1 Peebles Street
With 65 stores in ten Mid-Atlantic states ranging from South Carolina to New York, Peebles Inc. is one of the oldest and most successful department store chains in the United States. The company specializes in brand-name and private-label family clothing and home furnishings, but aims to offer its customers a broad array of merchandise priced for average shoppers--the "Ford and Chevrolet" customers, in the words of William S. Peebles, Jr., who served as the firm's vice-president from 1931 to 1973. Indeed, Peebles has carved a distinct market niche that caters to middle-income Americans in small- to mid-sized markets located in underserved rural areas and on the distant outskirts of growing metropolitan areas.
Throughout most of its history, Peebles has been a closely associated group of individually managed stores owned and operated by Peebles family members and their friends. "Most of the business," wrote Peebles historian Howard E. Covington, Jr., "was tied up in W. S. Peebles & Co., but all the stores were part of a corporate network [that ultimately consisted of] nearly twenty privately held corporations." By the late 1980s, however, that ceased to be the case. Two leveraged buyouts by Wall Street investors that decade shook up the company's management structure and culminated in a corporate restructuring of the firm to Peebles Inc. in 1992. The company is still privately held, but increasingly has taken on the characteristics of a public concern, disclosing, for example, financial information that had previously gone unreported.
Although disruptive and troubling, especially to a company with more than 100 years' history behind it, these management shake-ups proved remarkably successful, as they established a sound basis for rapid, long-term growth. The number of stores in operation increased by a net 30 percent from 1990 to 1995, while total sales during that same time period increased by more than 26 percent, from $138.7 million in 1990 to $176 million in 1995. By the mid-1990s Peebles ranked as one of the most profitable retailers in the country, even outperforming retail giant Wal-Mart in gross operating margin.
Local Beginnings, 1890s
Peebles Inc. dates its origins to the establishment of the Peebles and Green clothing store in rural Lawrenceville, Virginia, in 1891. Named after its two founders, William S. Peebles and Arthur S. Green, the store was renamed the Peebles and Purdy Co. in 1907 when Green decided to leave the clothing business to become a food retailer. Peebles took on another business partner, Leonard Purdy, and together the two headed up what Covington described as "one of the major mercantile businesses in Lawrenceville, [then] a thriving county seat community with a population of 2,000."
As the town and surrounding Brunswick County grew, so did Peebles's ambition, and he invested $26,000 of his own money in a new retail business, W. S. Peebles & Company. His cousin, W. B. Mitchell, joined him with a $6,000 investment, signing on as vice-president of the firm. Peebles's four sons also were brought on board, as stockholders and, later, as company officers and executives.
The year was 1923. Four years later, Peebles open a second department store in South Hill, Virginia. In 1929 a third store, in Emporia, Virginia, was added. "By 1930," wrote Covington, "Peebles enterprises were among Lawrenceville's brightest success stories."
Like many companies, the firm suffered during the Great Depression, with retail sales in 1930 dropping to 40 percent of what they had been the year before. During this period William S. Peebles died. His eldest son, John Isler Peebles, became company president, only to pass away himself six months later.
The Next Generation of Leadership, 1930s
Peebles's other sons stepped into the breach, assuming leadership of the company with dedication and commitment. Wesley became president and treasurer, William vice-president, and Marion secretary. Under their leadership, Peebles soon recovered from its difficulties. In 1934 stockholders began to receive a dividend on their investment, and bonuses were given out to employees. In 1935 a fourth store was opened (in Clarksville, Virginia), and, two years later, two additional stores in southeast Virginia were opened, making Peebles the largest retail merchandiser in the Lawrenceville area.
During the next 40 years Peebles expanded steadily throughout the region, adding stores in North Carolina (1938), South Carolina (1950), Delaware (1960), and Maryland (1967). In 1943 it entered into a partnership with businessman E. B. Kimbrell and opened a Peebles-Kimbrell department store in Forest City, North Carolina, which was the first of three highly successful joint ventures between the two companies. Twenty years later there were 26 Peebles or Peebles-Kimbrell stores in four states.
Throughout this period, Peebles distinguished itself from rival competitors in a number of ways. First, it sought to sidestep competition by locating in small communities of between 10,000 and 30,000 households&mdash+aces typically not served by such larger department store chains as Sears, Macy's, Levitz, and Kmart. In this way, Peebles usually was able to establish itself as a community's dominant retail department store.
Second, individual store managers were given broad latitude to run their stores as they saw fit, with little or no interference from centralized management&mdash′ovided, that is, they were profitable, which most were. Merchandising, staffing, training, expansion, customer credit, salaries, and compensation were the responsibility of the individual store managers. This system allowed the stores the flexibility they needed to succeed in distinct and competitive markets.
In the aftermath of World War II, however, as the U.S. economy witnessed unprecedented growth and prosperity, the old ways of doing business no longer proved adequate, and American business became more centralized and hierarchical. Peebles began to make significant changes, sometimes in anticipation of its need to do so, and other times in response to sudden and painful realities.
