The May Department Stores Company Business Information, Profile, and History

Company Perspectives:

May is passionate about friendliness. Our associates pride themselves on greeting customers with a smile, providing them with attentive service, and thanking them by name.

History of The May Department Stores Company

The May Department Stores Company is the second-leading upscale department store chain operator in the United States, just behind Federated Department Stores. The St. Louis-based company operates 11 department store chains and David's Bridal, the largest retailer of wedding apparel and accessories in the United States. Included in its holding are the well-known names of Lord & Taylor, Robinson's-May, Kaufmann's, Foley's, Filene's, Hecht's, Meier & Frank, Strawbridge's, L.S. Ayres, The Jones Store, and Famous-Barr. With nearly 600 retail outlets in 43 states, May recorded its 26th year of consecutive record sales and earnings during fiscal 2001.

The Early Years

The beginnings of The May Department Stores Company can be traced to 1877, when company founder David May opened his first store in the mining town of Leadville, Colorado, at the age of 29. An immigrant from Germany, May had settled in Indiana during his teen years, where he earned his living as a salesman in a small men's clothing store. Diligence and marketing flair won him a quarter-interest in the business, but ill health forced him to sell his stake and seek a drier, healthier climate in the West, where he tried prospecting. Inexperience brought swift failure, though, and thus he returned to the field he knew and opened a men's clothing store with two partners.

The firm of May, Holcomb & Dean supplied the miners with red woolen underwear and copper-riveted overalls. The store was an instant success, but a real estate disagreement dissolved the partnership, leaving May alone to put up a building on newly purchased ground. This second venture was called The Great Western Auction House & Clothing Store, an enterprise that was soon large enough to welcome a partner, Moses Shoenberg, whose family owned the local opera house. By 1883, the new partnership was flourishing, for the town's population had become sophisticated enough to demand clothing for many purposes. May and Shoenberg kept pace with the demand, ensuring success with aggressive advertising methods and conservative fiscal management.

Before long, The Great Western Auction House & Clothing Store was financially able to expand its merchandise to include women's apparel, after testing the market with a huge stock of expensive dresses bought from an overstocked Chicago store. Two years later, despite a post-boom depression that would doom Leadville's prosperity by the end of the decade, May bought out Shoenberg's interest in the store in 1885. He went on to add a branch store in Aspen, Colorado, and then another called the Manhattan Clothing Company in Glenwood Springs, Colorado.

Corporate strategy was already firmly established by this time. Print advertising that trumpeted genuine bargain prices lured an ever-escalating, middle-class clientele, while frequent sales kept the merchandise moving. Fast stock turnover kept the customers in the height of fashion. Energy and swift management decisions were David May's trademarks. A frequently-quoted story tells that he paid $31,000 for the stock of a bankrupt clothing store he spied during an 1888 visit to Denver, Colorado. By the end of the day, he had installed a brass band out front to help sell out the existing stock. It only took him one week to clear the inventory, remodel the store, and establish the property anew as The May Shoe & Clothing Company.

May's expansion efforts continued through the 1890s. First came the 1892 purchase of the Famous Department Store in St. Louis, Missouri, for which he and three Shoenberg brothers-in-law paid $150,000. Six years later, spreading his interests to Cleveland, Ohio, he spent $300,000 to buy the aging Hull & Dutton store, renaming it May Company. In order to more easily manage his many holdings spread across the country, in 1905 May moved the company headquarters to St. Louis, Missouri, where it remained into the 1990s.

Expansion in the Early 1900s

In 1911, one year after the May Department Stores Company was incorporated in New York, it was listed on the New York Stock Exchange. May used proceeds to purchase a second St. Louis chain, the William Barr Dry Goods Company. To consolidate the firm's Missouri holdings, he merged the two St. Louis chains, forming the Famous-Barr Company. In spite of the large investment this move demanded, sales for the year reached $14.8 million, with net profits of $1.5 million.

