Bradlees Discount Department Store Company

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Bradlees Discount Department Store Company

1 Bradlees Circle
Braintree, Massachusetts 02184
U.S.A.
(617) 380-8000

Public Company
Incorporated: 1961
Employees: 16,000
Sales: $1.83 billion
SICs: 311 Department Stores

The Bradlees Discount Department Store Company is a leading discount retailer in the Northeast. The company operates 136 department stores in nine states stretching from Maine to Virginia. Founded in Connecticut, Bradlees allied itself early on with a grocery store chain, and it remained a subsidiary of this company up until the early 1990s. After a leveraged buyout, the company went public independently, and subsequently embarked on a program of cost-cutting and new store openings.

Bradlees got its start in the late 1950s. The company was conceived by three businessmen in Connecticut, who envisioned a store that offered a wide variety of goods at discount prices. Because the three met to discuss their idea for the new store at the Bradley International Airport, outside of Hartford, they chose to call their store “Bradlees.”

The first Bradlees opened in New London, Connecticut, in 1958. Rather than having all of its merchandise owned by one vendor, it was comprised of a group of departments, each of which was run by a different licensee. In 1961, just three years after its founding, the fledgling enterprise was acquired by Stop & Shop, a New England grocery store chain.

With its purchase by Stop & Shop, Bradlees received a much-need infusion of capital. In the early 1960s, the company gradually moved from a licensee operation to direct ownership of its various departments, by letting its arrangements with its licensees expire. In the next years of the decade, Bradlees grew rapidly, as the discount department store industry came of age. By 1968, the company boasted 52 stores, which produced annual revenues of $139 million.

Throughout the 1970s, Bradlees continued to expand the number of stores it operated around the Northeast. The company also altered the nature and content of its merchandise, in an effort to position itself as a retailer of high-quality, low-cost goods. Bradlees increased the amount of clothing and accessories that it sold. In addition, in response to greater consumer interest in do-it-yourself home improvements, the company began to devote a larger quantity of display space to hardware and housewares.

Throughout this time, Bradlees also spent money to upgrade its facilities. Renovations focused on increasing the amount of space devoted to sales in each of its outlets, and to modernizing fixtures, such as racks and shelves. In 1978 the company also announced that it would open six to ten discount stores devoted exclusively to women’s sportswear in junior and misses’ sizes.

By the end of the 1970s, Bradlees’ overall sales had risen to $634 million. The company entered the following decade poised for greater growth in a highly competitive discount retailing environment, dominated by giants such as Wal-Mart and Kmart. Despite this competition, Bradlees’ sales rose steadily throughout the early 1980s. In 1981 the company recorded $720 million in revenues, and in the following year, this figure rose more than 20 percent to $871.2 million.

With this strong revenue growth, Bradlees sought to meet the challenge of its mammoth competitors by expanding its geographic scope. In December 1982, the company announced that it had purchased 13 Memco stores located in the greater Washington, D.C., area, from the Lucky Stores company. Six months later, Bradlees stated that it intended to open 20 new stores in 1983. In October, the company took a significant step toward meeting this goal, when it simultaneously inaugurated operations at 10 Bradlees outlets in the Washington area. At that time, the company also launched an advertising campaign that sought to blur the traditional distinction between discount stores and more upscale department stores. At the end of 1983, Bradlees reported operating profits of $80.5 million. This figure rose to $85.2 million over the following year, as sales increased by nearly 20 percent, to $1.4 billion. During 1984, Bradlees announced that it would continue to expand its number of stores, adding six to eight new outlets.

Bradlees continued its policy of expansion through acquisition in the mid-1980s. In March 1985, the company announced that it would move into another area of the Northeast, opening three new outlets in the Philadelphia area. Three months later, the company made public its acquisition of 18 stores in the Jefferson Ward discount chain, which Bradlees purchased from Montgomery Ward. These outlets, which made up Montgomery Ward’s northern division, were located in the Philadelphia area.

