Younkers, Inc. - Company Profile, Information, Business Description, History, Background Information on Younkers, Inc.

P.O. Box 1495
Des Moines, Iowa 50397

History of Younkers, Inc.

Younkers, Inc. is a Midwestern department store chain with, by early 1997, 48 stores in seven states. Most were in Iowa (18) or Wisconsin (17), but there were five each in Michigan and Nebraska, and one each in Illinois, Minnesota, and South Dakota. Younkers's stores were generally located in midsized to smaller cities where competition was more limited than in major metropolitan areas. In addition to apparel, Younkers's anchor line of business, the chain carried major cosmetic and fragrances lines, furniture, housewares, china, linens, gift items, and other merchandise. It also operated restaurants in certain of its stores. Younkers became a subsidiary and division of Proffitt's, Inc. in 1996.

An Iowa Institution, 1856-1978

Younkers (originally Younker & Brothers) was founded in Keokuk, Iowa, in 1856 by three young Polish-born brothers: Lipman, Samuel, and Marcus Younker. The general store was a base from which they strapped packs of merchandise on their backs that they carried into the neighboring countryside to farmers and others too busy or isolated to shop in town. They founded Iowa's first synagogue and closed the store on 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 live 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 headquarters for Younker Brothers. In 1881 it became the first Des Moines store to hire female sales clerks, and in 1900 this store moved to its present location at Seventh and Walnut Streets. Younker Brothers was a place to meet as well as to shop. Women lunched 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 installed Iowa's first escalator in 1939 and was the first department store in the United States to air condition its entire building.

Younker Brothers grew by acquiring Grand Department Store in 1912, Wilkins 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, and 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 $2 million in fiscal 1947. At the end of 1947 it acquired a Sioux City, Iowa store from Davidson Brothers Co. and had, since 1941, opened branch stores in Ames, Fort Dodge, Marshalltown, and Mason City. Younker Brothers went public in December 1948 to retire bank loans, offering a minority of its common stock at $26 a share. Much of its stock remained in the hands of three Des Moines merchandising families: 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 didn't fit, after allowing her weight to balloon over the winter. The store remodeled it without argument. Morey Sostrin, president and general manager, said, "We figure that the advertising value of such cases in small towns in Iowa is worth far more than the adjustment cost." Younkers was known for liberal credit policies (including 60,000 charge accounts) and a mail-order service. It was also running three Des Moines restaurants.

During the 1950s Younker Brothers acquired another Sioux City store and opened branch stores in Iowa City, Oskaloosa, and Ottumwa, Iowa; Omaha, Nebraska; and Austin, Minnesota. The Omaha store, opened in 1955, was its first in a shopping center. Net sales, after reaching $45.5 million in fiscal 1956, slumped to $37.1 million the next year and did not surpass the 1956 figure until 1962. Net income dropped from $2.4 million in 1956 to $1.4 million in 1957 and did not top the 1956 figure until 1965. In 1961 the company acquired Kilpatrick's Department Store of Omaha.

Although the biggest downtown department store in Des Moines, the Younkers flagship retained a reputation for "small town friendliness." This six-story, 400,000-square-foot, block-long building was responsible 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 major shopping centers. Net sales (including leased departments) reached a record $83.5 million in fiscal 1970, and net profit was a record $3.8 million. Apparel was accounting for nearly 80 percent of sales, with home furnishings, furniture, and appliances next in importance. Dividends had been paid each year since 1935. The long-term debt was $10 million.

Equitable of Iowa Subsidiary, 1979-1992

By 1978 Younkers had added branch stores in Des Moines and Davenport, Iowa; Moline, Illinois; and Sioux Falls, South Dakota, plus a main store 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 destroyed by a fire that year in which ten employees were killed. Net sales came to $135.5 million in fiscal 1978, and net profit amounted to $5 million. In 1979 Equitable of Iowa purchased Younker Brothers for $72.2 million and made the retailer a subsidiary named Younkers. Des Moines breathed a sigh of relief, since Equitable was controlled by Iowa's first family, the Hubbells. "The loss of an independently-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 next four years. Sales increased from $141.9 million in 1979 to $188.7 million in 1984. After net income slumped from $4.8 million in 1983 to only $723,000 in 1984, William Friedman, Jr.--a descendant of the group of families that had controlled Younkers since the 1920s--was ousted as president and chief executive officer, allegedly for alienating customers by turning Younkers into an upscale boutique. The Ottumwa store was closed, and 200 jobs were eliminated.

Under W. Thomas Gould, who first assumed the presidency and later became chief executive officer as well, Younkers shifted its focus back to the middle class. It updated its "Satisfaction Always" motto, adopted in 1936, to stress customer service even more than previously. Although not paying a commission on sales, the company adjusted wage rates every six months on a sales-per-hour basis. Salespeople were expected to acknowledge a customer within 30 seconds of arrival in a department at a distance of no more than 30 feet. Gould closed eight of the 37 Younkers stores that he felt were too small in markets that offered little growth opportunity, and he eliminated the chain's only furniture store.

Net income improved appreciably in 1986, and at the end of the year Younkers agreed to purchase a major competitor, Brandeis & Sons, which was operating 11 department stores in Iowa and Nebraska. This acquisition boosted Younkers's revenues by almost $100 million, and in 1988 the 37-store chain earned a record $8.3 million on revenues of $313.4 million. Gould and other Younkers managers chafed under 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 the Kmarts and Wal-Marts on price. Between 1985 and 1992 Younkers paid Equitable about $63 million in dividends.