By 1917, David May was ready to hand the company presidency over to his son, Morton. He named himself as the company's chairman of the board, but did not reduce his active interest in business affairs; in 1923, at the age of 75, he bought a Los Angeles department store, A. Hamburger & Sons, for $4.2 million cash. He then personally supervised its renovation and its energetic promotion. Renamed The May Company, the store opened new avenues in California and helped to produce 1926 sales figures that surpassed the $100 million mark for the first time in the company's history. It was a final triumph for David May, who died in 1927 at the age of 79.

That same year, the company acquired Bernheimer-Leader Stores, Inc., of Baltimore, Maryland. At a price of $2.3 million, the new acquisition was also renamed The May Company, and, by newly established company policy, was the last acquisition for some time to follow. Top priorities then became consolidation, improvement in performance, and store remodeling. Systematic modernization plans to update delivery systems and to provide customer parking began in 1928 and were completed in 1932.

May's sales reached $106.7 million in 1929. During the bleak years that followed, the company maintained its stability with strict financial planning and a greater focus on inventory. Buyers had always maintained large stocks of merchandise, regardless of the external economic climate. This practice now proved to be profitable, for higher purchase costs were not a problem; the company simply added the old and the new prices of an item, averaged the two, and held one of its famous sales. Large inventories thus became an asset, leaving the stores unaffected by the Depression-era foundering of distressed suppliers.

A distinct advantage to the company lay in the wide geographical spread of May's subsidiaries. Each store had its own buying department, allowing it to cater to its individual needs. Since the Depression's depth likewise varied from area to area, buyers could gauge their stock requirements with accuracy. Additional centralized buying facilities, however, allowed buyers to take advantage of mass-purchasing practices to keep their costs down. Careful planning paid off--although sales dipped to $72.5 million by 1932, they slowly recovered, rising to $89.2 million by the end of 1935.

Post-Depression Diversification

By 1939, the company was ready to expand once again. Foreshadowing a 1940s trend toward suburban shopping centers, May opened a Wilshire Boulevard branch of its Los Angeles store, stocking it with merchandise for the upper-income customer. Then, in 1946, May organized a merger with Kaufmann Department Stores, Inc., of Pittsburgh. With a history stretching back to 1871, Kaufmann's was western Pennsylvania's largest department store and had cordially shared several May buying offices for many years. Together, the two operations were large enough to produce combined 1945 sales of $246.4 million. Kaufmann's brought to the partnership a higher-income clientele, seven new units, and its own brand of paint, linens, and toiletries. In 1948, there was another important acquisition: the Strouss-Hirshberg Company of Youngstown, Ohio. This gave the company stores in Youngstown and Warren, Ohio, and New Castle, Pennsylvania.

The company founder's formula of aggressive promotion, competitive pricing, and wide selection gave it dominance in five of the eight cities that were now home to May stores. Liberal salaries and incentive plans ensured staff loyalty, as exemplified by several department store heads who had been with the company for numerous years. The different elements made a successful mix, resulting in 1949 sales that reached $392.9 million, despite population shifts to the suburbs, competition from discount houses, and increases in customer spending for food and gasoline.

In 1951, Morton D. May succeeded his father as company president, and Morton J. May moved on to the company chairmanship, just as his own father had done previously. Continuing in his father's expansion and consolidation footsteps, the younger May held the reins of 25 stores by the end of 1953; the lineup now consisted of ten large downtown stores, five large branch stores, and ten smaller branch stores. Sales for that year topped off at $447.5 million, and the company could well afford the $10 million it spent over the 1954-55 period to remodel, modernize, and enlarge suburban stores. Additional potential for suburban expansion spurred construction of the firm's first shopping plaza, The Center of Sheffield. Covering 55 acres near Lorain, Ohio, the development contained about 40 retail stores as well as parking for 3,000 cars. It proved so popular that another center was constructed in Los Angeles within the next two years.

Other new ventures in the 1950s included the 1957 purchase of Denver's Daniels & Fischer Stores Company, which was subsequently merged with existing Denver operations and renamed May D&F. Hecht Company of Washington, D.C., was also acquired in 1959, with branch operations in Baltimore. Though start-up costs and refurbishing usually curbed earnings in an acquisition's first year, Hecht's merger did not affect profits. May finished the decade with record sales reaching $645.1 million.

