to be acquired from some source. gale of fixed assets. - Occasionally, the firms have used as a source of funds the sale price of other assets. Marshall Field, in its attempt to get out of other types of businesses, has perhaps obtained more funds from this source than any of the other firms. The Merchandise Mart was sold in 1945. This building, famous land- mark in Chicago, had housed the company's wholesale division in prior years. But the wholesale division was eliminated during 1935 - 1937. Thereafter, the firm's occupancy decreased from forty-two per cent of the area to about seven per cent in 1945. During the war years, the federal and state governments were impor- tant tenants, but many of the leases were subject to cancellation in 1945 and 1946. On November 13, 1945 Marshall Field sold the Merchandise Mart to Joseph P. Kennedy of Boston. The reported sales price was $20 million.1 The firm realized $2.5 million profit after taxes (as a result of the carry-back, carry forward provision of the tax code) although the property was sold at a loss. How- ever, Marshall Field had funds for its use equal to the total sales price which greatly exceeded the profit on the sale. A textile mill was sold in 1946 for $1 million; the equipment of a woolen mill in 1948; and a lace curtain mill in 1952. In 1953, Fieldcrest .Mills division was sold. Because the wholesale division was lJoe McCarthy, The Remarkable Kennedys (New YOrk: ”The Dial Press, 1960), p. 145. However, Newsweek (September 12, 1960. p. 29) reported a sales priCe of but $12.5 million. -107- eliminated in the 1930s, Marshall Field found it was purchasing less and less of the total output of the mills division, and sale price of this division on October 1, 1953 (with the reduced federal income taxes resulting from a loss on the sale) brought the firm $26,600,000. These funds were used to reduce debt of the firm and to buy properties, including land for a warehouse three miles south- west of the loop. Associated also acquired funds through sales. In 1953, a $390 thousand gain after taxes was realized on the sale of McCreery, and in 1954, a New YOrk site netted a profit after taxes of $2 mil- lion. This property, located between 52nd and 53rd Streets on Fifth Avenue, had been acquired in 1945 to be used as a new site for Lord & Taylor. However, it was decided in 1954 to renew the lease on the store at 38th Street and Fifth Avenue, rather than to relocate uptown. The uptown property was sold on May 29, 1956. Of course, the total proceeds in each of these two cases would be far in excess of the gains reported by the company, because each of the assets would have had some net book value. Federated acquired an additional amount of cash from a real-estate transaction in Texas. Federated desired to acquire Foley of Heuston, but Foley was not interested in selling. Foley ihad plans and a site for relocation after WOrld war II. Federated purchased a site in Houston and threatened to build a competing firm there. As a result, Foley agreed to sell. Federated then