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Big downtown stores fall victim to the times

THE BALTIMORE SUN

At 6:30 a.m., April 8, 1861, an obscure young man named John Wanamaker opened the doors to a modest clothing shop tucked in downtown Philadelphia, 94 hours before the first gunshot echo of the Civil War.

More than a century later, the fabled Wanamaker name, graced on a 12-story granite and steel department store, will vanish from the retailing universe before a parade of lawyers in Room 627 of U.S. Bankruptcy Court in New York City at 10 a.m. Aug. 8.

There goes another one.

Wanamaker's, once the largest retail store in America, is only the latest department store across the nation to fall prey to consolidations, bankruptcies and corporate takeovers. Like dinosaurs, the grand old behemoths of downtown retailing have fast become extinct in Baltimore and other urban centers, representing the demise of another way of life, a lost social milieu when shopping was a genteel outing, tea was served and cars were left unlocked.

"It was the thing of the day, you didn't go out unless you were properly dressed. Now you throw on your jeans and a sweat shirt," recalled 73-year-old Eleanor W. Wesley, an administrative employee since 1940 at Alexandria, Va.-based Woodward & Lothrop department stores, where she met and married a co-worker.

"It's a whole different time."

Steeped in history, Wanamaker's and Woodward & Lothrop, founded in 1880, survived the Spanish-American War, the Great Depression and two world wars. But like other department stores, neither could withstand the rise of the suburban mall or the onslaught of other retailers. Woodward & Lothrop, or "Woodies" as most people know it, is expected to be swallowed up by one of two giant corporations -- Federated Department Stores of Cincinnati or May Department Stores of St. Louis, which has teamed up with J. C. Penney of Plano, Texas. Wanamaker's, a Woodies subsidiary, is being swept up in the proposed deal as well.

Department stores "have been disappearing for the last 50 years," said Joseph Siegel, vice president of merchandising for the National Retail Federation in New York. "What really is the cause is we're over-stored. In 1965, we had 4 square feet of retail space per capita throughout the nation. In 1990, we had 18 square feet of space per capita. There's [only] so much [consumer] money out there."

And there's so much competition for it: discount giants like Wal-Mart, bulk-quantity stores like BJ's Wholesale Club, big-box retailers like Home Depot, mail-order operators, specialty chains -- not to mention the growing market in television and computer shopping.

Lost in the retailing evolution is a time when customers were greeted by uniformed doormen in white gloves who opened department store doors to plush velvet rugs, cascades of window draperies and a panoramic selection of goods and services. But in recent years, in a prelude to what was to come, department stores like Woodies began to scale back in a cost-cutting push, closing down whole floors of retail space and shedding products like appliances and televisions.

"I'll tell you something," said Dorothy Reese, a sales associate since 1968 at Woodies in downtown Washington, D.C. "I go home sometimes and I cry because things have changed."

Federated's plan

Under the changes being contemplated in bankruptcy court, Macy's parent company, Federated, would buy 10 of Woodies' 15 department stores, including three in the Baltimore area, one of its four furniture stores and the lease on its distribution center in Baltimore.

As part of the same deal, the Wanamaker chain would be pried apart, like a stripped-down Chevy repo, with six stores going to Strawbridge & Clothier of Philadelphia, two to Boscov's Department Stores Inc. of Reading, Pa., and five to the Rubin Organization, a Philadelphia-based real estate developer. Federated would acquire the flagship Wanamaker department store in downtown Philadelphia and convert it into a Macy's.

The store name notwithstanding, the permanence of the place is embodied in marble floors, arched passageways, vaulted ceilings, the pipe strains of a majestic organ and a bronze eagle of 5,000 hand-crafted feathers, a special landmark planted in the store's atrium-style Grand Court.

The lore of shopping still resonates with customers.

"We all used to meet under the eagle," said Diane R. Sklut, a dental hygienist from Wilmington, Del., reminiscing about the late 1950s when she shopped at Wanamaker's during her college days in Philadelphia. But now, she said, "the next generation will just think it's Macy's with an eagle."

