Venture Stores Inc.

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Venture Stores Inc.

2001 E. Terra Lane
O’Fallon, Missouri 63366–0110
U.S.A.
(314) 281–5500
Fax: (314) 281–5152

Public Company
Incorporated: 1970
Employees: 18,000
Sales: $2 billion
Stock Exchanges: New York
SICs: 5311 Department Stores

Venture Stores Inc. is a leading regional discount store chain in the midwestern and southwestern United States. Venture was operating 114 stores in nine states in 1995, concentrating in the Texas, Illinois, and Missouri, areas. Despite fiercely competitive markets, Venture has grown rapidly since its parent company spun it off in 1990.

Venture Stores was started in 1970 by The May Department Stores Company. May was a leading upscale department store operator based in St. Louis, Missouri. It was known at the time for its popular Famous Barr department stores. The upscale department store chain, as well as other department store companies that May operated, including Kaufman’s and Woodward & Lothrop, continued to be May’s primary focus during the 1970s and 1980s. However, by 1970 May felt pressure from the increasingly popular discount retailers. Although many of the most popular discount chains had originated in the Northeast and West, they had begun expanding into the Midwest by the late 1960s and were threatening to erode the retail market share of May and other traditional retailers.

In an effort to profit from the discount store boom and to diversify its holdings, May decided to start its own discount retail division, and created Venture. It patterned its Venture division after other discount retail houses such as Korvette, Kmart, and Wal–Mart. May’s strategy was relatively straight forward. Venture would purchase inventory in bulk at reduced prices. It would sell the goods in a store environment that, compared to department stores, was austere and low–budget. By emphasizing self–service, volume sales, and a small operating budget, the store would be able to appeal to consumers by offering low prices.

The first Venture store opened in St. Louis in 1970. During the 1970s, Venture opened several stores in its chosen core St. Louis and Chicago markets, and eventually branched out into other major Midwest metropolitan areas. Venture soon dominated some metropolitan areas. Venture’s quick start–up and success hinged largely on May’s support. May was known as a savvy, aggressive, profitable retailer. Its large capital base allowed it to finance the construction and stocking of large stores, and then aggressively market them to regional shoppers. In Chicago, May acquired some existing stores and converted them into Venture stores. In addition, Venture benefitted from May’s proven expertise and infrastructure related to important retail elements like purchasing, distribution, and promotion.

May expanded the Venture division relatively slowly during the early and mid–1970s and remained focused on its core upscale department store operations. Importantly, in 1978 May selected Julian Seeherman to serve as Venture’s vice chairman. The 49–year–old Seeherman would eventually be credited with building the Venture chain to more than 100 stores by the early 1990s. Seeherman had only been with May since 1977. A retail industry veteran, he had been hired to serve as president and chief executive of Consumers Distributing, May’s catalog showroom operation. Prior to joining May, he had spent more than 25 years with Abraham and Strauss, rising through the ranks of sales clerk and department manager, and finally executive vice–president.

Seeherman, a native of Pennsylvania, was known as a hard worker and shrewd merchant. As a boy he had pumped gas and checked oil at the service station that his father managed. He later worked as a busboy at Summer resorts in the Catskill Mountains to pay his way through college. After graduating from the Syracuse University School of Business Administration, he entered the retailing industry as an executive trainee. “Nothing was given to him on a silver platter,” said Seeherman’s cousin, Steve Seeherman, in the St. Louis Business Journal ” His father was a hard worker and believed everyone else should be a hard worker.”

Also taking credit for Venture’s rise during the 1980s and 1990s was the man that would eventually serve as president of Venture, Philip G. Otto. Otto joined May in 1969, one year before the start–up of the Venture division. He served at various finance–related posts during the early 1970s before joining Venture as senior vice president of finance and operations in 1976. He jockeyed within Venture’s upper–level management before becoming chairman in 1986 and president in 1990. He succeeded Seeherman as president when Seeherman became CEO in 1990. Otto was known as a detailed businessman with retail expertise in finance and operations. In contrast, Seeherman excelled at the merchandising end of the business. So Seeherman and Otto complemented each other at Venture.

Although Venture enjoyed a relative dearth of discount competition during the early and mid–1970s, the retail discount industry became increasingly competitive during the late 1970s. Industry consolidation was one result. Retailers scrambled to increase economies of scale by buying up smaller competitors, and a few discounters like Kmart and Wal–Mart emerged as national discount powerhouses. That trend was intensified during the early 1980s by a slowdown in consumer spending during the U.S. economic recession of the period. The smaller regional discount chains like Venture and Korvette began facing fierce competition in some metropolitan areas.

Though competition forced the discount store pioneer, Korvette, into failure, Venture thrived. Venture became one of the lowest cost retailers in the nation and was recognized for its ability to deter rivals in its dominant Chicago market. Competition did force Venture to accept smaller profit margins. In St. Louis and Chicago, Venture mainly competed with Kmart and Target.

