Melville Corporation

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Melville Corporation

One Theall Road
Rye, New York 10580
(914) 925-4000
Fax: (914) 925-4026

Public Company
Incorporated: 1922 as Melville Shoe Corporation
Employees: 119,000
Sales: $8.69 billion
Stock Exchange: New York

Melville Corporation, which started as a small string of shoe stores, has become one of the largest U.S. retailing conglomerates. For much of its life, Melville was known chiefly for its chain of discount footwear stores, Thom Me An. During the late 20th century, however, Melville acquired more than a dozen other retailing operations. By the 1990s Melville had diversified to such a degree that shoes accounted for less than a quarter of the companys sales. Melvilles apparel, drug, and home furnishing divisions include such chains as Consumer Value Stores, Peoples Drug, and Marshalls.

The company originated in 1892, when Frank Melville, a shoe jobber, took over the three stores owned by his employer, who had left town under a cloud of debt. Melville parlayed the three New York shops into a small but thriving chain. In 1909 he brought his son, John Ward Melville, into the family business. The younger Melville, who dropped the John and was known by Ward, was named vice-president in 1916 and became the driving force behind much of the companys growth. He ran the corporation for nearly half a century, and served as chairman of the board until the day he died in 1977 at the age of 90.

While serving in the army during World War I, Ward Melville struck up a profitable friendship with J. Franklin McElwain, a New Hampshire shoe manufacturer. Together they devised a method to mass-produce shoes and distribute them at low prices though a chain of stores, which they decided to name after a Scottish golfer, Thomas McCann, which they shortened to Thom Mc An. They opened the first Thom Me An store in New York in 1922, offering a few simple styles of mens shoes at the fixed price of $3.99.

Despite the lack of variety, the discounting scheme was an immediate success, and new stores were opened all over the Northeast. By 1927 when the Thom Mc An chain had grown to more than 300 stores, demand outstripped the capacity of McElwains Nashua, New Hampshire, plant, which produced 20,000 pairs a day. Consequently McElwain acquired a new plant in Worcester, Massachusetts.

Melville Shoe, like other businesses, suffered during the Great Depression. In 1932, for example, sales dropped more than 21% from 1931 levels, from $26.2 million to $20.5 million. Despite rumors of bankruptcy that circulated in 1933, Melville Shoe weathered the storm with careful management, prudent expansion, and financial innovation. Melville made a public stock offering in 1936, taking its place on the New York Stock Exchange. Throughout the 1930s, Melville continued to open more outlets. By 1939 Melville operated 650 Thom Mc An stores and also marketed its products through its smaller John Ward and Frank Tod shoe-store chains.

In 1939 Ward Melville moved to centralize and unify the entire production and marketing operation under one corporate head. He proposed that Melville merge with McElwains manufacturing company, J. F. McElwain Company, which then produced about 11 million shoes annually for Melville. The stockholders of both companies approved the merger in December 1939. The following year, J. Franklin McElwain and Ward Melville participated in a ceremony to commemorate the production of their 100 millionth pair of shoes.

In 1940 as the economy started climbing out of the Depression, Melville posted sales topping $40 million for the first time. Sales continued to climb through the war years. The growth continued unabated until 1952, when total sales actually fell for the first time since the Depression. The decline from $92 million to $90 million signified the first inkling of a weakness in Melvilles time-tested strategy of producing a few styles of relatively cheap shoes. In an expanding and competitive economy, diversity and specialization became increasingly necessary. Accordingly Melville began to add more womens and childrens shoes in an effort to diversify.

In 1952 Melville acquired Miles Shoes, a chain of 151 stores. With this acquisition, better results were realized immediately: sales for 1953 increased about 20%, topping $108 million. By 1955 Melville had grown to include 12 factories and 850 stores. The following year, Ward Melville, then 69, was named chairman of the board, although he retained his post of chief executive officer. Robert C. Erb assumed the post of president that Melville had vacated.

As part of a sustained effort to increase market penetration, Melville created a new division in 1960. The new unit, Meldisco, was dedicated to leasing and supplying family shoe departments in self-service discount department stores. That year, however, earnings declined slightly from the 1959 totalsto $6 million profits on sales of $151 million. The trend continued in 1962, as sales climbed to $176 million while net income dropped to about $5 million.

In 1964 Francis C. Rooney, a vice-president, succeeded Robert Erb as president. Over the next two decades, Rooney oversaw tremendous growth at Melville that transformed the nature, breadth, and scope of Melvilles operations.

Rooney helped the company to tremendous growth. Between 1962 and 1967, sales jumped 50% and net profits tripled. By 1967 sales topped $260 million. At the end of the 1960s, Melville was the nations largest shoe retailer, operating 1,400 Thom Mc An, Miles, and Meldisco outlets. The growth also brought increasing differentiation and specialization, as Thom Me An turned into a suburban-based family chain, while Miles specialized in womens and girls shoes.

In 1968 Melville made its most important move of the decade, opening the first of its Chess King stores, a clothing chain geared toward fashion-conscious teens and youth. This was Melvilles first venture into the fashion industry, but it was not to be its last. In 1968 Melville also acquired Foxwood, renamed Foxmoor, a 16-store apparel chain that catered to young women.

The following year brought even more expansion. Melville bought three companies: the Consumer Value Stores (CVS) chain of drug retail outlets; Mark Steven, Inc., a firm that distributed products to CVS; and Retail Store Management, Inc. Buoyed by these acquisitions, Rooney boldly predicted in 1969 that Melville would attain total sales of $1 billion by 1975.

