Burlington Coat Factory Warehouse Corporation - Company Profile, Information, Business Description, History, Background Information on Burlington Coat Factory Warehouse Corporation

1830 Route 130 North
Burlington, New Jersey 08016

History of Burlington Coat Factory Warehouse Corporation

Touting itself as the largest outerwear retailer in the United States, Burlington Coat Factory Warehouse Corporation entered the early 1990s as one of the most successful retailers in the country. Diversifying beyond its original mainstay line of winter coats, Burlington Coat recorded exponential growth during the late 1980s by offering a complete line of men's, women's, and children's apparel, as well as children's furniture and linens, all at discount prices. In 1994, the company operated 185 stores scattered throughout 39 states, generated over $1 billion in sales, and stood poised for further expansion.

Belying its enormous size, Burlington Coat was essentially a family owned and operated business in the mid-1990s, as it was more than twenty years earlier, when Monroe G. Milstein, the patriarch of the Milstein family, opened the first Burlington Coat store in 1972. Over the ensuing twenty years, the family's grip on the operation of Burlington Coat was maintained by successive generations of Milsteins, led by Monroe Milstein and his wife, Henrietta.

Monroe's father, Abe, first linked the Milstein name to retailing when he opened a wholesale outerwear business in 1924. Nearly fifty years later, his son was drawn to the same type of business, selling outerwear at discount prices, but in a much different era, an era that would witness the rise in popularity of a particular breed of retailers and launch the Milstein name toward prominence in the U.S. retailing industry. Monroe Milstein acquired the first Burlington Coat facility in 1972, a coat factory located in Burlington, New Jersey, with an attached retail outlet. Initially, Burlington Coat specialized in selling winter overcoats, a product line whose sales were heavily dependent on the weather, peaking in the winter and dropping off during the summer months as temperatures rose. Though first year sales reached $1.5 million, Monroe Milstein was wary of the company's reliance on the vagaries of the thermometer, and quickly realized that substantial growth could not be predicted on unpredictable climatic variations.

Milstein diversified into other apparel niches, thus laying the foundation for Burlington Coat's further growth. In its first few years, the company had assumed characteristics that would dictate its future success. The company's first facilities, the coat factory and the adjoining retail outlet, were purchased as existing properties, not constructed specifically for Burlington Coat, a practice the company would employ throughout its history, leasing existing retail spaces, rather than constructing its own. This strategic flexibility enabled Burlington Coat to expand rapidly when economic conditions were favorable and quickly halt expansion when conditions soured, an enviable ability in a frequently capricious retail market. Another precedent set in the first few years was the decision to display the company's merchandise in sparsely decorated surroundings, giving Burlington Coat outlets a bare, 'warehouse feel,' while enabling prices to be discounted 30 to 40 percent. The diversification of the company's product line also would prove to be a linchpin to its future success, lessening Burlington Coat's dependence on a particular market niche within the retail clothing industry and expanding the company's inventory outside apparel into furniture and linens.

These hallmarks of Burlington Coat's existence--leased, sparsely decorated stores offering a wide assortment of merchandise--were established policies by 1975, a benchmark year for discount retailers. Prior to 1975, manufacturers were allowed to fix their prices in collusion with the more entrenched, conventional retailers, such as department stores, that sold their merchandise at standard prices. Essentially left on the sidelines, discounters frequently could not stock the same products as their higher-priced competitors, and the merchandise they were able to obtain from manufacturers could not be offered to the public at prices low enough to attract their business. Under such an arrangement, manufacturers and the higher-priced retailers prospered while discount retailers were forced to traffic in inferior quality products. When federal anti-trust legislation in 1975 made the agreements between manufacturers and retailers illegal, the door was opened to discount retailers, spurring their ascent to the top of the retail industry. For Burlington Coat, federal intervention arrived just as the company was gaining momentum and provided the defining difference between the two eras in which the father Abe and the son Monroe had hoped to succeed in the retail industry. For the son, it appeared the opportunity for success was now more readily attainable.

Success came, but at a moderate pace, at least in comparison to the rate of growth the company would realize later. By 1983 annual sales had climbed to nearly $300 million, and the company was becoming a giant in the retail industry. It went public that year, with the Milstein family purchasing a majority of Burlington Coat's stock and the company's name changing from Burlington Coat Factory Warehouse to Burlington Coat Factory Warehouse Corporation.

Two Supreme Court rulings in the early 1980s took much of the strength away from the 1975 decision that had essentially put an end to price fixing between manufacturers and traditional retailers. The new decision put the onus of proving vertical price fixing on the accuser, which invariably was the discounter. This greatly diminished the ability of discount retailers to mount a serious threat against the more established partnership between manufacturers and department stores; once a manufacturer terminated a contract with a discounter, the discounter was left with little recourse except to engage in lengthy and costly litigation. Perhaps more disturbing to discount retailers, such as Burlington Coat, was a shift in fashion trends toward high-priced merchandise, a potentially deleterious development that stifled growth throughout much of the decade. During the early 1980s, when consumers developed an affinity for high-priced, designer labels, Burlington Coat recorded modest sales growth, as the once bright prospects for discount retailers noticeably dimmed.

