Ward's Shuts its Doors

Montgomery Ward Inc. (Chicago) will shut down after 128 years in the mail-order and department store business. The 250-store chain, which climbed out of bankruptcy in 1999 with a commitment to build new stores and improve existing ones, was one of the first casualties of the recent disappointing holiday season. (Bradlees also announced bankruptcy earlier this week.) “Overallü weak holiday sales and a very difficult retail environment simply did not permit us to complete the turnaround that might have been possible in an otherwise thriving economy,” said ceo Roger Goddu.

In a meeting with securities analysts in December, then-chairman John Welch of General Electric and chairman Dennis Dammerman of G.E. Capital (which own the retailer) predicted that Ward's would lose $227 million after taxes in 2000. And this was before the holiday disappointment. As a result, the announcement did not surprise the financial community. “They said they were contemplating taking actions to reduce loses going forward,” said Martin Sankey of Goldman, Sachs. G.E. also gained $1.4 billion earlier this year from its sale of Paine Webber, and some presumed the losses charged to Ward's will help offset the taxes on the gains of the sale.

Ward's is one of the oldest retail organizations in the United States. It was founded in 1872 by Aaron Montgomery Ward, a traveling dry goods salesman who started selling to farmers by mail order. The company, which thrived from serving rural America with mail-order goods from its celebrated catalog, had been one of the leading national retailers since opening its first unit in Plymouth, Ind., in 1926. (It was a Ward's advertising writer who wrote “Rudolph the Red-Nosed Reindeer” as a 1939 in-store promotion.)

Almost from the beginning, Ward's went head-to-head with Sears Roebuck & Co., another Chicago-based company (founded 14 years later) that graduated from mail-order to bricks and mortar. Both offered wide varieties of merchandise in large, crowded, well-stocked stores. During the Depression of the 1930s, Ward's ceo Sewell Avery had saved the company by halting expansion and hoarding cash. But when he tried the same policy following World War Two, Sears beat its rival to the punch by aggressively spending on new stores and capturing the burgeoning suburban market. When Ward's tried its own suburban policy, it found Sears had grabbed up all the important malls, highway intersections and interstate locations. Ward's never caught up.

It made further competitive mistakes in ensuing years. When it tried to capitalize on low prices, it was met by competition from Wal-Mart, Kmart and J.C. Penney. When it tried to promote variety of product, it found tough competition from such as Kohl's and Target. When it tried to focus on specialized product areas, such as electronics, it lost the battle to the emerging category killer stores, such as Circuit City and Best Buy.

Since then, Ward's history had been one of complex financial arrangements to remain in business. It sold 54 percent of its business to Mobil Oil in 1974 (and the rest two years later). But things didn't improve and, in 1985, it was forced to close its venerable catalog business. In 1988, G.E. Capital helped arrange and finance a management buyout from Mobil, with G.E. retaining 50 percent ownership. In 1997, after hundreds of millions of dollars in loans and investments, G.E. had Ward's file for bankruptcy, only to help arrange its reorganization in 1999.

About 450 employees were dismissed immediately upon the bankruptcy filing. It is assumed that all 28,000 of the company's employees will eventually lose their jobs.