MERCANTILE'S HISTORY
Buying up small chains was key

Tuesday, May 19, 1998

BY LISA BIANK FASIG
The Cincinnati Enquirer

Mercantile Stores Co. Inc. emerged the same year the first shots of World War I were fired. But it was a corporate disaster that led to its sudden formation.

Dillard's buys Mercantile

5th & Race development put on hold

Analysts say neither chain has been 'strong operator'

Employees, city officials worried

West-siders just hope new owner will keep it open

Negotiating position of Dillard's strengthened

Dillard's history

Merchantile history

Its predecessor, H.B. Claflin Co. of New York, had crumbled into bankruptcy after gobbling up big retail names such as Lord & Taylor and Hahne's. In the aftermath, it emerged as two separate companies. Associated Dry Goods got Lord & Taylor and others. Mercantile settled for the smaller and lesser-known.

It was 1914.

Just as today, mergers and acquisitions were part of the game in building department store dynasties, and Mercantile was a player. In 1916, it acquired the George W. McAlpin & Co., planting its foot in Cincinnati. Seventy-five years later, it would move its corporate offices permanently from New York City to this market, settling in the northern suburb of Fairfield.

In the interim - and shortly after the acquisition of McAlpin's - events occurred that would forever shape the retailer. After World War I, a family of textile magnates in South Carolina bought a substantial stake in Mercantile. That family, the Millikens, still owns about 40 percent of the company and, Bloomberg News reported, will support the transaction - meaning Dillard's rivals would have a hard time dislodging its bid for one of the last major independent chains, analysts said.

The Millikens operate Milliken & Co., a Spartanburg, S.C.- based textile giant that traces its roots to 1865.

Seth Milliken co-founded the company with William Deering, and for a time, it was called the Deering Milliken Co. It became Milliken & Co. in 1976.

Patriarch Roger Milliken and two other members of the family are Mercantile directors. Mercantile for decades continued to grow by cherry-picking small chains that strengthened its position in the Southeast, Midwest and, to a lesser degree, Northwest. In 1952, it owned 49 stores. By 1969, it operated 18 divisions and reported annual sales of $318 million.

From 1955 through the 1980s, Mercantile seemed content consolidating its divisions from corporate offices in New York. It acquired deLendrecies in Fargo, N.D., in 1955 and then held off on buyouts until 1992, when it acquired Maison Blanche stores.

It had developed a reputation as a small but money-making retailer that ranked No. 1 or No. 2 in medium-sized cities. Through the 1980s, sales doubled and earnings tripled.

In 1991, Hoover's Handbook of public companies described it as ''one of the nation's most consistently profitable and least well-known major retailers.''

But an evolution came in the 1990s. First came the move to Fairfield, in 1991. A year later came the Maison Blanche acquisition. This expanded it into two new markets: New Orleans and Florida.

In that same year, Chief Financial Officer David L. Nichols rose to the position of CEO, breaking a tradition of placing merchants in the pilot's seat. Some retail analysts expected that with his financial background, he would force more aggressive management of the company's balance sheet.

Since then, it has posted consistently improved sales and net income, despite a slight setback in 1996 that has been offset by marked improvements in 1997.



Local Headlines For Tuesday, May 19, 1998

Dillard's buys Mercantile
5th & Race development put on hold
Analysts say neither chain has been 'strong operator'
Employees, city officials worried
West-siders just hope new owner will keep it open
Negotiating position of Dillard's strengthened
Dillard's history
Merchantile history
Crash kills brother, friend, 15
Officer Partin's body recovered
Killer may get death penalty
Judge lets Flynt case be assigned by random
20.4M travelers make airport 41st busiest in world
Baker jury selection under way
Drug combo shows promise
Hispanic, Vietnamese Catholics to fill 2 churches
Lawmakers rush to plug tax loophole
Mom, grandmother indicted in death of teen
Nationwide makes $1.6B hostile bid
Possible added charges delay chase arraignment
Property tax might be refunded
Some dislike school pick's experience
Tests identify torso in river