The Morning News from Wilmington, Delaware on July 12, 1987 · Page 51
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The Morning News from Wilmington, Delaware · Page 51

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Wilmington, Delaware
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Sunday, July 12, 1987
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Page 51
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Wall Street's week. E7 Personal finance E2, Stock listings E3 Sunday News Journal July 12, 1987 -E1 investing arrives Bocov9 evades treedls Unusual approach spurs retail growth By MAUREEN MILFORD Staff reporter If you believe in retail trends, Albert R. Boscov should be in bankruptcy 18 times over. Instead, the Reading, Pa., retailer seems to have the Midas touch running 18 highly successful stores that break all the latest retail commandments. Commandment No. 1: Specialty shopping is the wave of the future. Only retailers in the style of The Gap, The Limited and Banana Republic have a chance of successful survival. Boscov operates mini full-line department stores that carry merchandise even the big boys have abandoned. His stores, all within a three-hour drive from Reading, have everything from Scotch tape to washing machines. Even an extensive toy department remains in Boscov's stores. .Commandment No. 2: The independent family-owned department store is doomed. It's impossible to '4 - J q, ft I l V ' iifa1 Jill: -' - - ' '-"' v U " '..jiy compete againi me Dig retail conglomerates that can gobble up medium-size chains for breakfast. The Boscov chain keeps growing. Since 1962, the chain has increased to 14 Boscov stores and four Ports of the World outlet stores. A Wilmington Boscov store is expected to t Uww I open within the next several k ;." A I months in Concord Mall. A n '"timfi I second store south of Wil- Boscov mington will be opened as soon as Boscov can swing it. "We think it's a two-store town," Boscov said. Sales for the privately held company are increasing yearly, with 1987 sales expected to reach $400 million. In some cities, according to Boscov, his stores do more volume than the nation's largest retailer, Sears, Roebuck & Co. He said his three Reading stores do about $80 million in sales while Sears does about $34 million there. Boscov stores average about $263 a square foot in sales, while most stores average about $130 a square foot, he said. "We're dominant in every market we're in," Boscov said. Commandment No. 3: Department store advertising through pre-printed rotogravure circulars is the way to go. Although Boscov advertises in pre-prints extensively, he also dramatically uses regular display adver By MERRITT WALLICK J Staff reporter f David F. Marvin and Stanley Palmer pick countries the way most people pick stocks. . J Their strategy for worldwide investing sounds simple: Pick a country whose currency is in a rising trend against the U.S. dollar; pick a hot industry sector, pick a quality company in that sector in that order. i The tendency of many investors to cling to the U.S. stock markets is inexcusably provincial, the Wilmington money managers say. "Most people don't truly globally .invest," Marvin said. "It's a beginning trend." ; The obvious comeback from those who don't is that it makes good sense to stay out of foreign markets. Picking winners in your own country is hard enough; you must be right about the direction of the market and pick the right company in the right industry. Venturing into foreign markets complicates things. Winning an international bet means you also have to be right about currency fluctuations, local politics and local economic trends. ." The fact that most money managers are scared off by the added complexities of foreign investing keeps down the competition. Marvin & Palmer Associates Inc. has proven that with computers and a sharp eye, even a staff of seven can keep tabs on the world from Wilmington. In the past year Marvin and Palmer say their stock picks in foreign markets rose 89 percent, after the effects of currency fluctuations. The average for all managers of foreign stock portfolios was 64 percent, according to Frank B. Russell Co., the largest pension fund consultant in the country. . The firm manages $140 million in corporate pension funds and individual accounts. They are shooting for $1 billion. Even that would be small change for two men who cut their teeth managing Du Pont Co.'s $10 billion pension fund for 10 years. Money managers charge between 0.5 percent and 1 percent for their services. Marvin and Palmer are fond of poking holes in the conventional wisdom about global investing. Marvin's motto: "You'd better not. look to others for your great ideas. You need to have some very strong viewpoints about the way th world works." . Take the widely held view that currency markets are so unpredictable that only a gambler would place a bet. A graph of currency fluctuations for the past 17 years for Germany, Japan and Britain shows that currency trends against the U.S. dollar persist for years. : Then there's the view that worldwide inflation is on the rise. A five-year chart of gold prices in U.S. dollars does show a trend toward increased prices. But charts for Japan and Germany show a steady decline in gold prices since 1984. What the financial press has claimed to be new signs of inflation, Palmer says, is simply a local phenomenon in the U.S. economy caused by the weakening dollar. Finally, there's the widespread belief that the world's stock markets are just too high. IMost people are worried that the markets are too high. They think they're a house of cards ready to collapse," Marvin said. Misunderstanding about how high markets really can go can be traced to the failure to account for a decade of some of the highest inflation in history, Marvin said. - Taking 20 years of inflation into account, the Dow Jones industrial average would have to reach 3,000 just to regain the 