In June 1989 Equitable announced its intention to sell Younkers but rejected offers of about $90 million as inadequate. Sales grew slowly in subsequent years, but after the company earned a record $12.8 million on sales of $330 million in 1991, almost all of the common 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 reduce Younkers's long-term debt from $104 million to $89 million.

Public Company Again, 1992-1995

Gould, who as chairman remained at the helm of Younkers, continued to stress customer service. Interviewed by Daily News Record [DNR] in 1992, he said, "The '80s were merchandise and marketing driven. The '90s are customer driven. ... We have to totally reverse the hierarchy of the '80s where the buyers and merchandisers were on top and the sales associates were on the bottom." His philosophy was to stress basics rather than trendy but unsuitable merchandise. "Former management thought the American consumer had gotten thin and rich overnight," Gould told a Business Week reporter. In fact, the average female customer was consuming so many calories that Younkers was making one-quarter of its women's apparel sales in sizes 14 and higher and, therefore, was featuring large women in its catalog and fashion shows.

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 financially troubled H.C. Prange Co., a privately owned chain with 25 stores, 18 of them in Wisconsin, for $67 million in cash and assumption of $9 million in debt. Prange proved harder to digest than expected, however, and although Younkers's sales rose to $597.9 million in fiscal 1993, net earnings fell to $12.2 million and, on an earnings-per-share basis, only half the previous year's level. During fiscal 1994 sales and earnings barely rose. The value of a share of Younkers 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 store chain.

A battle royal for control of Younkers broke out in 1994, when Milwaukee-based retailer Carson Pirie Scott & Co. made an unsolicited $152 million ($17-a-share) takeover bid for the company. Carson's already held 12 percent of the stock. Younkers not only rejected the bid as inadequate but adopted a poison-pill defense intended to make the acquisition prohibitively expensive.

Undeterred, Carson's 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's board voted not to sell. Carson's, which would have closed Younkers's headquarters and the downtown Des Moines store, then sued Younkers's directors for "gross breaches of fiduciary duty."

Sale to Proffitt's

By late 1995 Younkers's position was more attractive to alternative offers, because the former Prange stores had become an asset, accounting 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 Tennessee. Younkers, which became a Proffitt's subsidiary as well as a division, preserved its name and much of its independence, although about one-fifth of the jobs at Des Moines headquarters were eliminated. (The flagship Des Moines store, a money loser, remained open only because of a city financial aid package.) Even Carson's voted its shares in favor of the merger.

Gould became vice-chairman of Proffitt's, yielding the CEO position at Younkers to Robert Mosco. Mosco resigned in October 1996 to become president of Proffitt's newly formed Merchandising Group. Three "unproductive" 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 fiscal 1997 (the year ended February 3, 1997) women's apparel accounted for 32 percent of Younkers's sales, men's apparel for 16 percent, home furnishings for 16 percent, and cosmetics for 11 percent. Children's apparel, accessories, leased departments, lingerie, and shoes accounted for the remainder of the division's sales, in that order.

Additional Details

Further Reference

Byrne, Harlan S., "Younkers," Barron's, September 13, 1995, pp. 35-36.Chandler, Susan, "This Takeover Goes Way Past Hostile," Business Week, July 3, 1995, pp. 72-73."City Store Wins State Buyers," Business Week, May 28, 1949, pp. 56-58.Couch, Mark P., "Peeking into Younkers' Executive Suite," Business Record, May 2, 1992, p. 1."Equitable of Iowa Says Friedman Removed as Younkers Chief," Wall Street Journal, January 4, 1985, p. 24."Equitable Puts Younkers Chain on the Block," WWD (Women's Wear Daily), June 1, 1989, pp. 1, 11.Hartnett, Michael, "Younkers," Stores, March 1993, pp. 16, 18, 20."Insurance Firm Agrees To Buy Younker Bros.," Daily News Record, August 4, 1978, p. 3.Kasler, Dale, "Surprise Bid Puts Younkers on the Market," Des Moines Register, October 29, 1994, 1A, 6A.------, "Tom Gould, CEO," Des Moines Register, November 7, 1993, pp. 1G, 7G.------, "Younkers," Des Moines Register, February 3, 1996, pp. 12S, 11S.------, "Younkers Becomes a Part of Proffitt's," Des Moines Register, February 3, 1996, pp. 1A, 10A.------, "Younkers Bid Caps Year of Troubles," Des Moines Register, October 30, 1994, pp. 1A, 7A.------, "Younkers President Taking New Job," Des Moines Register, October 26, 1996, pp. 12S, 7S.Oliver, Suzanne, "Milan Proposes, Des Moines Disposes," Forbes, July 19, 1993, pp. 88, 92.Poxon, Jeffrey, "Younker Brothers, Inc.," Wall Street Transcript, January 10, 1972, p. 26,774.Sharoff, Robert, "An Independent Voice in the Midwest," DNR (Daily News Record), February 3, 1992, p. 16.Sloane, Leonard, "Iowa's Younkers: Friendly Store," New York Times, April 11, 1966, pp. 55, 59.

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