331 West Wisconsin Avenue
Company Perspectives:
Through the years, Younkers has defined, and will continue to offer, the style and quality that customers have come to expect and enjoy.
Younkers is a Midwestern department store chain with 47 stores scatte red throughout Illinois, Iowa, Michigan, Minnesota, Nebraska, South D akota, and Wisconsin. Younkers' stores are generally located in midsi zed to smaller cities where competition is more limited than in major metropolitan areas. Younkers' stores sell apparel and accessories fo r men, women, and children, as well as home furnishings and furniture . Younkers and its peers in Saks Incorporated's Northern Department S tore Group were put up for sale in 2005.
An Iowa Institution: 1856-1978
Younkers (originally Younker & Brothers) was founded in Keokuk, I owa, in 1856 by three young Polish-born brothers: Lipman, Samuel, and Marcus Younker. The general store was a base from which they strappe d packs of merchandise on their backs that they carried into the neig hboring countryside to farmers and others too busy or isolated to sho p in town. They founded Iowa's first synagogue and closed the store o n Saturdays, the Jewish Sabbath. Another brother, Herman, joined them in 1874 and opened a 1,320-square-foot dry goods store in Des Moines on their behalf with a $6,000 grubstake. "We have come here to l ive and mean to do what is right," the store declared in a newspaper advertisement taken out on its opening.
With the closing of the Keokuk store in 1879, Des Moines became headq uarters for Younker Brothers. In 1881 it became the first Des Moines store to hire female sales clerks, and in 1900 this store moved to it s location at Seventh and Walnut Streets and remained opened until 20 05. Younker Brothers was a place to meet as well as to shop. Women lu nched at the elegant Tea Room upstairs and teenagers took their dates there for dinner and dancing. Just about every organization in town met at the Tea Room. The store even had a knitting classroom. It inst alled Iowa's first escalator in 1939 and was the first department sto re in the United States to air condition its entire building.
Younker Brothers grew by acquiring Grand Department Store in 1912, Wi lkins Department Store in 1923, and J. Mandelbaum & Sons in 1928. Originally incorporated in 1904, it merged with Harris-Emery Co. in 1927, thereby becoming the largest department store chain in Iowa, an d reincorporated under Delaware law. Its net sales (excluding leased departments) rose from $8.4 million in 1938 to $26.4 million in fiscal 1948 (the year ended January 31, 1948). Net profit rose in this period from a low of $308,000 in 1939 to a high of nearly &# 36;2 million in fiscal 1947. At the end of 1947 it acquired a Sioux C ity, Iowa store from Davidson Brothers Co. and had, since 1941, opene d branch stores in Ames, Fort Dodge, Marshalltown, and Mason City. Yo unker Brothers went public in December 1948 to retire bank loans, off ering a minority of its common stock at $26 a share. Much of its stock remained in the hands of three Des Moines merchandising familie s: the Frankels, Mandelbaums, and Rosenfelds.
As the largest store in Iowa, the Younkers of this period carried the old adage that the customer is always right beyond the call of duty. A Business Week article cited the case of a lady who brought back her fur coat, complaining it did not fit, after allowing her wei ght to balloon over the winter. The store remodeled it without argume nt. Morey Sostrin, president and general manager, said, "We figure th at the advertising value of such cases in small towns in Iowa is wort h far more than the adjustment cost." Younkers was known for liberal credit policies (including 60,000 charge accounts) and a mail-order s ervice. It also was running three Des Moines restaurants.
During the 1950s Younker Brothers acquired another Sioux City store a nd opened branch stores in Iowa City, Oskaloosa, and Ottumwa, Iowa; O maha, Nebraska; and Austin, Minnesota. The Omaha store, opened in 195 5, was its first in a shopping center. Net sales, after reaching $ ;45.5 million in fiscal 1956, slumped to $37.1 million the next y ear and did not surpass the 1956 figure until 1962. Net income droppe d from $2.4 million in 1956 to $1.4 million in 1957 and did n ot top the 1956 figure until 1965. In 1961 the company acquired Kilpa trick's Department Store of Omaha.
Although the biggest downtown department store in Des Moines, the You nkers flagship retained a reputation for "small town friendliness." T his six-story, 400,000-square-foot, block-long building was responsib le for 42 percent of corporation sales in fiscal 1965. At the end of the decade, in addition to the main Des Moines and Sioux City stores, there were 16 Younkers branch stores in Iowa, more than half in majo r shopping centers. Net sales (including leased departments) reached a record $83.5 million in fiscal 1970, and net profit was a recor d $3.8 million. Apparel was accounting for nearly 80 percent of s ales, with home furnishings, furniture, and appliances next in import ance. Dividends had been paid each year since 1935. The long-term deb t was $10 million.
