BY LISA BIANK FASIG
The Cincinnati Enquirer
Mercantile Stores Co. Inc. was 24 years old when Arkansas-born William Dillard opened his first store, in the southwest Arkansas town of Nashville.
Few would have considered them rivals then, in 1938. Mercantile had already been in business for nearly a quarter century and cut its teeth in the retail epicenter of New York, where sophisticated, savvy merchants convened.
Mr. Dillard, who parlayed an $8,000 loan from his father into a $6.6 billion company, prudently built stores in the suburbs and Southwest, as he watched the population shift.
As the two converge, a glimpse through Dillard's scrapbook may provide images of Mercantile's future - and what the merger means to Cincinnati.
Mr. Dillard's expansion efforts began 10 years after opening his store, which he sold to finance a partnership in Wooten's Department Store in Texarkana, Ark. Soon after, he bought out his partner and renamed the company Dillard's.
In the 1950s and 1960s, Mr. Dillard developed a strategy of buying well-established stores in the suburbs of small cities. By the time it went public in 1969, Dillard's operated 15 stores in three states, and posted sales of $65.2 million.
Though not the leviathan Federated Department Stores has become, Dillard's is known for unrelenting expansion, mainly in the suburbs. Since 1969, Dillard's has made more than 130 acquisitions, often of strings of stores sold by other retailers. It penetrated some northern markets, taking advantage of plum real estate opportunities.
In 1994 it entered an agreement with Wal-Mart and Mexican retailer Cifra, to open several stores there. Dillard's holds a 50 percent stake in that venture.
Analysts had long expected Alcoa, Tenn.-based Proffitt's Inc. to make a move on Mercantile. But the Dillard's match, they agree, makes even better sense.
''Mercantile has excellent locations, and Mr. Dillard only buys companies that have good locations,'' said Kurt Barnard, publisher of Barnard's Retail Trend Report.
Mr. Dillard, now 83, just Saturday stepped down as CEO of the Little Rock-based company, though he remains chairman. His son, William II succeeded him as CEO.
No one expects the retailer's operating philosophy to change. Unlike other department store companies that frequently retain the local names of their acquisitions, Dillard's operates all of its stores under the Dillard's nameplate.
As such, they all carry the thumbprint of the Dillard's stores, targeting middle- to upper-income shoppers with national designer names. Some of the nearest Dillard's stores are in Canton, Ohio, and Louisville.
Several of its stores operate under the novel ''Dillard Double-header'' concept, where two anchors hold camp in key shopping centers.
Essentially, the retailer splits one store and operates it from two places in the mall. One store carries women's, cosmetics, accessories and home furnishings, and the other, men's, junior's, young men's and children's.
But even with split stores, Dillard's presence is nearly three times that of Mercantile, which has 102 stores in 17 states. Dillard's operates 272 stores in 27 states.
Retail analysts characterize William Dillard as conservative, which likely suits Mercantile's largest shareholder, the Milliken family and associates.
And, more than one analyst said, they think William Dillard and patriarch Roger Milliken are friends.
''Dillard's makes sense, because it is two conservative families,'' said analyst Bernard Sosnick, with Genesis Merchant Group Securities. ''Strong balance sheet for Dillard's, two conservative families and a pretty good fit for the stores.
''That smells a lot better than Proffitt's.''