The 1960s-70s: Social and Demographic Influences

As the 1960s began, demographic research, used to track present and future buying patterns, showed two new trends. On one hand, there was a shift to discount merchandising, bringing the company into competition with drugstores, supermarkets, and discount houses. On the other hand, the more expensive end of the spectrum was now showing an increased emphasis on fashion in clothes, linens, and other May staples. To move inexpensive staples more efficiently, the company increased automation in most units. At the specialty merchandise end, the company upgraded its merchandise to include even more exclusive brands.

Two important acquisitions were negotiated in 1965, both of which were finalized the following year. One was a merger with Meier & Frank Co., Inc., of Portland, Oregon. Another acquisition, G. Fox & Company, brought May into Hartford, Connecticut. Both of these mergers were scrutinized by the Federal Trade Commission (FTC), whose restrictive powers were broadened early in 1966. As both transactions had been initiated before the new restrictions came into force, the acquisitions were allowed, although the company had to agree to make no further acquisitions for ten years unless specifically permitted by the FTC.

When Morton D. May became chairman of the board in 1967, to be succeeded as president by Stanley J. Goodman, a disturbing new trend appeared: the vigorous acquisitions program and its concomitant store renovations and expansions began to eat into profits. Downtown stores were waning in popularity, and customer demand at the new suburban branches was not yet enough to compensate. Labor costs also rose significantly. Year-end figures told their own story: in 1966 total sales reached $869.1 million, yielding a profit of $45.9 million, while 1967 total sales reached $979 million but brought a profit of just $38.4 million. The following year, although total sales passed the $1 billion mark for the first time, profit sank to $36.2 million.

Nevertheless, plans involving the discount end of the market continued. In 1968, the company hired John F. Geisse, an experienced discount merchandiser, to head its new discount subsidiary; he soon became a vice-president. The new enterprise, called Venture, started in St. Louis in 1970. Achieving quick success, it burgeoned to a 12-unit chain by 1972. Three years later there were 20 stores, serving a population of over eleven million.

In 1975, the Venture subsidiary contributed an estimated 9 percent of May's $1.75 billion in sales. Focusing on the Midwest market, the company had eight Chicago-area Venture stores, a number too small to give the advantages of increased productivity or warehousing and distribution savings. To remedy this problem, in 1978 the subsidiary purchased 19 Turn-Style stores with a combined annual sales figure of about $180 million from Jewel Companies. The units were then redesigned and restocked at a cost of $27 million. Further expansion had to be temporarily shelved, however, because existing distribution and inventory monitoring systems were unable to cope with the sudden increase in the Chicago-area activities.

Catalog shopping, accommodating the ever-swelling numbers of working women, was another new enterprise of the 1970s. In a 50-50 partnership with Canadian Consumers Distributing Company, Ltd., May opened 18 catalog showrooms in the mid-1970s, planning an eventual 150 more. Unlike other catalog stores that offered merchandise that was dispatched from separate warehouses, these supplied catalog-ordered items from storage facilities on the premises. Although hopeful that the new enterprise would at least break even by the end of 1976, this was not the case, and May sold its 70 U.S. showrooms to Consumers Distributing Company (CDC) in 1978.

In November 1979, the company bought Volume Shoe Corporation for about $150 million in stock. A family-owned chain of more than 800 self-service stores in Topeka, Kansas, Volume was then enjoying annual sales totaling more than $200 million. The following year, a recession combined with negative effects of start-up costs for an enlarged shoe distribution center and cut deeply into profits. Between 1979 and 1983, however, the chain showed the biggest earnings increase of any May Department Store Division. Moving purposefully toward its goal of establishing a Payless Shoe Outlet chain nationally, Volume purchased 83 stores from HRT Industries as well as 38 from Craddock-Terry Shoe and was eyeing possibilities in east coast cities.