Despite this aggressive expansion, Bradlees lost market share throughout 1985. This posed a serious problem for its corporate parent, Stop & Shop, since this company had diversified into a number of different retail chains which had lost money in the mid-1980s, and Stop & Shop was looking to Bradlees, its stronger property, to compensate for red ink in other parts of its operation. In the middle of 1986, Stop & Shop removed Brad-lees’ president. By the end of that year, the company’s sales had risen again, to reach $1.9 billion, up from $1.6 billion a year before.

In 1987 Bradlees announced that it would open 11 new stores and remodel 13 old ones in the course of that year. This policy was in keeping with Stop & Shop’s overall reliance on its successful Bradlees subsidiary to contribute a larger portion of the company’s revenue.

In the late 1980s, Bradlees built on its presence in the Philadelphia area by moving into the New Jersey market. The company bought a chain of stores from the Two Guys company, which, combined with its Jefferson Ward operations, made it a significant retail player in the nation’s fourth-largest market. With this move, Bradlees’ stores spanned the East Coast from Maine to Virginia, without any major gaps in coverage.

To support its operations in the Philadelphia/New Jersey area, Bradlees purchased a 530,000-square-foot distribution center in Edison, New Jersey. This warehouse facility was designed to increase the efficiency with which the company supplied its stores in the overall region.

In the late 1980s, Bradlees’ corporate parent, the Stop & Shop company, became the target of a hostile takeover bid by the Dart Group Corporation. In January 1988, Stop & Shop began to take evasive maneuvers to avoid becoming a subsidiary of another, larger conglomerate. The result of these efforts was a leveraged buy-out, which took place in June 1988. After the company’s stockholders approved the deal, Stop & Shop’s outstanding stock was purchased for $44 a share, and the company became a privately held enterprise.

As a result of the financial turmoil of its parent company, Bradlees streamlined its operations, drawing back somewhat from its far-flung geographic reach. The company sold the leases to 37 of its stores located in its southern division, made up of outlets in North Carolina, Virginia, and Maryland, to the Hechinger’s chain. This move allowed Stop & Shop to pay off some of the $1.2 billion debt it acquired in the leveraged buyout, and to focus Bradlees’ attention more exclusively on markets in the Northeast.

In 1989 Bradlees brought in a new management team and set out to remake its operations for the 1990s. The company undertook a sweeping examination of its businesses, and made a number of changes. In April 1989, Bradlees unrolled a new advertising campaign in Massachusetts, Connecticut, and Pennsylvania. In this push, “Mrs. B,” the old Bradlees’ spokesperson, was replaced by a series of Bradlees shoppers who delivered monologues about what drew them to the store. These ads had been designed with the input of focus groups and surveys to allow the store to reach out to customers.

In addition, Bradlees instituted a program of certified values, which were indicated with black and gold signs throughout the store. In this program, the company offered low prices on certain items all the time, instead of relying on periodic sales to bring customers into the store.

Bradlees also began to modernize and automate many of its operations. The company began to test bar-code scanning at cash registers in one of its Massachusetts stores, which promised to allow for a greater degree of precision in tracking inventory and sales. In addition, Bradlees installed on-line credit verification, for faster processing of sales. The company also started implementing computerized scheduling, which it planned to have fully rolled out by the end of 1989. All told, Bradlees spent $34 million modernizing its retail systems.

While upgrading its machines, Bradlees also took steps to enhance the performance of its workers. The company instituted customer service training in all stores for all employees, in an effort to improve crucial interpersonal skills. In addition, Bradlees tried to involve local managers more thoroughly in decisions about merchandise choice, display, and store layout. To remove a layer of bureaucracy and centralize its operations, the company also closed its New York buying office in early 1989.

Bradlees opened only one new store during this year, in Meriden, Connecticut, but this outlet, inaugurated in June, represented a new prototype. It featured a redesigned children’s furniture department, and boutique-like selling areas, clearly marked with special signs.

