Edison Brothers Stores, Inc.
Edison Brothers Stores, Inc.
501 North Broadway
P.O. Box 14020
St. Louis, Missouri 63178-4020
Fax: (314) 331-7500
Sales: $1.51 billion
Stock Exchanges: New York
SICs: 5661 Shoe Stores; 5621 Women’s Clothing Stores; 5611 Men’s and Boys’ Clothing Stores; 5812 Eating Places
Edison Brothers Stores, Inc., is a leading retailer, specializing in apparel, footwear, and entertainment. Begun as a shoe store in Atlanta, Georgia, in 1922, Edison stores (under many different names) now dominate many regional shopping malls, with some malls having six or more Edison-owned stores. Edison Brothers Stores, Inc., now comprises the Edison Menswear Group, the Edison Footwear Group, 5-7-9 Shops, Edison Brothers Stores International, and Edison Brothers Entertainment. The company owns and operates 1,883 apparel stores including J. Riggings, JW/Jeans West, and Oaktree; 766 footwear stores including Bakers/Leeds, Wild Pair, and Sacha London; and 138 entertainment units including Dave & Buster’s, Time-Out, and Space Port. Currently the company’s expansion is focused on its menswear chains and its large-space entertainment centers.
The Edison brothers got their start in the early 1920s. On October 28, 1922, Sam, Harry, Mark, Irving, and Simon Edison opened their first shoe store, called Chandlers, in Atlanta. Although there was relatively little variation in footwear styles at that time, the Edisons’ new store sold stylish women’s shoes for six dollars. This one-price policy was an industry standard since other chains discovered that the practice sped up sales.
Although their business began small, the Edison brothers certainly had extensive connections to the shoe business. Their father, a Latvian immigrant, had been a small business owner in Europe and later in Atlanta before working as an agent for a Boston shoe manufacturer. Prior to their initial collaborative business effort, all of the Edison sons had connections to footwear sales. In 1920 Sam and Mark Edison were running two shoe stores, and that same year Irving and Simon began a ladies’ boot shop. Harry Edison is credited with the idea of getting all of his brothers together to start the first Chandlers store.
The Edisons’ first store was an immediate success, with their low prices attracting customers from many markets, including Atlanta’s upper class. In addition, with swift marketing sense, the Edison brothers quickly capitalized on the heightened fashions of women’s shoes after World War I. They bought a large stock of high-style shoes on credit, and the shoes sold quickly, netting the nascent partnership a profit of $282,000 in their first year in business.
Growth was fast and furious and the brothers opened their second store, called Baker’s, the next year. Baker’s shoes were geared toward a lower priced market than the original Chandler’s store. Then they set up another Chandler store in New Orleans after picking up a good site at a low price. In 1926 the Edison Brothers’ partnership incorporated in Georgia (with $150,000 of paid-in capital), becoming Edison Brothers Stores, Inc. (EBS). Stores were opened in Nashville and Louisville, and by 1928 the Edisons had a chain of 12 Chandler stores stretching throughout the Midwest and southeast and as far west as San Antonio, Texas.
As profits grew throughout the 1920s, competition in the industry intensified. Price warfare became the order of the day, but the Edisons were able to expand their operations in both the Baker’s and Chandler shops, and, by 1929, sales in their 17 stores totaled more than $3 million. In order to expand beyond the limits of their earnings, and hesitant to continue to expand their already over-leveraged borrowing position, the company went public in 1929 (issuing $950,000 of common and preferred stock) and moved its headquarters from Atlanta to St. Louis. The funds enabled them to add fourteen more Baker’s and three more Chandler stores in 1929. The company was in a good position to weather the unforeseen economic collapse of the 1930s.
The onset of the Great Depression, while slowing profit growth considerably as demand collapsed, did not stop Edison from expanding its operations throughout the 1930s, even with prices falling drastically. With heavier emphasis on the Baker’s shoes, which were lower in price, the Edisons were in a relatively good competitive position overall. They even opened a new chain called Burt’s, which sold a line of $2.88 shoes. Thus, with shoes in three differently priced markets, the Edison Brothers were diversified and in fair good shape compared to their competitors. Overall, during the period from 1930 to 1938, the company added an average of a dozen stores per year while only closing a few.
The Edison Brothers continued to apply their retailing wisdom and rarely picked unprofitable markets. In addition to the cost-cutting behavior necessary for any successful business, the Edisons operated their stores under different names, thereby avoiding confusion with local competition. For example, on the West Coast, where a C. H. Baker shoe chain already existed, Edison called its medium-priced stores Leed’s.
