Thick on the Best, To Hell with the Rest

For San Francisco baseball fans, the 81-acre field near Nob Hill is best known as the longtime home of the Pacific Coast League's Seals, whose stadium was torn down after the team moved away in 1958. But last week workmen were preparing the old grounds for a new and different pitch. And by next spring, bargain hunters instead of ball fans should be swarming into a $9,000,000 shopping complex belonging to one of the nation's largest yet least-known retailers--Manhattan-based Interstate Department Stores.

Offering everything from garden tools to groceries to girdles at discount prices, the new complex will be the latest of 30 White Front stores that Interstate has strung through California. It will also be the showplace of a fast-growing nationwide retailing chain that now numbers 114 stores, including Topps stores through the East and Midwest and toy-selling Children's Supermart stores in the Washington, D.C., suburbs, as well as 31 conventional department stores in 12 states.

Interstate is one of the few retailers to have mastered the uncertain art of discount selling at a sizable profit. Its sales have soared from $66 million in 1958 to an estimated $555 million last year. With about 90% of its annual business coming from its discount operations, the company has become the nation's third biggest discounter, after S. S. Kresge and E. J. Korvette. And with estimated 1967 profits of $11 million, Interstate earned an impressive 16.9% on capital, compared with 11.3% for Kresge and 8.3% for Korvette.

Route Toward the Top. The route toward the top was plotted by Interstate's $151,250-a-year president, Sol W. Cantor, now 56. A 1932 law-school graduate (St. John's University), Cantor forsook the bar for the bargain basement as soon as he left the class room; he took a $12-a-week buyer's job at Interstate instead of a position in a law firm that would have paid him $10. At the time, Interstate, which had been formed by a 1928 merger of three Midwest department-store chains, was having a rough time trying to fight its way out of the Depression. And while the company struggled to stay solvent, Cantor rose steadily through a series of management upheavals. He became president in 1952, well aware that he had "a very sick company" on his hands. He prescribed heavy cost cutting and an all-out push into the then new wave in retailing: discounting.

Determined to get rid of marginal operations, Cantor sold or shut down 15 of Interstate's 46 department stores, put the proceeds into acquiring White Front and other discount chains, and expanded them at a rapid pace. This year alone, Interstate will open 15 to 20 new stores, including the San Francisco White Front.

Brisk Turnover. Among many cost-cutting techniques, Cantor has installed a centralized-buying operation, in which cash registers at key discount stores keep itemized sales records on tape for processing by a Manhattan computer. When stocks run low on a particular item, the computer automatically reorders it from the manufacturer. Store personnel can thus be freed from time-consuming inventory taking, and shelves are kept supplied for a brisk, six-times-yearly stock turnover, compared with three times for department stores.

Hopeful of hitting the $ 1 billion mark in annual sales by 1972, Interstate is still counting on the original discount-store formula. Other chains, such as Korvette, have been pushing profit margins closer to the average 40% of conventional department stores, adding dressed-up store interiors and such fancy goods as fur coats and art. Cantor aims to keep his profit margins at a minimum--about 28%--and stick to the pipe-rack staples. "Our motto," he says, "has always been Thick on the best, to hell with the rest.' "

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