In addition to this new store, Bradlees redesigned nine existing stores in 1989. Using wider aisles, brighter lighting, and more vivid styling, Bradlees sought to update its selling environment for the 1990s. The company put the emphasis in these new stores on clothing and other “soft” items for the home, while still incorporating harder, more functional items. As a result of this revamping, Bradlees reported sales of $1.8 billion over the course of 1990. This figure rose by 2.2 percent in the next year.

In the early 1990s, Stop & Shop’s managers decided to undo the leveraged buyout that had made the company a privately held concern, saddling it with cumbersome debts. In November 1991, the company decided to go public again, raising funds to pay off debts through an initial public offering of stock. Rather than present Stop & Shop to the market as one company, however, it was decided to separate out the grocer and Bradlees, which accounted for more than a third of the parent company’s sales, and present the two companies separately. In this way, Bradlees would be able to update and expand independently of its longtime corporate partner.

Accordingly, Bradlees put in motion the steps necessary to become a separate public company. This process culminated when Bradlees sold 11 million shares on the New York Stock Exchange, commencing on July 1, 1992.

After this move, Bradlees continued to experience strong sales in the Christmas season of 1992. This momentum was not maintained, however, in 1993, as consumers remained cautious in spending their money, and bad weather hit the Northeast. In addition, Bradlees faced stiff competition from other discount retailers.

In an effort to counter these factors, the company embarked on a program of cost cutting. In November 1993, the company reorganized its merchandising operations. The company also changed the way its planning and allocation division worked, and also made changes in the way its stores were managed. In January 1994, Bradlees cut its payroll, reducing its management staff by 280 employees.

Despite its smaller staff, Bradlees planned to expand its profits by opening new stores, primarily in the heavily congested corridor between Boston and Philadelphia, with an emphasis on New York City. In the fall of 1994, the company opened 10 new stores, including four that opened in October in New Jersey. These stores were located in sites that had formerly housed Pace Membership Club stores, so they had a large, open warehouse format. The company took this opportunity to experiment with a store format that was larger than its traditional outlet. ’The assortment is similar,” the company’s chairman told DM, “but the extra square footage allowed us to present the merchandise better and to give greater space allocation to those departments with high sales potential.” The company took advantage of the warehouse space by keeping layouts open and incorporating skylights into its design.

Bradlees also opened six new stores in the first week of November. Among those outlets was a New York flagship store on Union Square in Manhattan. Formerly the site of a Mays department store, this outlet featured six floors of selling space, making it the largest Bradlees outlet ever. To fill these floors, Bradlees arranged ladies’ accessories and apparel on the first floor, children’s clothing and toys in the basement, more clothing on the second and third floors, hardware on the fourth floor, and electronics on the fifth floor, along with an Italian restaurant that looked out over Union Square Park. A top floor of the building was used for offices and storage. To draw customers up to the higher floors of the store, Bradlees planned escalators between individual floors, and several banks of elevators. The elevators located at the front of the store were encased in glass, to make an appealing display, as well.

One of the major challenges of doing business in Manhattan, in addition to the high price of real estate, was the difficulty of resupplying the store with new merchandise, given the congestion of city streets. “In your wildest dreams, you can’t imagine the difficulties we face with distribution at this store,” Brad-lees’ chairman told DM. The company was forced to supplement its regular fleet of 45-foot trailers with smaller, 26-foot trailers in order to bring goods into Manhattan. As a result of these efforts, Bradlees hoped that its Manhattan store would contribute sales of $50 million a year.

Building on this high-profile New York presence, Bradlees planned to open other stores in the region in Brooklyn and Staten Island. In addition, the company planned to seek further growth in New Jersey, Pennsylvania, and Massachusetts. After its strong effort to reduce costs, followed by a wave of new store openings, Bradlees looked to a new chief executive officer to further rejuvenate the company, and steer it into the future. With three decades of experience in discount retailing in the northeast, the company appeared to be in solid shape as it moved into the late 1990s.