Expansion continued for the company in the early 1940s and was bolstered by government wartime spending. Sales at the 168 stores rose to $45 million in 1942, but the entry of the United States into World War II brought rationing, including rationing of shoes and shoe leather—up to 40 percent of the nation’s supply of sole leather was slated for military use—and other market restrictions. To combat this smaller shoe market, Sam Edison put in a line of millinery, called the “Casual Hat Bar Operation,” but this failed to revive profitability as overall sales fell below $40 million and two stores failed. By 1945 the sales drought had passed, and sales reached $53 million. In 1946, with the war over and rationing lifted, sales jumped to $65 million as pent-up spending power was unleashed and new style demands pushed women to replenish and update their shoe wardrobes. Sales stabilized around $70 million by 1947-48, and upward pressure on prices—from slowly rising leather costs and demand pressures—led some to suspect the Edisons of collusive inflationary pricing practices. Edison’s comptrolling Vice-President Alfred T. Leimbach pointed out, however, that leather costs more than doubled in the years surrounding World War II, and Edison’s profit margins actually declined over the period.
In 1948 Edison Brothers, Inc., opened its first store in a shopping mall, posting sales of $75 million during the year. That same year saw the opening of Edison’s 200th store, after 25 years in business. Just nine years later, Edison opened its 300th store, and in 1958 sales shot above $100 million. Harry Edison was named chairman of the board, and Irving Edison was elected president of the company. Edison also entered into the New York City market with a Bakers store on 34th Street.
By the mid 1960s, Edison stores were continuing to achieve record sales and profit growth. Sales in 1964 were growing at a rate of ten percent, and the four main Edison store chains, Baker’s, Chandler’s, Leed’s, and Burt’s reported a net income of $1.15 per share, up from $1.04 per share from the year earlier. By 1966 Simon Edison was named chairman, and he continued the Edison policy of opening and acquiring new stores and closing unprofitable stores. Edison opened 20 stores in 1965 and closed 13 (with 515 stores total in operation at that time). The company also expanded its business, operating women’s accessories shops and moving into children’s shoes (which were being sold in 60 of the company’s 515 stores). Overall, from 1960 to 1965, the company closed 46 stores and replaced them with more productive units.
By 1968 Irving Edison retired, and his son, Bernard Edison, became president of Edison Brothers. Store expansion continued as the Edisons acquired Jeans West, a chain of pants stores with sales of $7.5 million. In 1970 EBS acquired 5-7-9 shops, a future mainstay in the Edison store stable. Wild Pair, a shoe store that featured “look-alike” or “unisex” shoes designed for young people, opened its first stores in Houston and Tucson in 1972, as total Edison sales topped $290 million.
Shoe styles were becoming dressier at this time, and this was a good sign for Edison’s growth prospects. Boots became more popular among men, and more informal wear also became popular. A devalued dollar helped the export market and cut down import competition, and production in the industry in general expanded. Competition led to greater concentration, however, as the number of U.S. shoe manufacturers shrunk from 721 in 1964, to 581 in 1967, to 481 in 1971. Edison stores remained near the top of the shoe and apparel retailing business.
Although it took Edison 40 years to get 500 stores, only ten more years were needed to reach 1,000, accomplished in 1973. Julian Edison, son of Mark Edison, took on the duties of president of the shoe division, but it was the non-shoe component of the business that made the most rapidly increasing contribution to the growth of sales—by 1972, non-shoe sales were 28.6 percent of corporate sales. One major non-shoe venture was Edison’s acquisition of Handyman Home Improvement Centers, a San Diego-based chain of eight do-it-yourself hardware and building materials stores. Since then, they have spread as far as Texas and into Oregon. Also in 1971, Edison added another non-shoe business: United Sporting Goods, a four-unit chain based in Los Angeles. Fashion Conspiracy, a San Diego operator with 127 stores selling women’s junior wear, was also acquired.
During the same period, Edison’s existing major chains, Chandler’s, Baker’s, Leed’s, and Burt’s, covered much of the price spectrum of the shoe market up to where luxury prices begin. Baker’s and Leed’s continued to do well with fashion shoes priced under $15, while Burt’s prices were even lower. According to Edison, the idea was to seek high volume by covering lower price ranges with trendy footwear, accepting the risks of inventory going out of fashion any moment while foregoing the high margins of the luxury/high fashion range.
Diversification continued, but the shoe market began to stagnate in the mid-1970s. Imports grabbed a bigger share of the market and Edison Brothers Stores’ competition such as Brown Group Inc., Interco Inc., and Melville Corp. diversified through acquisition as well. EBS’s earnings growth performance remained strong through the late 1970s mainly due to its diversification and reliance on its non-shoe business. Shoe and apparel still accounted for 76 percent of sales volume and 86 percent of net income, with the rest coming from hardware and building materials operations. Per share net income was up 25 percent in 1976, with no sign of letup into the 1980s.