In 1970 Melville, the fifth-largest and most profitable U.S. shoemaker, operated 1,644 total retail outlets. In 1972 Melville was ranked as the 43rd-largest retailing company in the United States, with sales of $512 million, and more than 15,000 employees.

Not satisfied with this accretion, Melville continued to expand. In 1972 Melville acquired Clinton Merchandising, Inc., which operated 80 stores in the Midwest and Northeast, as well as Metro Pants Co. and Spotwood Apparel, Inc., both manufacturers of mens and boys clothing. That year Melville left its long-time midtown Manhattan headquarters for a larger building in Westchester County, New York.

Melvilles expansion took on an international character in the 1970s as well. In 1971 Melville entered into a joint venture with C. F. Bally of Switzerland, contracting to sell the upscale Bally shoe line in the United States. The same year, Melville formed a European buying company. In 1973 Melville initiated a venture to market Thom Me An shoes in Japan.

Despite the diversification, shoes still accounted for 71% of Melvilles $765 million in sales in 1974. In 1975 Melville branched out further into non-shoe retailing when it bought Marshalls Inc., then a chain of 32 retail apparel stores. Expansion continued apace in 1977, when Melville bought the Mack Drug Co. chain, and merged it into the CVS unit.

In 1976 Melville, then the nations 32nd-largest retailing company, belatedly reached Rooneys vaunted goal of $1 billion in sales, due to the combination of acquiring new chains and expanding existing units. In 1976 total receipts from the firms 3,300 outlets totaled $1.2 billion. As part of a continuing trend, the footwear sales portion declined to 60%.

After Ward Melville died in June 1977, Francis Rooney, who already held the posts of president and chief executive officer, was named chairman of the board. Ward Melvilles death marked the end of an era and the beginning of a new one in which shoes would play an increasingly smaller role in the Melville scheme. By 1978 Melville operated 3,812 stores, and had sales of $1.75 billion. Shoes accounted for about 53% of the total.

As the 1970s came to a close, Melville continued to boom. In 1980, Melville, with 48,000 employees and more than 4,500 stores, saw its 26th straight year of increased sales. That year, Kenneth Berland was named to the post of president.

The following year, in which sales soared to $2.8 billion, Melville acquired the Kay-Bee Toy and Hobby Shops Inc. By 1982 Melville, the largest U.S. shoe retailer, operated nearly 5,200 total stores. These included 470 Chess King, 588 Foxmoor, 433 CVS, and 1,200 Thom Mc An outlets. In 1982 Melville added Wilsons House of Leather and Linens N Things to its roster.

Despite the recession of the early 1980s, sales rose to $3.3 billion in 1983; nevertheless, Melville suffered some retrenchment during the 1980s. The firm began to phase out six of its seven shoe factories in late 1983, eventually terminating about 2,000 jobs. In 1985 Melville sold the 614-store Foxmoor chain, whose sales were declining. The same year, Melville shut down 72 Thom Mc An outlets. Despite the closures or sales of various stores, 1985 receipts rose to $4.7 billion, and profits surged to $219 million.

In 1985 Stanley Goldstein, a CVS founder who joined Melville when his corporation was acquired by the shoe giant, succeeded Berland as president, and took his place as heir apparent. The following year, Goldstein was named chairman and chief executive officer, replacing the retiring Francis Rooney. To Goldstein fell the task of building on Rooneys phenomenal record. Rooney had transformed the firm from a successful shoe company into a diversified retailing giant.

Melvilles expansion continued under Goldstein. In 1987, while amassing $5.9 billion in sales, Melville acquired 25 Heartland and Pharmacity drug stores and 36 Leather Loft stores. In 1988 Melville bought Finish Line, a chain of athletic footwear stores and Bermans Specialty Stores.

In 1989 Melville underwent some structural renovation. The firm created a profit-sharing plan and an employee stock ownership plan, under which about 6% of the companys common stock was distributed among its employees.

The year 1989 brought to a close a remarkably successful decade, one in which sales and earnings both increased more than threefold. The Melville that left the 1980s was vastly different from the one that entered that decade. In 1989 shoes, once the firms mainstay, accounted for only 22.5% of the total sales; the apparel sections accounted for 36%; and the drug store business accounted for 28%. The toys and household furnishing division accounted for the remainder of sales.

This trend continued in 1990, as Melville acquired more non-footwear retail outlets. Melville bought both Circus World Toy Stores Inc., which it folded into the Kay-Bee division, and Peoples Drug Stores, a 490-store chain. By the end of 1990, Melville operated 7,754 stores and listed 119,000 employees on its payroll. Sales for 1990 totaled $8.68 billion.

Ward Melvilles shoe company had come a long way. The process of diversification that began in the last years of Ward Melvilles life picked up momentum throughout the 1970s and 1980s. With its vast, diverse holdings and sound financial condition, the Melville Corporation is looking forward to a second century of profits and growth.

Principal Subsidiaries

Melville Realty Co.; Marshalls Inc.; Wilsons Suede & Leather Inc.; Meldisco; Thom Mc An Shoe Co.; Kay-Bee Toy Stores; Fan Club Stores; This End Up Furniture Co.

Further Reading

Grooving shoe sales to a young market, Business Week, April 27, 1968; Melville steps into the billion-dollar class, Business Week, April 11, 1977; Sloane, Leonard, Ward Melville, 90s Shoe Magnate, Dies, The New York Times, June 6, 1977; Rudnitsky, Howard, Fancy footwork, Forbes, March 29, 1982; Barmash, Isadore, Retailing: The Special Case of Melville Corp., The New York Times, April 4, 1982; Chakravarty, Subrata N., Reshaping the last, Forbes, September 17, 1990.

Daniel Gross