Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 31, 1991 TAG: 9103290047
SECTION: BUSINESS PAGE: E-1 EDITION: METRO
SOURCE: GERRI WILLIS/ LANDMARK NEWS SERVICE
DATELINE: RICHMOND LENGTH: Long
The dish would allow Thalhimers' managers to tap into May's telecommunications system. It links the company's headquarters in St. Louis, merchandisers in New York and divisional offices across the country. This way, corporate bosses could pass along merchandise ideas while keeping close tabs on their multibillion-dollar retailing empire.
Employees of the 26-store Thalhimers chain couldn't have been asked to make a broader leap in corporate culture. The Virginia retailer was more high-touch than high-tech, the sort of place where former Chairman William B. Thalhimer Jr. was known as Mr. Billy.
Questions and rumors flew. Would Thalhimers be folded into May's Washington-based Hecht's division, which only a year ago made inroads into Hampton Roads and Richmond?
Longtime Thalhimers vendors worried about the well-known May "matrix," the company's short list of preferred suppliers. What would happen to the flagship Thalhimers store in Richmond, an old-fashioned multifloor shopping palace that was part of the city's heritage?
Clearly, the homespun environment at the 149-year-old retailer was history. In its place was May's no-nonsense reputation, with an emphasis on strong cost controls and lean operating staffs.
In January, the company announced its first layoffs, about 200 people altogether, including a dozen at Thalhimers' Roanoke store at Valley View Mall and half that number at River Ridge Mall in Lynchburg.
Thalhimers' new boss, however, has tried to stem the rumors.
Three weeks after being named president and chief executive officer, Howard Lehrer said in January he planned no overhaul. "You're not going to see dramatic happenings," he said. "We will continue to build on the name and the great tradition that Thalhimers has established. We've quality people in the organization, and we look to continue to build a strong retail structure on the base that has already existed with Thalhimers."
But there have been changes.
Some were expected, like the exit of William Thalhimer Jr. and his son, William Thalhimer III, the company's executive vice president. And Lehrer had taken the place of Robert Rieland, who went on to run another department-store chain.
Other changes were not expected. Two non-family executives retired, and many of the long-tenured buying staff left.
Even now, three months after the acquisition, retail analyst Kenneth Gassman said he expects more changes. "There could be additional layoffs and significant organizational changes as Thalhimers' management is streamlined," Gassman said.
Why? "To do it May Co.'s way," he said.
Through the 1980s, May could do no wrong. It was a period when other discount and department store companies got themselves in serious problems with overexpansion and buyouts.
For example, before Campeau Corp.'s leveraged buyout of Federated and Allied department stores ended in bankruptcy, May Chairman David Farrell acquired Associated Dry Goods Corp., a department-store holding company, for $2.4 billion in 1986. Instead of choking on debt like Campeau, May was transforming into one of the country's pre-eminent retailers, with 14 department-store operating divisions from Los Angeles to Pittsburgh.
And while Thalhimers' former owner, Carter Hawley Hale Stores Inc. of Los Angeles, spent much of the past decade fending off two takeover attempts and in February was forced into bankruptcy court, May's balance sheet was so strong in contrast that when it bought Thalhimers last December, it paid the $325 million tab in cash.
At the center of May is Farrell. The chairman once toured divisions in a motor home so he could fire questions at his divisional chiefs, The Wall Street Journal reported in a profile of winners and losers in retailing.
"May Co. is David Farrell," said Kathie Campisano, former May manager.
"There is not a decision you make independently from the color of the ink on the paper to the signs on your store - even the thickness of paper used in shopping bags," Campisano said.
Said another, "You may not like their tactics, but you can't argue with their results."
"They are competitively well-positioned. They don't have an overly leveraged balance sheet," said Wayne Hood, a retail analyst with Prudential Securities in New York. "They have the ability to refurbish and expand stores and go after talented individuals in the industry. They have the technology."
"If May has a fault, it is probably more business-oriented than fashion-oriented," said Linda Morris, a retail analyst with Provident National Bank in Philadelphia. "But that fault has enabled them to come through a very difficult environment."
But the apparent ease with which May has increased market share and profits has not translated into a graceful performance when the company has appended new chains.
Indeed, Lehrer's career is a lesson in the May way.
Lehrer, 52, a poised but publicity-shy manager, started with the company at Hecht's in Washington. For 24 years, he worked as a buyer, divisional merchandise manager, divisional vice president and, in 1981, senior vice president.
