Business & Finance: Profitless Hearn

Oldest department store in New York is Hearn’s, founded in 1827 by an immigrant descendant of an English divine. In the 1870’s many a rich old lady in coach and four clattered over the cobblestones of 14th Street to alight at Hearn’s for a camel’s hair shawl at $10,000 or laces at $1,000 a yd. For 105 years the store was managed by the Hearn family whose youngest executive, Donald Hearn Cowl, kept a yacht as late as 1931 and raced every Saturday with Junius Morgan. But in 1932 Hearn’s, crippled by Depression, long eclipsed in fashion by younger stores, was turned over to a board of trustees. They were glad of a chance to sell the store lock, stock & barrel to two Jews named Maurice Levin and Jacob M. Kaplan, who promptly set about putting it on its feet.

Last week with Hearn’s once more thronged with customers, Messrs. Levin and Kaplan began their third year in control by announcing a unique merchandising policy. Starting about Sept. 1 Hearn’s will operate for one year without profit. Owner-Manager Levin, who holds all the stock, will take no salary, no dividends. Net income, if any, will be turned back into lower prices. “We are able to do this,” said Mr. Levin, “because, fortunately, we have no stockholders, bondholders or bankers in this business. . . . There isn’t a soul to drain off dividends. . . . We believe our plan will help speed recovery. More goods will pass over counters, more mills will be busy and more jobs will be the result. . . .” NRAdministrator Johnson had approved the plan, said Mr. Levin, and so had Alfred E. Smith and New York’s Mayor LaGuardia.

Since Hearn’s publishes no income statement, no man knew last week whether there were any profits to sacrifice. But that did not bother President Levin, who has never drawn any salary or dividends. Yet he keeps a large apartment in Manhattan, a country place at Croton, N. Y. where he keeps riding horses. Ten years ago, at 36, he was already a wealthy man.

In Boston at the age of 12, Maurice Levin was selling newspapers with his brothers. From their mother they had inherited a run-down little grocery store with $500 in debts. Creditors offered to waive their claims, but the boys insisted on paying, and within four years they did. Meanwhile a step-brother named Kaplan, onetime draftsman for Western Electric Co., had gone down to Santo Domingo where he started a company to export raw molasses to the U. S. to make industrial alcohol. He lost his first barge in a storm, but by 1919 he was handling nearly 100,000,000 gal. of molasses. That year he summoned Step-Brother Maurice Levin into the company and the next year they sold their Sugar Products Corp. to U. S. Food Products, forerunner of National Distillers, for $2,500,000. Mr. Kaplan stepped out of the business, but Mr. Levin sank his profits into two other molasses ventures. By the time he was ready to retire in 1930. ostensibly to reacquaint himself with his family, he had taken a hand in reorganizing the old American Solvents & Chemical Corp., had drained off a sizable fortune from the molasses barrels.

One 1932 day in Manhattan some of his banker friends telephoned him to go over to Fifth Avenue & 14th Street. Hearn’s was for sale, they said. Mr. Levin protested that he knew nothing about department stores, had in fact never been inside one. But he put on his hat and went over. Inside the ancient barnlike building 450 employes waited forlornly for the store to collapse. Sales for the previous year had been barely $5,000,000. Inventories were down to nothing and few manufacturers dared extend credit to Hearn’s. So Mr. Levin bought the store.

He put it on a cash basis. That enabled him to pick up attractive bargains from wholesalers and manufacturers. Then he spent $300,000 dressing up the store with a new front on 14th Street, new counters, fresh paint, new escalators. While his brother, who had changed his name from Levin to Jacob M. Kaplan, managed Hearn’s capital, and a store executive named Leonard Ginsberg looked after the merchandise, President Levin started a series of shrewdly aggressive promotion campaigns. In two years business had picked up enough to keep 1,000 clerks busy. Last week President Levin opened his enlarged wine & liquor store, said to be the biggest in Manhattan.

Specializing in quick turnover at low prices, Hearn’s is probably the cheapest of Manhattan’s big department stores. For every customer from Park Avenue, there are 100 from Third Avenue who crowd into Hearn’s to buy wool overcoats at $10, dresses at $2.99, neckties at 39¢. But in two years President Levin has run up Hearn’s sales from $5,000,000 to $10,000,000. Last week he confidently predicted that for 1934 they would be $15,000,000—nearly a fifth of the gross sales of Macy’s, biggest U. S. department store.