For example, in 1952 Peebles began coordinating bulk purchases for the firm's growing number of stores. At the same time, Peebles began promoting itself and its products via direct mail marketing, which was then a novel business practice. In 1956, in Lawrenceville, Virginia, it opened its first "supermarket," also a novel move for the time. In 1958 the company took another dramatic step forward when it opened its first store in a major metropolitan area, in Manassas, Virginia, on the outskirts of suburban Washington, D.C.
The move marked a significant change with past company policy, which had been to open stores in the central business districts of rural America. Such a policy became increasingly difficult to maintain, however, as economic growth bypassed these areas and became concentrated instead in the suburbs surrounding major American cities.
Although the Manassas store quickly became profitable, Peebles did not take immediate steps to build on its success. As late as 1968, in fact, two-thirds of its business still took place in the company's traditional small-town department stores. Peebles was changing, but not fast enough, it seemed, to keep pace with the times. Indeed, many of its stores in older and more rural towns were losing money or barely breaking even. And newer stores in metropolitan Washington, D.C., were too few in number for the company to take full advantage of their profitability.
Leveraged Buyout, 1960s
Leadership of the company was split, moreover, between the older generation of Peebles, who sought to stay the course, and the younger generation of Peebles, who were pushing for more rapid change. Wesley Peebles, Jr., son of the president and company secretary, was the main catalyst pushing for change, and in December 1968 he finally won out, as Peebles began merger discussions with a New York investment banking firm. Peebles eventually reached an agreement with another firm, and Wesley and his cousins agreed to divide the company.
As a result, Peebles's books were opened up to outside analysis for the first time ever, and the firm was found to be worth close to $3.7 million. After a leveraged buyout was executed, Wesley, Jr., left the day-to-day operations of Peebles, and his cousin Bill (William Peebles, III) became defacto chief executive officer (the first in the history of the firm).
Despite its financial strength, Peebles was facing significant challenges. The rise of suburban shopping malls or strip centers and heightened competition from discount retailers like Kmart, Grant's, and Roses were rendering many of its traditional stores obsolete and unprofitable, while the average lead time on a new store was two years. Management turnover was a growing problem, and it was becoming increasingly difficult to find young managers to replace those who were departing.
Progress was slow but steady. In 1972 Peebles began using computers to record, track, monitor, and centralize its system of charge accounts, which previously had been done by individual store managers in hand-written entries. Not long thereafter Peebles moved to a centralized buying and distribution system, which also was made possible through computerization. Still, it was not until 1985 that the firm completed its transition to centralized buying, and not until 1988 that all in-house credit operations were done electronically.
In October 1972, Peebles opened a second 30,000-square-foot store, in Waldorf, Maryland, a southeastern suburb of Washington, D.C. A year later, William S. Peebles, III, formally replaced his uncle, Wesley S. Peebles, as president. In September 1978, Peebles held its first annual management meeting, and, one month later, the company completed its purchase of eight Southern Department Stores, an established department store chain in Virginia specializing in cosmetics, the purchase of which proved immensely profitable. The company now had 37 stores in four states.
Continued Growth and Modernization,1980s and 1990s
Thirty-one new locations were added in the 1980s as the process of modernization continued. Downtown stores in declining or stagnant rural areas were closed, but the conservative management style and close customer contact developed there was maintained in the chain's rapidly growing suburban stores.
In 1984 Peebles joined the prestigious New York-based Frederick Atkins buying office, a move which, according to one former merchandise manager, "put us into the major leagues of retailing." In 1984 Peebles also acquired The Collins Company, a regional department store group based in Charlotte, North Carolina, thereby giving the firm its first locations in America's increasingly popular shopping malls. In 1985 Peebles moved its corporate offices from Lawrenceville to South Hill, Virginia, and, in 1986, opened its first centralized distribution center.
Peebles considered going public in the mid-1980s, but was effectively precluded from doing so by virtue of the fact that, despite real progress at modernizing, it still was a network of interlocking companies rather than a single corporate entity with an exclusive balance sheet. Management worked through this problem and decided that it would be substantially more profitable for them to sell Peebles to the highest bidder than to go public. The firm put itself on the market in June 1986 and was bought out in October of that year by Investcorp, an investment group based in Bahrain, for $77.6 million.
In January 1988, Peebles celebrated $100 million in annual sales. That same year, Mike Moorman became the first non-family member to run the Peebles business. A lifelong company employee who began his career at Peebles as a manager trainee in 1964, Moorman remained CEO well into the next decade, despite further shakeups at the firm. In 1989, for instance, Peebles was the beneficiary of an immensely profitable leveraged buyout by an investment group headed by PaineWebber Inc., which paid $152 million for Peebles and its 48 stores in seven states. Also that year the National Retail Merchants Association named Bill Peebles its "Independent Retailer of the Year," in honor of his lifelong service to the industry.
In the 1990s, in an effort to stay ahead of the competition and avert the intense competitive pressures plaguing many other retailers, Peebles modernized and streamlined its operations still further. In 1992, the year it renamed itself Peebles Inc., the company cut the lead time that it needed to open a new store from one to two years to only six weeks. The number of Peebles stores thus grew dramatically in the 1990s, as did the number of states in which they were located. In 1996 alone, eight stores were slated to be built in two new states, Alabama and Ohio, further solidifying the company's strength in its core market.
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