Three years ago, he started on a cross-country tour through some of the company's new Associated properties. His first stop was as chief executive officer at Goldwaters, a Phoenix, Ariz.-based chain of nine department stores founded by the ancestors of former U.S. Sen. Barry Goldwater.
When May bought Associated, Campisano, who served as senior vice president and merchandising manager, thought the ownership change would boost Goldwaters' already solid performance.
"I felt they had some phenomenal strengths," said Campisano, who now works as a partner in a party-rental business. "I thought we would be a powerhouse."
But Campisano and other former Goldwaters workers were unprepared for the changes that would come their way. In the past, store managers developed their own plans and buyers searched for new vendors. Its managers called their employer "Camelot."
"May was 180 degrees different," Campisano said. "It was totally centrally driven. People in stores were expediters of the corporate directions."
As May's systems were put in place, managers found the much-vaunted telecommunications system a source of anxiety. At Goldwaters, the video sessions were held on Mondays, and sometimes Farrell would appear asking hard questions that reflected his intimate knowledge of the operation.
"It kind of insinuates you don't know what you're doing," said one former buyer, recalling the nail-biting sessions. Buyers found they could only deal with May's stream-lined list of vendors. Still, former Goldwaters workers said they learned much from May's operations.
And, when Goldwaters buyers were taken on a four-day trip to Scottsdale, Ariz., to learn the secrets of the company's buying operations, they were impressed with the presentations, and their treatment. "They spared no expense," said one. "They wined and dined us."
Buyers were each given a pyramid-shaped, Lucite paperweight that outlined corporate goals the May way. The implication to employees was that Goldwaters would be around for a while.
It wasn't so.
Months after that buyers meeting, May announced that the Goldwaters stores would be converted into Robinson's, another of May's divisions. More than 400 jobs were cut, though May offered placement services and jobs at its other divisions.
"It was a shock to this community," said Michael Adams, regional vice president of Retail Merchandising Service Automation, a nationwide consulting firm to independent specialty stores based in Riverside, Calif. "At one point they were planning to be in business, and the next day it changed."
Soon after the announcement, Lehrer was moving again.
His next stop was Denver, where May had acquired another Associated chain, the Denver, and added it to its May D&F division. As president of that division in 1989, Lehrer landed in the middle of a highly publicized court battle in which the state attorney general's office charged that the company had engaged in deceptive advertising practices.
The suit brought in June 1989 charged, among other things, that May D&F inflated the "regular" price of goods offered on sale in its advertising. The impact of the practice was that consumers were misled on savings on merchandise, the suit said.
The case spotlighted two issues in retailing: the pricing practices used in advertising, and the increasingly aggressive prosecution by attorneys general on consumer-protection issues. The trial in May 1990 was a showdown. May vigorously defended its case, bringing in two attorneys from its corporate staff as well as two Denver lawyers. A month later, a state court judge ruled in favor of the attorney general's office on all counts, and required May to disclose its pricing policy in its ads. The company was fined $8,000 in civil penalties and $335,000 in attorney fees.
"In layman's terms they gave him a slap on the wrist," said Donald Lichtenstein, assistant professor of marketing at the University of Colorado at Boulder, and an expert on the issue who served as a May consultant on the case.
Lehrer contends he had little involvement in the case. "That had taken place prior to my getting there," he said. "I really had no or minimal involvement in that suit. I was not called as a witness."
However, Lehrer was involved in rectifying the stores' image among shoppers, said Don Andresen, a fellow retailer and former president of the Colorado retail council. "May Co. had gone under a little negative press," Andresen said.
Four months after the judge's ruling in the Colorado attorney general's case, May announced it would buy Thalhimers and Lehrer moved to Richmond.
Despite the fact that Thalhimers workers knew Carter Hawley Hale's financial position had eroded, the announcement of the buyout was troubling to many. What would the May way mean to Thalhimers?
"Initially, people were shocked," said a longtime Thalhimers employee who now works for a competitor. "The concerns people had were personal. You know, `What's going to happen to me?' "
Lehrer's answer? Bottom-line. May will do what makes sense.
"We constantly evaluate and re-evaluate the merchandise mix, the vendor structure, the productivity, the profitability of any given department," Lehrer said. "The thing that makes a department store viable is change."
by CNB