Welcome to the Woolworths Museum
On top of the world a century ago ...
... with echoes across the globe today
110 years ago, on 31 January 1912, F.W. Woolworth Co. was listed in New York for the first time. The sale of shares had raised a $65,000,000 bounty for its Founders.
Seymour Knox, Fred Kirby and Perry Charlton had each built a substantial chain under his own name. They had prospered as part of the Friendly Rival 5 & 10¢ Buying Syndicate of their friend Frank Woolworth, topping up their own purchases with the pick of his bargains.
The decision to merge had been a tough one. The Pioneers had to sacrifice control of their empires to achieve the bumper payday. Even FW's brother Sum and his mentor, former boss William Moore, would have to watch as their names were removed from above the doors of the lucrative smaller chains that they had nurtured. Frank had made it a price-of-play had been that every outlet must carry his name, but had promised that the merged company would expand rapidly, generating ever-larger dividends that would ease the pain for his Friendly Rivals. Each would be a Senior Vice President and Director of the new Woolworth's and would oversee its future direction from the Board Room.
Freed from the daily grind of running their companies, armed with a payout that far exceeded the original brokers' forecasts, the Founders soon took up other interests. These included many philanthropic donations, endowing hospitals, schools and community facilities, while retaining cash for some vanity projects. Investing in new ventures supplemented the dividends from their Woolworth shares to secure a generous inheritance for the next generation.
Frank Woolworth himself lay behind the most radical project. He commissioned the leading architect Cass Gilbert to design him a Gothic Renaissance skyscraper that was to be the tallest and grandest in the world.
Finding the new Board was unsupportive, he resolved to bankroll the $13.5m project personally. To control costs he insisted on overseeing every detail, and buying most of the materials directly, in cash. What began as a vanity project proved highly lucrative, giving his best ever return, as well as boosting his reputation as a Merchant Prince.
By late summer in 1912 the lower floors were nearing completion (above, left) and tenants were moving in as work to complete the spire continued at pace. It would stretch 750 feet into the clouds above New York. Clever marketing had dubbed it both the Cathedral of Commerce and the Tower of Nickels and Dimes, and had leased virtually every square inch of floor space, leaving room for a spectacular new headquarters on the floors directly below the spire for the Five-and-Ten Cent Stores at a peppercorn rent.
A decade later, exactly a century ago, F.W. Woolworth Co. had doubled in size. It could boast stores in every State of the USA and in much of Canada. Its first overseas venture in Great Britain and Ireland, which Frank Woolworth had forced through despite the objections of his Board in 1909, had blossomed into a chain of 100 highly profitable stores. The Woolworth Building was famed across the globe and admired as an example of the world at its best, and Frank's Five-and-Tens dominated mass-market retailing in North America, with what seemed to be an unassailable lead over the competition. Despite its traditional reliance on imports the chain had prospered during the World War. History credits Frank with a pivotal role in getting American industry to embrace the latest mass production techniques that he had sen in Europe.
But now there was a new man at the helm, occupying the President's desk in Frank's Napoleonic office. By training Hubert Templeton Parson was an Accountant rather than a Retailer. Brother Sum had declined the role on Frank's passing, as had the other Founders. They chose his 'best boy' - the son he never had - as President, so long as Sum agreed to chair the Board. It seems they considered Parson as a safe pair of hands who would consolidate and optimise what Frank had built, without considering the way that FW's entrepreneurial flair and buying skill had constantly adapted the range and formula to keep the chain on top in a changing world.
Parson stuck doggedly to the ten cent maximum long after rival chains had added higher priced ranges, opening the door for them to catch up.
Parson retired in 1932. His successor, Byron Miller, had been one of the team that set up the UK operation in 1909, before returning to New York to become FD after Parson took the helm in 1919. Investors loved Miller after he engineered a huge special dividend by floating Woolworth UK in London in 1931. Now he must tackle another elephant in the room.
Within weeks he had persuaded the Board to introduce twenty cent lines and to plan to drop the upper limit altogether once new ranges had been built. Suddenly the brakes were off. Thanks to the two moves profit surged rapidly on both sides of the Atlantic, despite London opting to retain its sixpenny maximum.
Unlike its American parent, Woolworth UK had no direct competitor. Its fixed price retail format at such low prices was unique. Instead of following the lead from New York, (as a recently opened sister company in Germany had chosen to do), its Directors resolved to redouble their efforts not only to maintain their sixpenny maximum, but also to use their huge buying power to broaden the range to add whole new categories at jaw-drop prices.
New lines added during the decade included electric fittings, a big DIY and home range, and even luxuries like cameras.
The Board kept growing their Buying Power by adding branches at an extraordinary rate, retaining profit for up to two openings a week, normally built in-house from the ground-up, with freeholds paid for in cash to avoid paying rent. Between 1930 and the outbreak of World War II in 1939 400 outlets became 750. During the same period profit tripled as did the dividends paid to both investors and the parent company in New York. It was only the outbreak of World War II that finally ended fixed pricing.
In the late 1950s the Board appointed its youngest and most entrepreneurial President since Frank Woolworth himself. Facing stiffened competition and a rapidly changing retail scene, Robert C. Kirkwood set about reinventing the brand. First he invested heavily to relocate many older stores from Main Street into large, more modern shopping malls and edge-of-town retail parks, and to convert every branch to self-service. By 1962 he was ready to launch phase two.