Venture vied for customers by expanding its number of stores and its offerings. After Seeherman had been named president of the Venture chain in 1982, Venture’s growth excelled. By 1985, Venture consisted of more than 50 stores, most of which were in Chicago and St. Louis. During the next five years, Venture added approximately six stores per year. Though many of Venture’s early stores were located in urban centers, Venture began emphasizing the construction of discount superstores in suburbs during the mid–1980s. At the same time, Venture broadened its offerings to include more clothing and other soft goods.

May bought another discount chain in 1985 and drew on the talents of two of Venture’s top executives to run it. Caldor, the discount chain May acquired when it bought Associated Dry Goods (ADG), consisted of more than 100 stores throughout the Northeast, but lacked Venture’s financial strength. May replaced Caldor’s leaders with Don R. Clarke, who became chief executive, and Marc Balmuth, who was named president. May significantly improved Caldor’s performance during the late 1980s.

Venture did not suffer without Clarke or Balmuth, achieving steady gains. The chain consisted of nearly 80 stores by 1990, and had expanded into new markets. Venture opened its first Kentucky outlet in 1985 and by 1990 was operating in eight states: Missouri, Illinois, Kentucky, Iowa, Oklahoma, Kansas, Arkansas, and Indiana. Though operating results continued to improve into the late 1980s, the pace of the improvements had slowed. Sales rose from $1.2 billion in 1988, to $1.3 billion in 1989, and then to $1.4 billion in 1990.

To the surprise of many observers, May decided to sell all its discount operations in 1989. May executives had become disenchanted with the discount divisions. Besides the nagging recession, they were also discouraged by the increasingly combative nature of the discount industry. May jettisoned Caldor in 1989 and then spun–off Venture in 1990. Seeherman was named CEO of the independent Venture chain and Otto became president.

Despite Venture’s proven management team, some analysts doubted the company’s ability to thrive away from its parent. Part of the doubt stemmed from the fact that May had increased the company’s debt prior to spinning it off. Nevertheless, others were optimistic. In fact, some observers felt that Venture had languished under May’s umbrella, unable to take advantage of growth opportunities that it could have pursued had its parent not been focused on its department stores. Indeed, the results of Seeherman’s efforts during the early 1990s supported that appraisal. Under Seeherman’s direction, Venture added five more stores onto its chain during 1991 and added another nine in 1992. In 1993, moreover, Seeherman aggressively entered Texas markets. Venture opened a total of 12 new stores, 11 of which were in Texas. That boosted Venture’s total number of outlets to 104 by the end of the year. In 1992, Discount Store News awarded Venture the “Discounter of the Year Award.”

In addition to assuming a more aggressive growth strategy, Seeherman streamlined the company. He outlined four goals Venture would need to achieve to remain competitive: 1) to improve customer service; 2) to drive costs down with new technology and upgrade warehouse and distribution operations; 3) to increase sales–per–square–foot; and 4) to continue to project an image of social responsibility. “No matter how good we are today, we must get better,” Seeherman declared in Discount Store News. “It won’t get any easier.” Seeherman’s and Otto’s efforts paid off during the early 1990s as Venture flourished. Sales rose to $1.5 billion in 1991 and to $1.8 billion in 1992. Likewise, net earnings increased to $41.5 million in 1991 and to $47.5 million the next year.

Unfortunately, competition threatened Venture’s success in 1993. Wal–Mart, Kmart, and Target had all entered Venture’s largest market, Chicago. Although consumer surveys indicated that Venture was still the preferred discount store for most buyers in that city, relative newcomers Wal–Mart and Target were gradually eroding Venture’s dominance. Kmart was already operating more than 60 stores in the region going into 1994, compared to Venture’s 39.

As competition proliferated, Venture’s sales fell short of projections in 1993. It generated revenues of $1.9 billion during the year, about $23 million short of its goals. Net earnings slipped to $41 million. Furthermore, the company reported dismal profits early in 1994, suggesting a downward trend in the company’s performance. “If you look at a lot of the retailers’s margins, it was a blood bath last year in terms of competitive pricing,” Seeherman said in the St. Louis Post Dispatch. While markets soured and profits fell, Otto announced his resignation late in 1994, effective in May 1995. Otto’s resignation came just as the 62–year–old Seeherman was looking for a successor to pilot the Venture chain. Otto had been the logical replacement.

During this time, Venture entered its ninth state, opening ten stores and Dallas and Houston in July 1993. By 1995, the company was operating 20 stores in the new Texas market. Despite short term disappointments, Venture remained a dominant player in its major markets and continued to pursue an ambitious growth strategy going into the mid–1990s. The discounter had earmarked about $450 million for new store construction and about $50 million to renovate existing locations. It opened nine new outlets in 1994 and planned to open an average of ten new stores annually throughout the mid–1990s, most of which would be located in Texas. That would bring the size of the Venture chain to about 150.