Equitable of Iowa Subsidiary: 1979-92
By 1978 Younkers had added branch stores in Des Moines and Davenport, Iowa; Moline, Illinois; and Sioux Falls, South Dakota, plus a main s tore in a Cedar Rapids shopping center and the Merle Hay Mall in Des Moines, which had a separate store for homes. This last store was des troyed by a fire that year in which ten employees were killed. Net sa les came to $135.5 million in fiscal 1978, and net profit amounte d to $5 million. In 1979 Equitable of Iowa purchased Younker Brot hers for $72.2 million and made the retailer a subsidiary named Y ounkers. Des Moines breathed a sigh of relief, since Equitable was co ntrolled by Iowa's first family, the Hubbells. "The loss of an indepe ndently-owned business always is sad," the Des Moines Tribune declared in an editorial. "But the acquisition of Younkers by another Des Moines-based firm avoids the drawbacks of absentee ownership and promises to be good for the community."
The Younkers chain of 29 stores (25 in Iowa) grew slowly during the n ext four years. Sales increased from $141.9 million in 1979 to &# 36;188.7 million in 1984. After net income slumped from $4.8 mill ion in 1983 to only $723,000 in 1984, William Friedman, Jr., a de scendant of the group of families that had controlled Younkers since the 1920s, was ousted as president and chief executive officer, alleg edly for alienating customers by turning Younkers into an upscale bou tique. The Ottumwa store was closed, and 200 jobs were eliminated.
Under W. Thomas Gould, who first assumed the presidency and later bec ame chief executive officer as well, Younkers shifted its focus back to the middle class. It updated its "Satisfaction Always" motto, adop ted in 1936, to stress customer service even more than previously. Al though not paying a commission on sales, the company adjusted wage ra tes every six months on a sales-per-hour basis. Salespeople were expe cted to acknowledge a customer within 30 seconds of arrival in a depa rtment at a distance of no more than 30 feet. Gould closed eight of t he 37 Younkers stores that he felt were too small in markets that off ered little growth opportunity, and he eliminated the chain's only fu rniture store.
Net income improved appreciably in 1986, and at the end of the year Y ounkers agreed to purchase a major competitor, Brandeis & Sons, w hich was operating 11 department stores in Iowa and Nebraska. This ac quisition boosted Younkers' revenues by almost $100 million, and in 1988 the 37-store chain earned a record $8.3 million on revenu es of $313.4 million. Gould and other Younkers managers chafed un der Equitable's direction, however, because its profits were absorbed by the parent organization instead of being earmarked for expansion, which company managers felt was needed to generate the economies of scale needed to compete with Kmart and Wal-Mart on price. Between 198 5 and 1992 Younkers paid Equitable about $63 million in dividends .
In June 1989 Equitable announced its intention to sell Younkers but r ejected offers of about $90 million as inadequate. Sales grew slo wly in subsequent years, but after the company earned a record $1 2.8 million on sales of $330 million in 1991, almost all of the c ommon stock was put on the market at $12.50 a share. Some of the proceeds from the 6.17 million shares sold in 1992 were used to reduc e Younkers' long-term debt from $104 million to $89 million.
Public Company Again: 1992-95
Gould, who as chairman remained at the helm of Younkers, continued to stress customer service. Interviewed by Daily News Record [DN R] in 1992, he said, "The '80s were merchandise and marketing driven. The '90s are customer driven. ... We have to totally reverse the hie rarchy of the '80s where the buyers and merchandisers were on top and the sales associates were on the bottom." His philosophy was to stre ss basics rather than trendy but unsuitable merchandise. "Former mana gement thought the American consumer had gotten thin and rich overnig ht," Gould told a Business Week reporter. In fact, the average female customer was consuming so many calories that Younkers was mak ing one-quarter of its women's apparel sales in sizes 14 and higher a nd, therefore, was featuring large women in its catalog and fashion s hows.
During fiscal 1992 (ended January 30, 1993) Younkers had net earnings of $17.6 million on net sales of $473.4 million. In April of that year Younkers purchased the department store division of financ ially troubled H.C. Prange Co., a privately owned chain with 25 store s, 18 of them in Wisconsin, for $67 million in cash and assumptio n of $9 million in debt. Prange proved harder to digest than expe cted, however, and although Younkers' sales rose to $597.9 millio n in fiscal 1993, net earnings fell to $12.2 million and, on an e arnings-per-share basis, only half the previous year's level. During fiscal 1994 sales and earnings barely rose. The value of a share of Y ounkers stock fell from a high of $32.50 in 1993 to $12.25 in June 1994, making the company vulnerable to a takeover by a bigger s tore chain.
