Montgomery Ward To Close Operations

by MARTHA IRVINE, Associated Press Writer, 28 Dec 2000

CHICAGO (AP) -- Retailer Montgomery Ward Inc. is shutting down after more than 125 years in business and numerous attempts to entice shoppers back to its struggling stores, employees said Thursday.

Wards spokesman Chuck Knittle declined to comment but said the company planned to make an announcement later in the day.

Dozens of employees were seen leaving the company's headquarters with boxes in hand Thursday. Several said they had been told at a meeting that General Electric Co.'s GE Capital Unit, owner of the 250-store retailer, was pulling financial support from Wards in the wake of sluggish holiday sales. GE Capital referred all calls to Wards heaquarters in Chicago.

''I'm just devastated,'' Anece Rich, a 28-year Wards employee who worked in the company's mail room, said as she left Wards headquarters. ''They took care of us as best they could.''

A supplier said Wards officials had stopped accepting orders at its distribution centers and had told him they were closing all 250 stores.

''They are shutting down. It's official,'' said Ronnie Goldfinger, senior VP of Highland Park-based Performance Marketing Inc., a manufacturer's representative that sold consumer electronics to Wards.

Retail analysts also said they had heard the end of the company was near.

''It's sad. It's too bad because a lot of effort has gone into trying to save the thing,'' said Sid Doolittle, a Chicago-based retail consultant who spent 28 years as a Wards executive.

Begun in 1872, Wards pioneered mail-order catalogs when it came out with a single sheet of dry-good items for sale. It was the first U.S. mail-order house to sell general merchandise. Sears, Roebuck & Co. wasn't founded until 1886 and didn't put out its first general merchandise catalog until a decade after that.

Ward opened its first store in Plymouth, Ind., in 1926.

But the company, which now employs about 37,000 in 31 states, has been financially unstable for years.

Hope had been rekindled in August 1999 when the company emerged from Chapter 11 bankruptcy, announcing a plan to revamp many of its stores.

But some analysts said it was too little too late.

''Wards has not established themselves as anything distinctive in the marketplace,'' said George Whalin, president of California-based Retail Management Consultants. ''There's just no reason to go there -- unless maybe they're the closest store to your house.''

Whalin said it had become increasingly difficult for Wards to survive in a retail market swamped with competitors -- everything from Home Depot to Best Buy and Target.

News of Wards' apparent demise comes two days after Massachusetts-based discount retailer Bradlees Inc. announced that it is going out of business.

''It's brutal. It's as competitive as anything out there,'' Whalin said.

Wards had been shooting for sales growth this year of about 9 percent. Instead, it hovered at a sluggish 2 percent.

''It's like leaving part of your life behind. My heart's breaking, but I'm going to go and look for another job, because that's all you can do,'' Sharon Bray, a 35-year employee who worked in systems quality assurance, told WBBM.

She held out little hope that anything would save her job.

''No more Wards, not unless someone jumps in and buys us,'' she said.

On the Net: Montgomery Ward: http://www.wards.com

-- Andre Weltman (aweltman@state.pa.us), December 28, 2000

Answers

Wards never recovered from a strategic mistake by its CEO, Sewell Avery, in 1945. Avery was convinced that there would be a post-war depression. He established a corporate policy of building cash balances and not expanding with debt. Sears' management took the opposite view, and expanded into the newly developing suburbs. A recession came in 1946 and again in late 1948, but they were mild. Consumer demand was high, after almost two decades of low demand: first, during the depression; then, during World War II. That forecasting error by Avery put Wards behind the curve. The company never caught up.

-- Gary North (gnorth@bigfoot.com), December 28, 2000.

Good to hear from you, Dr. North. Below is what the New York Times has to say about the history you raise. Note the arrest by FDR's goons.

Indeed, this has been a long time coming. But I note a certain sad irony that Montgomery Ward, having survived the "first" Great Depression by not over-expanding, finally folds just as we rush headlong to the next Great Depression (in my opinion), caused in large part by the same over-expansion.

As the saying goes, "Timing is everything."

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Headline: Montgomery Ward to Close Its Doors

Source: New York Times, 29 Dec 2000

http://www.nytimes.com/2000/12/29/business/29WARD.html

[begin snip]

...But whatever the immediate reason, Ward's demise was long in the cards. Retail historians date the start of the decline to the postwar boom of the 1950's, when its rival, Sears, Roebuck & Company, moved aggressively into the then nascent suburbs, while Ward, under the steely leadership of its then chief executive, Sewell Avery, hoarded cash and waited for a second Great Depression.

"It has been a slow-motion train wreck," said Sid Doolittle, a Chicago based-retail consultant who was an executive with the company for 28 years.

In 1872 Aaron Montgomery Ward, a traveling dry goods salesman, started selling to farmers by mail through a one-page catalog list. By inventing the general merchandise mail-order catalog, Mr. Ward could keep prices low through bypassing the middlemen, like small- town shopkeepers and itinerant salesmen. Sears was not founded until 14 years later and its catalog came years later still.

In 1875 Mr. Ward pioneered another practice now taken for granted — "satisfaction guaranteed or your money back."

A decade later, Ward's book was 240 pages and the shopper's bible for America's rural folk. The company went public in 1919 and began opening its own stores in the next decade.

As the company grew into one of the biggest retailers in the country, its colorful history became intertwined with the nation's own.

It was a Ward advertising writer who in 1939 wrote "Rudolph the Red- Nosed Reindeer" as an illustrated poem to hand out to children visiting Ward's Santa for Christmas.

In 1944, Mr. Avery, the chief executive who would run the company as it lost out to Sears in the 1950's, defied the War Labor Board's attempts to force recognition of a union. President Franklin D. Roosevelt ordered that he be seized. Many newspapers published a front-page picture of the unflappable Mr. Avery, his impeccable double-breasted suit and pocket handkerchief unmussed, being carried out of his store by two soldiers.

But Mr. Avery and his company were at their height. It was a perch soon to be lost, however. Mr. Avery had saved Ward in the 1930's from bankruptcy by foreseeing the Great Depression and halting expansion and hoarding cash. He repeated this formula after the war, but this time Sears got it right by spending heavily to be the first to serve consumers in the suburbs blossoming across the nation.

Ward eventually caught on and tried to move to the suburbs, too, but by then Sears was already well ensconced in important malls in good locations at intersections of the emerging interstate highway system. Ward could never catch up...

[end snip]

**********

--Andre in southcentral Pennsylvania

-- Andre Weltman (aweltman@state.pa.us), December 29, 2000.