1,000 level it achieved in 1966, Marvin said. Adding a growth factor of 2 percent a year for that period would put the market as high as 7,000, just to equal the 1966 levels, he said. The Japanese market, which also stood at 1,000 in 1966, has risen to 20,000. Critics of that market are fond of pointing out that its price-earnings ratio (a common measure of whether equities are overpriced) of the Japanese market is 63, compared with a U.S. market ratio of 17, considered nosebleed territory by many. Palmer calls such analysis simple-minded because it fails to take into account fundamental differences in bookkeeping between Japanese and American firms. Japanese companies are much more conservative in their treatment of depreciation and reserves. Paul Aron of Daiwa Securities America, a recognized expert in international accounting, has said an apples-to-apples comparison between the Japanese and Ameri- See MONEY MANAGERS - E6 Stalf photos by Chuck McCowen Al Boscov unabashedly snuggles up to a teddy bear on the floor of his store in Reading, Pa. Below, the unconventional Boscov strikes a couple of animated poses. tising in the main sections of newspapers. Boscov says he believes newspaper advertising is "critical" to his success. Commandment No. 4: Department stores should target a particular customer. Winning means divide and conquer. Boscov concentrates on what he calls the broad-based middle. "We shoot strongly for the middle," Boscov said. In his stores can be found expensive gold chains and Gucci jewelry, while less than a yard away is costume jewelry priced under $5. In women's clothing can be found Guess?, Esprit and Chaus labels. But there's also lower priced, polyester-blend sportswear. Commandment No. 5: Forget old-fashioned, entrepreneurial, seat-of-the-pants retailing. Surround yourself with MBAs, accountants and market researchers instead. Because his management team visits store locations, most of Boscov's management meetings are conducted in buses. "People think we can't have a meeting unless it's in a bus," he said. When he opened his first Delaware store in the Dover Mall in 1982, he admits, he totally misjudged the market. He said he was not aware customers would come from all over Delaware, as well as Maryland. As a result, the store is too small and crowded. It has a lot more potential, Boscov said. llvi&fe'r $ It-l' cr v- ;m rfn..n. rB r... ..p,..T,1 r-Trhrn'-ii - ""w f-mmt N Work is not the right word for it campaigns have been the products of brainstorming sessions by people who realize the true nature of retailing, Boscov said. "Retailing is nothing but recreation. It's something to do today," Boscov said. He believes his unusual stores, which still carry a full toy department, grew out of necessity. Boscov opened his "first real store" in 1962 in Reading, called the outlet capital of the country. He had studied retailing at Drexel University, but long before that he was fitting shoes in his father's dry goods store. Just being in Reading meant monitoring what the value-conscious competition was doing, then adapting. At the same time, the old-line department stores decided they all "wanted to be the same" and target the upscale customer, Boscov said. The merchandise lines that the big boys threw away, Boscov picked up. "Nobody told us we shouldn't do it," Boscov said. .Because the company is young, it's not so firmly entrenched it can't break the rules, is now the largest privately held independent retailer in the nation. Catch him in his office and he's leaning over newspaper advertising layouts or making a quick decision about a stuffed toy horse. Somewhat soft-spoken, the father of three daughters sprinkles his conversation with plenty of laughs at his own expense. It's clear Boscov is having a lot of fun with his 18 stores. "Work is not the right word for it," Boscov said. Competitors, however, view him as a very aggressive, hard-line merchant. "Our buyers eat nothing but raw meat," Boscov jokes. The Reading native admits he and his team are "very aggressive," but he attributes much of his success to his ability to deal with people. "Retailing is all people. There's no patents." Boscov said he's been able to build a team of people who like to dream. The crazy and successful advertisements and promotion Boscov said. He said he limits his growth to within three hours of Reading so he can be involved in the communities. He has been instrumental in bringing a theater to Wilkes-Barre, Pa., and he often tackles political issues. At one time, the chain took the controversial step of supporting legislation for gun control. In each store he- likes to create an atmosphere in the boys' department that reflects the area. In Pottsville, Pa., the department is a coal mine. "It's too dark for retailing, but we have fun," Boscov said. The boys' department in the Dover store is decorated with airplanes. One of the biggest challenges for Boscov will be his entrance into the Wilmington market. For the first time, Boscov will be up against some retailers he hasn't faced before, such as Strawbridge & Clothier and Macy's. "It will be a real experience for us," Boscov said. For this owner, business is 'nothing but recreation ' By MAUREEN MILFORD Staff reporter READING, Pa. - Albert R. Boscov loves his big, brown teddy bear. Without much prompting, Boscov plops his 5-foot-5 frame into the lap of the 9-foot teddy. He's oblivious to the stares of customers. Boscov, 57, doesn't seem to care what other people think. Perhaps that's the key to his success. Affable and unaffected, Al Boscov has a reputation in the retail industry as a feisty maverick who is the $400 million department-store chain. "There's nothing artificial about him," said Ezekiel S. Ketchum, president of Meridian Bank of Reading. It doesn't matter what the rest of the retail world is doing, Boscov is following his own course and very nicely, thank you. His chain

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