At the same time, a new May president, David Farrell, instituted a program of refurbishments to renovate some of the company's more outdated units and rejuvenate their image as trendy fashion outlets. The company spent $117 million on the Famous-Barr chain alone, although other stores were also remodeled. Farrell also instituted stringent cost-cutting means, which included the installation of new telephone and energy-management systems for all 138 department stores. Merchandise was upgraded to tempt the upscale customer, for the company was competing against specialty stores whose fashion reputations were already established.

Maintaining Market Share in the 1980s

A significant threat to market share appeared in the mid-1980s, in the form of warehouse stores and off-price outlets. Offering brand-name merchandise at discount prices, they forced retailers to rethink their customary strategy. May's answer, to fulfill its requirements of upgrading merchandise at one end of their market niche and meeting the off-price challenge at the other, was the 1986 acquisition of Associated Dry Goods (ADG) at a cost of $2.5 billion. This steep purchase price brought the company the quality Lord & Taylor chain, J.W. Robinson department stores, L.S. Ayres units, Caldor discount operations, and Loehmann's off-price apparel shops. As was the case with the other May subsidiaries, each chain continued to operate independently.

In 1987, May formed a 50-50 partnership with PruSimon, called May Centers Associates (MCA). May transferred its shopping center operations to MCA. Two partners owned PruSimon: Melvin Simon & Associates, Inc., of Indianapolis, Indiana, and the New York-based Prudential Insurance Company of America. PruSimon paid $550 million in cash for its share of the partnership. May's chief benefit was to disengage from management functions unrelated to the stores, which increased in number once again with the $1.5 billion acquisition of Filene's of Boston and Foley's of Houston in 1988.

After spending two years acquiring a huge chunk of the upscale department store market, the company then decided to narrow its retailing focus, and made moves to discontinue its discount operations. Loehmann's was sold in 1988, two years after it was acquired. Offered next were Venture and the Caldor chain that had been part of the ADG acquisition. Unfortunately, there were a large number of retail operations for sale at the end of the 1980s, and the company was unable to reach its asking price of almost $600 million for Caldor. Consequently, it sold this unit to an investor group, which formed a company called Odyssey Partners L.P., to buy an 80 percent share. In 1990, Venture was spun off to shareholders in a tax-free distribution. That same year, May acquired Thalhimers, a 26-store group based in Richmond, Virginia, which helped May's sales surpass $10 billion.

Continued Expansion: 1990s and Beyond

In the early 1990s, The May Department Stores Company continued to expand its reach through the acquisition of stores around the country, consolidating them into one of May's own companies, depending on the geographic region in which they were situated. Thalhimers was consolidated with Hecht's, and Rochester, New York-based Sibley's was consolidated with Famous-Barr. Furthermore, in 1993 Los Angeles' May Company and Robinson's were combined to form Robinson's-May, which remained one of the area's premiere upscale department stores into the late 1990s.

Many critics began to wonder whether May's quick takeovers would backfire. Because the company was purchasing stores with names that were already established and then changing each store into one of its own, the possibility existed that customers would become confused and once-prosperous stores would lose business. Fortunately for May, however, this did not seem to be the case, and the company continued to post record earnings throughout the acquisition phase. Furthermore, the company actually saved itself money by controlling its marketing expenses; rather than spend money to promote many different individual stores from city to city, the company instead was able to advertise regionally once new stores were transformed into one of May's namesakes.

The aggressive acquisition and transformation practice continued throughout the mid-1990s. Engulfed by the rapidly expanding May holdings were ten Hess's in Pennsylvania and New York in 1994, and 16 Wanamaker and Woodward & Lothrop stores in Philadelphia and Washington, D.C., in 1995. All in all, throughout 1995 the May Company either acquired or opened a total of 37 new department stores. It also acquired two large discount shoe store chains, Kobacker Company and The Shoe Works, in Columbus, Ohio. Together, these two chains numbered 550 stores.

The company followed its impressive expansion efforts with another key acquisition of 13 Strawbridge & Clothier stores in Philadelphia in 1996. The stores continued to be operated under the name Strawbridge's, and May opened another 15 throughout the year. May also decided to spin off its Payless ShoeSource holdings to the public in mid-1996, listing the newly-freestanding company on the New York Stock Exchange that year and achieving annual sales of $11.7 billion.

