As chief executive of a major department store chain, Marshall Hilsberg says he knows what consumers want, and "value" is high on the list. That's not to say he'll promise his shoppers the lowest price on, say, a sweater.
Hilsberg, after all, heads Lord & Taylor, the New York-based granddaddy of department stores that has built its reputation on American style and status, a chain expanding at a rapid pace and entering the Baltimore market this week -- and Hilsberg is not about to compete with Wal-Mart.
But if it's merino wool or cashmere sweaters customers are after, "you'll find outstanding quality at the best prices you can find," Hilsberg said. "On comparable merchandise, we're very well priced. I don't care what the pocketbook is, everyone wants value."
Staying focused on customers -- primarily those seeking the latest designer fashions in the core areas of career, casual and special occasion -- has helped Lord & Taylor survive where other chains have disappeared. After 172 years, it touts itself as America's oldest specialty store.
But powering its growth of the past decade -- with new locations from New York to Chicago to Dallas and now Baltimore -- is the muscle of parent firm May Department Stores Co., the nation's second largest department store operator, with 369 stores. St. Louis-based May also owns The Hecht Co., the Baltimore region's dominant chain, as well as six other regional department store chains across the country.
Since May bought the 31-store Lord & Taylor chain in 1986, the number of locations has more than doubled. May views the chain as one of its strongest drivers of growth, because of its strong brand name, national scope and upscale specialty store niche -- it doesn't have departments like home furnishings -- that allows it to compete with other May divisions, even within the same mall.
On Wednesday, Lord & Taylor will come to White Marsh Mall, opening a 120,000-square-foot, two-level store on the former site of Woodward & Lothrop. Soon after, Lord & Taylor stores will open in Annapolis Mall, on Sept. 30, and in Owings Mills Town Center and The Mall in Columbia, both in early November.
"At Lord & Taylor, our business has continued to be quite healthy, and May views it as a growth vehicle based upon its performance and the great acceptance of the brand name," Hilsberg said. "We service the Washington market aggressively, a little Delaware and into Pennsylvania and New Jersey. Baltimore was a jumping-over point we had not penetrated, and the opportunities started to avail themselves."
Those opportunities came about, in three of the malls, after several years of talks and negotiations with The Rouse Co., owner of all but Annapolis Mall.
Lord & Taylor fit in with Rouse's plans to re-energize its malls, said Anthony Deering, Rouse's chief executive officer.
"Our overall objective is to have each property dominant in its market," Deering said. "This will contribute to Owings Mills, White Marsh and Columbia being the premier retail properties, in a combined way, in the state, not just the region."
For May, the Lord & Taylor expansion is part of an overall growth strategy for all divisions that calls for opening 20 new department stores a year for the next five years and remodeling or expanding 100 stores in the same period -- a total $3.6 billion investment.
This year alone, May is investing $725 million, partly to open 19 new stores and expand seven. Among the new stores opening this year are 10 Lord & Taylors, including the four in Maryland, and three Hecht's.
"One of May's key objectives is to compete on speed, to move with decisiveness and agility, to quickly bring the most desired merchandise to the customer," Gene Kahn, May's new president and chief executive officer told shareholders at the company's annual meeting in May. He added that the company also sought to "key in on the most sought-after brands, by responding aggressively to trending ideas, vendors and items."
The biggest obstacle to May's growth plan could be finding spots to put its stores. Many analysts and consultants agree that America already is over-stored and over-malled.
"There's just not a lot of new mall construction here domestically," said Jeff Stinson, a research analyst with Midwest Research in Cleveland.
But analysts also agree that May is better equipped than most to succeed.
In fiscal 1997, May racked up its 23rd consecutive year of record sales and earnings per share. Sales climbed 7 percent, or 3.6 percent on a store-for-store basis, to $12.4 billion. Earnings per share jumped 10.3 percent, to a record $3.11.
"May has just been a very consistent grower for a long, long time," said Sally Wallick, a retail analyst with Legg Mason Wood Walker Inc. in Baltimore. "It's impressive because retail is cyclical. When you have a recession, typically the consumer is pulling back. They've been able to grow sales and earnings year in and year out."
May, which got its start in 1877 when David May opened his first store in the silver-mining boom town of Leadville, Colo., has spent most of the century on a shopping spree, steadily acquiring either whole chains or individual department stores and folding them into its empire.
"There are advantages that come from consolidation in terms of being able to lower costs and take advantage of economies of scale and having buying clout," Wallick said.
After listing on the New York Stock Exchange in 1911, May acquired the Bernheimer-Leader department store in Baltimore in 1927, which was renamed The May Co. before becoming part of Hecht's in 1959, the year May acquired that chain and its stores in Baltimore and Washington.
May bought Pittsburgh-based Kaufmann's in 1946; Portland, Ore.,-based Meier & Frank in 1966; Associated Dry Goods Corp. -- with its Lord & Taylor and J. W. Robinsons divisions -- in 1986; and Houston-based Foley's and Boston-based Filene's in 1988.
Consolidations followed, including in 1995 when the company bought 16 Wanamaker and Woodward & Lothrop stores in Philadelphia and Washington, consolidating them with Hecht's and Lord & Taylor. In 1996, May bought 13 Strawbridge & Clothier stores in the greater Philadelphia area, folding them into the Hecht's division but keeping the potent Strawbridge name. And just last week, May closed a deal to buy 11 former Mercantile stores from Dillard's, which had acquired Mercantile. The deal will give May a presence in four new markets in the Midwest.
May's discipline when it comes to controlling costs is legendary in retail circles. The company is known for its efficiency, for constantly tracking and ridding excess inventory and for centralization, all of which keep selling, general and administrative expenses, as a percentage of sales, lower than other department store operators, analysts said.
"May is one of the best-managed department store chains in the country," said Joseph Ronning, a retail analyst with Brown Brothers Harriman in New York.
For nearly two decades, management policies have been set and overseen by former chief executive David Farrell. Farrell retired earlier this year after 19 years at the helm.
When his retirement was announced in January, competing retail executives speaking to Women's Wear Daily lauded him as setting a standard in department store management, as a fierce competitor and the architect of the Matrix system, which places strict sales and profit requirements on vendors. It became part of May culture, under Farrell's direction, to export the best practices from each division to other divisions.
But his reputation didn't come from endearing himself to his staff. He was known for making surprise inspection visits to his stores, inspiring dread among store managers and grilling them on issues such as how they arrived at their merchandise assortment. His philosophy called for keeping people on the sales floors -- and as few layers of management as possible.
Farrell's absence hasn't slowed the company down.
"It's been a very good year for them, but you could say that about a lot of retailers," Wallick said. "Given the strong economy, low unemployment, consumer confidence is high and income is growing. People have had money in their pockets, and they're willing to spend it. In this environment, May is going to get its fair share."
In part, that means continuing to tap into the attractive demographics in the mid-Atlantic states, including the suburban Baltimore region, she said.
Lord & Taylor's entrance into the market, "strengthens [the May Co.'s] position here, gives them more revenue and a greater presence," Wallick said.
Sister store Hecht's, now with nine stores in the Baltimore region, says it welcomes the competition.
"Our past experience has been that when a new chain comes in or a new store, it is helpful to us," said Nancy Chistolini, senior vice president of fashion and public relations. "It brings additional traffic into a mall."
After opening, Hilsberg said, the stores, which carry the the same pricing and merchandise from location to location, will begin to tailor categories -- career, casual wear and special occasion -- to the market.
Pub Date: 9/13/98