Despite having 5,000 branches across the globe, and strong performance in Europe, it was still proving hard to deliver an acceptable return after cutting prices.
Kirkwood's diagnosis was that the Company needed a new trading format, new ranges many of which it should manufacture iteself, and a fully streamlined operation in every country. He took on debt to build Woolco - a huge out-of-town format - and to acquire a string of new businesses, including the suitmaker, Richman Brothers and the huge Kinney Shoe Corporation. He also adopted a new marketing strategy and forced through similar changes in the British subsidiary. His strategy met with approval from the Corporation's bankers and institutional investors, allowing him to raise the necessary finance very cheaply, promising full repayment after twenty-one years in 1983. He believed this would give plenty of time for the changes to come to fruition and that by that date F.W. Woolworth Co. would be rich enough to pay down the debt.
By 1982 it was clear that a major part of Kirkwood's strategy had failed. Despite ostensibly being profitable, Woolco had barely covered its operating costs in its twenty years of trading, let alone filling a cash pot to pay off the huge debts incurred to open it. Experts believed the only way to turn it around would be to pump in much more cash to reinvent it, while the Board found it was unable to roll forward the loans without increasing the cost of borrowing more than ten fold.
Just three years earlier as US Woolworth marked its centenary, it had faced its first ever hostile takeover bid. The Board had assured investors that all was well, and their plans would boost profit dramatically in the Eighties.
Meanwhile a series of unforced errors in Britain with potential legal consequences for the parent coincided with much lower annual returns and dividends back to the parent. As a result when they were approached by a Consortium offering cash to buy the parent's golden share, they decided to accept.
By the end of 1982 Woolworth UK had been sold to venture capitalists for much less than its market value, and every Woolco store across the USA had closed its doors, with the premises up for sale and all of its stock sold off for cash.
The following year they would be able to pay off the debt and emerge as a much smaller company, with a weakened Woolworth which had lost much of the buying and distribution infrastructure that it shared with Woolco, and neither funds nor a plan to reinvent it. Instead the Board planned to grow its newer and more profitable brands - particularly its fashion and shoe businesses, with Footlocker showing the greatest potential.
In 1997 after fifteen years of 'death by a thousand cuts' and a number of unsuccessful regeneration projects, the New York Board finally concluded that American Woolworth could not be saved, announcing that all of its remaining stores would 'retire' and launching a grand clearance sale in which all of the merchandise and even fixtures and fittings were sold. It had already sold the branches in Canada to The Bargain! Shop. Later the same year the branches in Mexico and Germany were also sold for nominal sums to their management teams.
The best surviving American Woolworth's were converted to the Footlocker brand, which would be the new principal line of business for the renamed Venator Corporation. All of the staff were paid in full, including generous severance payments for those unable to find a suitable alternative role in the Group.
Ironically the same year marked the high water mark for profits in Great Britain. New owners had asset stripped the business, closing and selling the larger stores and mortgaging the rest of the remaining property, using the funds to develop new business interests and make many acquisitions. But they had also found a new formula for the High Street which was popular with the public and generated enough profit to pay market rents and leave more than £100m profit left at the year end. The contrast with the USA could not have been more marked.
Within five years the failure of a planned Kingfisher merger with the supermarket chain Asda had prompted a shareholder revolt. The parent company was forced to agree to demerge its High Street businesses, selling Superdrug privately and stripping Woolworths of its remaining assets, saddling it with debt and setting it free to trade as an independent listed business.
Some analysts thought it would emerge like a phoenix from the ashes, while others were more cynical about the high debts and increasingly competitive market.
It survived just six years before being swallowed up by debt, collapsing during the Credit Crunch of 2008, and shutting up shop completely in January 2009, shortly before its centenary in the British High Street.
T for Today
Today echoes of Woolworth exist all over the retail world. A handful of former subsidiaries trade successfully under the name under new management often as part of another retail group. There are substantial chains in Germany, which includes 'Since 1879' in its trademark, and Mexico, which would be recognisable as a similar trading format for British shoppers. In Canada more than 150 stores in small communities trade under the RedApple and The Bargain! Shop banners which have a strong Woolworth heritage after acquiring the remaining stores in 1995, and most of the original Woolco outlets formed the basis of Walmart's push north of the Rockies.
The distinctive buildings are still a key part of the streetscape in the UK, with Wilkinsons, B & M and a number of pound shop brands stepping in to fill the gap left by the demise of Woolworths and sometimes occupying the same premises. Most of the former British Woolcos, sold off in the 1980s, have since been absorbed into the Asda supermarket chain.
And the Woolworth name lives on in the former copycat chains, which were never related, as supermarkets in Australia and New Zealand and Department Stores in South Africa and Zimbabwe. Each proved itself much more able to update and modernise the formula than the Company itself.
Frank Woolworth's Gothic Skyscraper also survives as a key feature of the New York City skyline. The Woolworth Building has recently had a makeover as part of turning the upper floors into luxury apartments with awesome views across Manhattan. Woolworth House in Marylebone Road, the former London headquarters, is getting a similar makeover as part of conversion into stylish, eco-friendly residential accommodation
And still, thirteen years on from the last British Woolies closing its doors, there is occasional, much-covered speculation that maybe someone will bring the brand back to the High Street. The copy seems most likely to find its way onto the front pages of the red-tops each April 1st! The chain may be gone, but it is still not forgotten. It is celebrated here in the Woolworths Museum.