fy for Growth

Chicago’s Spiegel, Inc., third largest of U.S. mail-order houses, is still a pygmy among giants; Spiegel’s 1945 sales were only $70 million to Montgomery Ward’s $700 million. Sears, Roebuck’s massive $1 billion. Last week the pygmy was jolted full of growth hormones.

Some of the hormones were drawn indirectly from the giants themselves. Nominated to Spiegel’s board of directors (and certain of election this month) were Donald M. Nelson, onetime Sears executive vice president, and Clement D. Ryan, onetime Ward president. Both men had fallen out with the giants. Don Nelson, now president of the Society of Independent Motion Picture Producers, after a headlined career as boss of the old War Production Board, and “Rox” Ryan now president of the Whitney Department Store, Spiegel subsidiary in San Diego, Calif., were expected to inject big-time know-how into Spiegel policies.

But most of Spiegel’s new hormones were self-generated in a razzle-dazzle retail expansion program. Last week Spiegel topped it off by buying ]. & R. Motor Supply Co., operator of a Midwest chain of 55 stores selling auto parts, radios, work clothes, general hardware. Reported price: about $2 million.

The Doctor. Prescriber of these and many other medicines was Modie Joseph Spiegel Jr., fast-talking, energetic president and general manager. Modie Spiegel took over the 80-year-old family business in 1932, when it was deep in Depression trouble. Annual sales had dropped from a $20 million peak in the booming ’20s to a disastrous $7 million. Losses since 1929 had been $2.6 million.

Only ten years out of Dartmouth but carefully trained in the business, young Spiegel proved himself a hardworking, fertile-brained therapist. He trimmed the catalogue mailing list, concentrated on selling fewer people more items with big profit margins. Most important, he put sales on a send-no-money basis. Result: Spiegel’s started turning profits in 1933.

By 1941, sales had zoomed to $57 million. Then along came the Federal Government’s famed Regulation W, stringent new rules on credit terms. Spiegel’s, its sales suddenly cut in half, was almost trampled to death by the cash-dealing giants, lost $2.4 million in 1943. Modie Spiegel decided that the best way to survive was to expand into direct retailing. He began concocting his new prescription. Its name: “The Five Store Plan.”

Sears and Ward had long since gone into direct retailing with such vigor that, running more than 600 stores apiece, they were doing 60% of their business in them. But instead of going into general merchandising, where the giants were well entrenchedt Spiegel’s started buying up specialty shops geared to its five mailorder departments—women’s wear, children’s wear, men’s clothing and sporting goods, home furnishing, hardware-farm-auto supplies. The firm laid out $5 million for 100 outlets in 1944, $3.2 million for nine others in 1945.

These purchases gave Spiegel’s so much new profit stature (1945’s net: $1.2 million, almost ten times 1944’s) that last November it borrowed $7.5 million, went hunting for more stores. First major use of the new capital was in the J. & R. Motor Supply deal. Other deals were in the works, and Modie Spiegel hoped soon to float a new stock issue to get more capital. Already Spiegel’s ratio of counter to mail-order sales was nearly 50-50, and total 1946 volume might hit $100 million. The pygmy was growing.