EBS soon became the largest retailer of women’s shoes. In 1979, just six years after opening its 1,000th store, Edison opened its 2,000th store. Among the new stores in the late 1970s was Oaktree, which opened its first store in Houston in 1976. By 1983, sales surpassed the $1 billion mark; Andy Newman, son of Julian Edison, became president of the shoe division; and Martin Sneider became president of the company’s rapidly growing apparel division. Sneider was the first non-Edison to hold a top management position at EBS. The shoe and apparel divisions moved into a newly completed corporate headquarters building in St. Louis, so that they could share information between them.
By 1985 more changes in the corporate officers were under way. Andy Newman was elected chairman, and Martin Sneider became president of the company as Bernard Edison retired. The Edison family, nonetheless, maintained control of over 30 percent of the company’s stock. The mid-1980s would be a time of reorganization and rethinking of a long term strategy as the company fell on hard times. According to some sources, Edison began to fall behind by squandering its competitive position in the malls, with many of its original stores needing remodeling. Further, the Handyman Home Improvement Centers unit was losing money, prompting BBS to sell off its assets, one share for four BBS shares. Edison’s 2,475 stores posted a loss in the first half of 1987 of $10.8 million, following a profit of $9.2 million in 1986, and its rate of return on equity fell from 27.9 percent to 15.4 percent.
Despite declining profitability, BBS continued to pursue growth by acquisition, acquiring the J. Riggings division of U.S. Shoe Corporation, with more than 200 stores operating as part of what is now the Edison Menswear Group. Edison then turned around and sold off 14 of its less profitable Fashion Conspiracy women’s apparel stores to Wisconsin ID, Inc. These acquisitions and sales were part of an overall fierce cost-cutting campaign designed to reduce overhead and restore greater profitability. This also involved a massive capital investment project to remodel its more established store lines as well.
As part of the company’s new strategy, Edison president Martin Sneider made what some called a highly risky maneuver: taking the company away from women’s wear and into a risky young men’s market. By joining the world of men’s fashion, Edison faced heightened competition from stores such as The Gap. Edison purchased the 200 J. Riggings stores, along with two other men’s chains, Jeans West and OakTree, for their growth potential. J. Riggings sells moderately priced suits and sports jackets to an older clientele. Jeans West featured casual wear and were called JW stores. OakTree sold low priced urban trendy wear with designer labels.
Edison Brothers Stores also spent $3 million in 1985 and $20 million overall (from 1985 to 1987) to remodel its older stores. Sneider’s restructuring plan has paid off handsomely for BBS in less than three years. Earnings had peaked in 1983 at $46 million and sales had stalled at around $1 billion. Sneider’s plan helped Edison develop niches in men’s fashion, and overall profits recovered. By 1987 Sneider’s Edison Brothers, Inc., turned a $21 million loss to a $36 million profit. Stock prices rose as well.
Edison Brothers Stores continued to acquire profitable enterprises: 200 Foxmoor Stores; 120 Webster/Zeidler and Zeidler stores; 39 Harry’s Big and Tall stores; a small chain of Repp Ltd. big/tall/athletic menswear stores. BBS also opened its first store in Mexico. The company started Edison Brothers International, a new division to handle foreign buying offices in Hong Kong, Taiwan, and Bangkok. They also opened a $10 million facility near Los Angeles to ease distribution for products.
In another competitive move, Edison Brothers Stores, Inc., expanded into the business of mall-based entertainment centers, a business strategy designed to attract people to shopping malls for purposes other than shopping and to bring more families to the malls for whole day outings. BBS started its entertainment division with the acquisition of Dave & Buster’s restaurant/entertainment complexes and grew with the acquisition of Time-Out and Space Port family entertainment centers. By 1991 Edison Brothers became the exclusive U.S. distributor for Virtuality, the first application of virtual reality technology accessible to the general public, in malls. Virtuality is a type of computer game software, for use in video arcades, where participants wear helmets containing screens that show three-dimensional computer-generated images. The helmets also block out the real world so that the user is immersed in this virtual world. BBS operated ten Virtuality centers across the country.
Edison’s most publicized move in this area came when Paramount Pictures licensed the use of the television series Star Trek: The Next Generation to the company for use in its virtual reality centers. Edison’s largest virtual reality project was called Exhilarama, a 40,000 square-foot family arcade. Executives of BBS expressed confidence that the arcade would attract families to malls.
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—John A. Sarich