Toward the end of the century, May stores continued to face keen competition, but the company thrived on the strength of its stellar reputation and its on ongoing efforts to upgrade products and maintain its position as marketer of high-visibility brands. The company continued to build on these strengths with innovative merchandising ideas, while retaining a focus on expansion throughout the country. During 1998, Jerome Loeb was named chairman and Eugene Kahn took over as president and CEO. Under the leadership of these two retail veterans, May logged its 24th consecutive year of record sales and earnings that year and added 11 Dillard's Inc. stores to its arsenal.

During 1999, May divested its consumer electronics interests in order to make way for additional floor-space for its higher-margin items such as housewares, furniture, gift merchandise, and textiles. It acquired the Utah-based Zions Cooperative Mercantile Institution and consolidated those stores into its Meier & Frank operations. Profits reached $927 million that year on sales of $13.86 billion.

May moved into the new millennium determined to continue its success. As part of its strategy to secure a younger customer base, the company purchased the David's Bridal Inc. chain of wedding apparel and accessories stores in 2000. David's Bridal was the largest wedding apparel and accessories chain in the United States and had a solid customer base of 18 to 34-year-olds--the exact demographic May began to target for its department stores. As such, the company began implementing new programs that would entice young bride-to-be's to shop at both David's and May-owned department stores. For instance, a David's Bridal customer would receive a wedding gift card if she registered at a May department store.

May also opened 23 new department stores in 2000 and expanded into nine new markets. The following year, it acquired 13 stores from bankrupt Wards and nine stores from Saks Inc. In December, it announced plans to purchase After Hours Formalwear Inc., the largest tuxedo rental and sales retailer in the United States Kahn commented on the purchase in a 2001 Daily News Record article, stating, "After Hours is a very exciting acquisition and a highly strategic complement to our David's Bridal business. There are tremendous marketing and other business synergies between David's stores, After Hours' stores, and the wedding registry business in our department store divisions."

As May forged ahead with its growth plans in the new millennium, the American economy slowed and the retail sector began to feel the pains of overgrowth. In fact, by 2001, the United States had 5.6 billion square feet of retail space--20 square feet per person. May however, remained confident that even during difficult economic times, it would continue to secure record growth. With its strong position in the retail industry and its long-standing successful business strategy, May appeared to be well positioned to combat increased competition and economic hard times well into the future.

Principal Subsidiaries: Leadville Insurance Company; Snowdin Insurance Company; May Merchandising Company; May Department Stores International; May Capital Inc.; Grande Levee Inc.; David's Bridal, Inc.; Lord & Taylor; Hecht's; Strawbridge's; Foley's; Robinson's-May; Kaufmann's; Filene's; Famous-Barr; L.S. Ayres; The Jones Store; Meier & Frank.

Principal Competitors: Federated Department Stores Inc.; Dillard's Inc.; Saks Inc.

Chronology

• Key Dates:
• 1877: David May opens his first store in Leadville, Colorado.
• 1892: The Famous Department Store is acquired.
• 1898: May purchases the Hull & Dutton store and renames it May Company.
• 1905: The company's headquarters are moved to St. Louis.
• 1911: The firm lists on the New York Stock Exchange; the Famous-Barr Company is formed.
• 1926: Sales surpass $100 million.
• 1946: The company merges with Kaufmann Department Stores.
• 1954: May begins a $10 million modernization of its stores.
• 1959: The Hecht Company of Washington, D.C. is acquired.
• 1965: May completes the purchases of Meier & Frank Co. Inc. and G. Fox & Company.
• 1978: The firm's Venture subsidiary buys 19 Turn-Style stores from Jewel Companies.
• 1986: May acquires Associated Dry Goods for $2.5 billion.
• 1990: The company buys the 26-store chain, Thalhimers; sales surpass $10 billion.
• 1992: May begins to implement a consolidation strategy.
• 1996: Thirteen Strawbridge & Clothier Stores are purchased; the company spins off its Payless ShoeSource holdings.
• 2000: The David's Bridal chain of stores is acquired.