A battle royal for control of Younkers broke out in 1994, when Milwau kee-based retailer Carson Pirie Scott & Co. made an unsolicited & #36;152 million ($17 a share) takeover bid for the company. Carso n already held 12 percent of the stock. Younkers not only rejected th e bid as inadequate but adopted a poison-pill defense intended to mak e the acquisition prohibitively expensive.
Undeterred, Carson raised its bid to $19 a share in 1995 and won a nonbinding resolution from Younkers shareholders to put the company up for sale to the higher bidder, but Younkers' board voted not to s ell. Carson, which would have closed Younkers' headquarters and the d owntown Des Moines store, then sued Younkers' directors for "gross br eaches of fiduciary duty."
Sale to Proffitt's in 1996
By late 1995 Younkers' position was more attractive to alternative of fers, because the former Prange stores had become an asset, accountin g for more than 40 percent of the company's total sales. In February 1996 the company quickly accepted a $24-a-share, $216 million offer from Proffitt's, Inc., a department store chain based in Tenne ssee. Younkers, which became a Proffitt's subsidiary as well as a div ision, preserved its name and much of its independence, although abou t one-fifth of the jobs at Des Moines headquarters were eliminated. ( The flagship Des Moines store, a money loser, remained open only beca use of a city financial aid package.) Even Carson voted its shares in favor of the merger.
Gould became vice-chairman of Proffitt's, yielding the CEO position a t Younkers to Robert Mosco. Mosco resigned in October 1996 to become president of Proffitt's newly formed Merchandising Group. Three unpro ductive Younkers stores were closed in 1996, and two others were sold to a third party. New Younkers units were scheduled to open, however , in Iowa City, Iowa, and Grandville, Michigan, in 1998. During fisca l 1997 (ended February 3, 1997) women's apparel accounted for 32 perc ent of Younkers' sales, men's apparel for 16 percent, home furnishing s for 16 percent, and cosmetics for 11 percent. Children's apparel, a ccessories, leased departments, lingerie, and shoes accounted for the remainder of the division's sales, in that order.
Changes in the Late 1990s and Beyond
Despite fending off advances from Carson Pirie Scott & Co. in 199 5, Younkers found itself inextricably linked to the company in 1998 a fter its parent acquired the chain in February 1998. Later that year, Proffitt's shelled out $2.1 billion to acquire Saks Holdings Inc . and adopted the Saks Incorporated corporate moniker.
As a Saks subsidiary, Younkers continued its slow and steady growth. In 1999, the company set plans in motion to open a store in Muskegon, Michigan. It also opened two new stores in Lansing and Okemos, Michi gan. At the same time, unprofitable stores began to shut their doors. Its location in Bettendorf, Iowa, closed and the Younkers on College Avenue in Appleton, Wisconsin, shut down.
In the early years of the new millennium, competition was fierce for department store operators. An increase in sales at discounters like Wal-Mart and Kohl's as well as specialty retailers began to hurt Youn kers' business. As such, Saks took several measures to shore up the c ompany's profits. Younkers left its home in Des Moines as company hea dquarters were moved to Wisconsin during the latter half of 2002 and into 2003. Almost 300 jobs were cut as part of the reorganization. Th e company's merchandising, advertising, marketing, and other support functions were integrated into Carson Pirie Scott & Co.'s operati ons.
At the same time, several of Younkers' stores were shuttered. Its loc ation at the Crossroads Mall in Omaha, Nebraska closed. The company a lso said goodbye to its flagship store in downtown Des Moines in Augu st 2005. The location had proved to be unprofitable and its closure w as part of Carson Pirie Scott & Co.'s strategy to focus on its mo st productive and profitable locations.
During this time period, profits at Saks were falling. To top it off, the U.S. Securities and Exchange Commission had launched an investig ation into the company's accounting practices. Several Saks executive s were fired as a result of the investigation, which found that the c ompany had improperly collected allowances from several of its vendor s. Saks was operating with two main business segments at this time: t he Saks Department Store Group (SDSG) and Saks Fifth Avenue Enterpris es (SFAE), which included the Saks Fifth Avenue stores, Saks OFF 5th stores, and saks.com.
During 2005, Saks decided to focus solely on its high-end SFAE busine ss and began to look for buyers for the stores in its SDSG segment. A s such, Saks began to entertain offers for its Northern Department St ore Group, which included Younkers, along with Herbeger's, Carson Pir ie Scott, Bergner's, and Boston Store. Bon-Ton Stores Inc. swooped in with a $1.1 billion offer in October 2005. Bon-Ton, which had us ed acquisitions to fuel much of its growth throughout its history, wo uld double in size as a result of the purchase. Saks and Bon-Ton were expected to close the deal in the coming months. With a new parent c ompany on the horizon, only time would tell what was in store for You nkers in the years to come.
Principal Competitors: Federated Department Stores Inc.; Marsh all Field's; Sears, Roebuck and Co.