While sales growth was slow, it was better than average during these lean years for discounters nationwide. Sales barely eclipsed $300 million in 1984, then inched upward, climbing to $480 million by 1987. This lull in business, however, was only temporary, for in the next five years Burlington Coat's sales volume would more than double, as the company evolved into a retail empire. Several of the reasons for this exponential growth were attributable to strategic decisions made by Burlington Coat's management, but others were attributable to changing conditions within the retail industry that brought Burlington Coat and other discount retailers to the fore.

Efforts toward diversification were intensified, as the number of linen stores within Burlington Coat stores rapidly increased, growing from 55 in 1989 to over 140 by 1991. Men's apparel, particularly men's suits, became an important contributor to company sales, and stores began to offer merchandise entirely beyond the scope of many apparel retailers, including such items as children's furniture. Perhaps the most important contributor to Burlington Coat's dramatic growth was a recession in the late 1980s and early 1990s that arrested consumer demand for expensive, designer apparel. As the economy suffered and many consumers were left with significantly less discretionary income, discount retailers flourished. Burlington Coat, still continuing to lease its retail space, moved quickly to take advantage of the situation, quickly increasing the number of its stores.

As Burlington Coat's sales figures spiraled upwards, the company made two key moves to increase the efficiency of its operation. Burlington Coat improved inventory controls and took advantage of economies of scale by constructing a 438,000 square foot national distribution center in 1990. Located a mile and a half from the company's original coat factory and store in Burlington, the distribution center was supported by a new computer system Burlington Coat had instituted in 1988 in anticipation of the new distribution center. The computer system enabled Burlington Coat to process as many as 125,000 pieces of merchandise each day at its distribution center and helped position the company to continue to grow during a period that saw many other businesses fail.

Annual sales flirted with the $1 billion mark in 1992, then reached $1.2 billion the following year. There were 185 Burlington Coat stores in 1993, ranging in size from 16,000 square feet to 133,000 square feet, and plans were in place to continue expanding throughout the mid-1990s. Typical Burlington Coat stores offered 10,000 to 20,000 garments from as many as 300 different manufacturers at a 35 percent to 40 percent discount. In 1993, Burlington Coat signed an agreement with Mexican retailer Plaza Coloso S.A. de C.V., an operator of supermarkets and department stores, to open a Burlington Coat store in Juarez, Mexico, the company's first store outside the United States. The following year, after purchasing a ten-store discount chain called Mid-Island, Burlington opened an experimental freestanding men's store that offered men's outerwear, sportswear, and tailored clothing, a service not offered by many discount retailers.

As the company entered the mid-1990s expecting to open 25 to 30 stores between 1994 and 1996, an emphasis was placed on its men's apparel segment, particularly men's suits. Men's apparel increased its importance to the company during the early 1990s, largely because fewer and fewer retailers were offering men's formal attire. By the mid-1990s, men's apparel accounted for 35 percent of Burlington Coat's total sales, a substantial portion that nearly matched the sales garnered from outerwear. With this emphasis on men's apparel and another segment, children's furniture, which, it was hoped, would cultivate Burlington Coat customers at a younger age, the company entered the mid-1990s remarkably well-positioned for further growth.

Principal Subsidiaries: Burlington Coat Factory Warehouse of Reading, Inc.; Burlington Coat Factory Warehouse, Inc.; Monroe G. Milstein, Inc.; LC Acquisition Corp.; C.L.B., Inc.; C.F.I.C. Corp.; C.F.B., Inc.; Burlington Coat Factory International, Inc.

Additional Details

Further Reference

Arlen, Jeffrey, 'Burlington Coat Factory: Original Off-Pricer,' Discount Store News, March 16, 1992, p. A10.'Burlington Coat in Pact to Open Store in Mexico,' Women's Wear Daily, October 11, 1993, p. 2.Butler, Stacey, 'Retail Industry Divided Over Bill to Protect Discounters,' Baltimore Business Journal, May 27, 1991, p. 6.'Coat Factory Takes Honors,' Chain Store Age Executive, February 1994, p. 44.Palmer, Jay, 'Pipe-Rack Recovery,' Barron's, March 23, 1992, p. 20.Peres, Daniel, 'Burlington Coat to Open Experimental Men's Store,' Daily News-Record, March 3, 1994, p. 2.Salfino, Catherine, 'Burlington Coat Pins Star on Men's Suit Business,' Daily News-Record, March 26, 1993, p. 8.

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