Strength in Variety

S.S. Kresge is a man as well as a variety store, and, at 97, he was recently called out of retirement to address the annual meeting of the chain that he forged. While stockholders applauded, old S.S. (for Sebastian Spering) got up and exhorted them to make Kresge "an outstanding five-and-ten-cent syndicate." That did not jibe with President Harry B. Cunningham's idea of his job, and he rose to his feet and said so. Smilingly, he reminded everyone that the nation's third largest variety chain (after F.W. Woolworth and W.T. Grant) has expanded far beyond its old dime-store stage and is, in fact, quite a different creature. This small semantic difference highlights a new philosophy that has set all the variety chains off on their biggest spree of change and expansion.

Pheasant & Paperbacks. Most of the chains have begun to emulate the discount, drug and department stores that in recent years have lured away some of their traditional lower-priced business. This week Kresge will open seven more of its big K-Mart discount houses, bringing the total to 88 out of a chain of 870 stores. Last week Grant (1,097 stores) started building another of its huge Grant City stores, which are so much like department stores that they sell color TV sets and high-fashioned clothes. J.J. Newberry (548 stores) has opened 24 department stores under the name "Britts," and S.H. Kress is busy with plans to redesign the interiors of many of its 270 variety stores to make them look less jumbled. Declaring its intention of becoming the world's biggest discounter, giant Woolworth (4,192 stores in North America and Europe) has opened 16 "Woolco" discount stores and expects to add 11 more within a year.

The chains still stock plenty of merchandise that is tasteless or downright tawdry, but they are also selling more and more higher-quality, higher-profit items. Kresge's K-Marts now offer some 35,000 items, including such new additions as hi-fi sets and frozen string beans. Woolworth's stocks diamond rings at $99.95, electric organs at $79.95 and canned Scottish pheasant at $6.98, has become the nation's largest retailer of records (40 million last year) and paperback books (15 million). Already the world's largest restaurant chain (1,706 luncheonettes), it is also planning to serve liquor in some of its "Harvest House" restaurants outside the stores. Grant's has auto service stations and prescription pharmacies, and both Grant and Woolworth now offer 24-month credit plans.

Paint & Profits. To keep up with change, the chains are rapidly adopting self-service (Woolworth now has it in 80% of its stores) and moving toward larger stores. Grant's new centers sprawl over 31 acres of floor space. Woolworth is placing most of its new stores in downtown areas instead of suburbs because President Robert C. Kirkwood senses "a trend of rejuvenation in the center city." In declining fringe neighborhoods, Kresge has converted its old and unprofitable stores into small-inventory cut-rate stores that sell only limited lines--the fastest selling shades of paint, the most-in-demand sized bra (34).

Though the costs of expansion and modernization run high, the chains are profiting from their new look. Woolworth, which announced record nine-month sales and earnings a fortnight ago, expects to increase its $1.2 billion sales by 15% this year; Grant's sales are running 10% ahead of last year's $699 million. After a money-losing 1963, the McCrory chain (583 variety stores) and J.J. Newberry have pulled back into the black. Kresge's sales ($504 million last year) are growing at a rate of 25% so far this year, and the company hopes to catch up soon with second-place Grant. Nothing would please S.S. Kresge more than to see that happen to his five and tens, by whatever newfangled name anyone chooses to call them.

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