Wanamaker's vision

Not exactly what John Wanamaker had in mind. He was a visionary, Sam Walton before there was a Sam Walton, who came up with the then-crazy idea of money-back guarantees and selling items at a set price (rather than haggling over it). He is credited with creating the first department store with a restaurant, the first illuminated by electricity, the first with a full-page newspaper advertisement, the first to use the telephone, the first to coin the phrase "white sale," the first to introduce profit-sharing for employees, and the first -- so the legend goes -- to receive radio transmission of the Titanic disaster.

But history doesn't ring the cash register.

"The fascination with large department stores has changed to the point where now people are not so concerned about the name of the store, they're concerned about the bargain they can get," said the Rev. William Allen Zulker, a John Wanamaker biographer.

Today, the retail scene is dominated by seeing-eye automated doors, bar-code cash registers, power centers, warehouse retailers with bulk goods stacked to the rafters and public address systems blaring the latest sale of the day.

Woodies, like a dowager, couldn't keep up.

The chain piled up debt after real estate developer A. Alfred Taubman bought Woodies in a $230 million leveraged buyout in 1984 and spent an additional $183 million to acquire the Wanamaker stores in 1986. It was too much: Woodies filed for bankruptcy protection in January 1994. Last fiscal year, the company lost $39 million, compared to $109 million a year earlier, while revenue declined 1.5 percent to $835 million from $848 million.

Pressure mounted from all sides.

"It was the continuing recessionary conditions in the economy, the shifts in customer shopping patterns and basically reduced disposable income," said Woodies spokeswoman Rivian Bell. "You've got generally a consolidation of regional department store chains, and it's harder to compete."

In recent years, the same pressures have been applied to several other department stores, which have met with the same fate: bankruptcy. B. Altman died. So did Bonwit Teller. And Federated filed for bankruptcy protection in January 1990, only to re-emerge and gobble up other chains that went belly up, including R.H. Macy & Co. of New York.

"The go-go '80s got up and left. Retail sales: down, down, down," said Peter Chapman, president of Bankruptcy Creditors' Service Inc. of Princeton, N.J. "You can only have so much of it."

Deep pockets survive

Only the deep pockets have thrived, like Hecht's department stores, backed by the financial resources of its parent company, May Department Stores, which operates 315 units, including Lord & Taylor, generating $782 million in net income on sales of $11.9 billion last year. What's more, the company didn't load up on debt, like Woodies, its main competitor in the region.

"Why has May Department Stores not filed [for bankruptcy]? They don't owe people money," Mr. Chapman said. "There's no layer upon layer of debt."

Other forces have wrought havoc on department stores -- changing demographics, the suburban exodus and the drive to merge, consolidate and otherwise expand so that companies can compete by acquiring goods in greater volume at lower costs.

The result -- lower consumer prices, higher turnover -- but only for retailers big enough to move the merchandise en masse.

"It seems as though the small player just can't make it these days," said Barry Susson, a senior manager specializing in retail and consumer products at Ernst & Young in Philadelphia.

Sentimental name

In the bottom-line drive, there is little room for sentimental attachments, like the Wanamaker name. For all the letters and telephone calls to department store officials from heartbroken customers, under the Federated deal, the store name would be dropped in the name of a more persuasive voice: corporate buying power.

"It would not be profitable for us to operate that store under any other name than Macy's," said Federated spokeswoman Mary Ann Shannon. "Operating the store under the larger Macy's organization structure would result in added merchandising strength, increased operating efficiencies and vastly improved economies of scales, so that is the business rationale behind it."

All that stands between a Federated takeover of Woodies and the flagship Wanamakers store -- a deal that stands to generate $640 million in gross proceeds -- is a competing bid by May Department Stores.

The St. Louis chain, which countered last week with a bid that would bring in $704 million in the sale of assets, would acquire three Woodies stores in the Washington, D.C., area and 13 Wanamaker stores in the Philadelphia region. May's partner, J. C. Penney, would acquire seven Woodies stores in the Baltimore-Washington market.

The U.S. Bankruptcy Court in New York will settle the multimillion-dollar matter on Aug. 8 and, if necessary, the following day.

Regardless of the outcome, the memories of what a downtown department store used to be will remain.

"This store was just unbelievable. People would just come in and we were always busy. Everyone came to John Wanamaker," said 65-year-old Rita E. Cathcart, who has worked at the Estee Lauder cosmetics counter since 1960.

"Oh, there were hats and gloves, and husband and wives would go to the tea room without fail. They just didn't come in the store. It was something special, like an evening out."

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