JG Industries, Inc. History
Chicago, Illinois 60622
Telephone: (312) 850-8000
Fax: (312) 787-5625
Incorporated: 1928 as Goldblatt Brothers., Inc.
Sales: $196.2 million (1994)
Stock Exchanges: Chicago NASDAQ
SICs: 5712 Furniture Stores; 5661 Shoe Stores
JG Industries, Inc., is the holding company for Goldblatt's Department Stores, one of Chicago's oldest discount retailers. Under the slogan "The Incredible Bargain Centers," Goldlatt's 14 stores primarily operate in inner city neighborhoods and cater to poor and immigrant populations by offering goods at deeply discounted prices. Twelve stores are located in Chicago, with the two remaining stores in Homewood, Illinois, and Hammond, Indiana. Approximately 50 percent of sales are in apparel, which are often name-brand factory seconds or purchased through diverters, while the stores also sell linens and domestics and everything from shoes to small radios to kitchen and other household supplies. After declaring bankruptcy in 1981, Goldblatt's has returned to profitability. Its holding company, JG Industries, is partly owned by Jupiter Industries, Inc., a private Chicago-based corporation headed by real estate magnate Jerrold Wexler, which controlled approximately 55 percent of JG in 1995. A series of divestitures, most recently of JG's 58 percent interest in Huffman-Koos Inc., a New Jersey-based furniture retailer, signals JG's intention to focus its future growth strategy on its Goldblatt's store chain.
At its height, Goldblatt Brothers Inc. operated 47 stores, including its 11-story flagship store on Chicago's State Street, and accounted for fully 15 percent of the Chicago area's retail sales. From the beginning, Goldblatt's was a family operation, founded in 1914 by brothers Nate and Maurice Goldblatt, who were assisted by their two younger brothers, Joel and Louis. The Goldblatt family immigrated to the United States from the village of Stachev, Poland. Father Simon Goldblatt, a former chief rabbi, and oldest sons Nate and Maurice arrived in 1904. Two years later, they had saved enough money to send for the rest of the family, which included mother Hannah, son Louis, and four daughters. Joel Goldblatt was born in the United States the following year.
The family operated a grocery store and butcher shop on Chicago's West Side, living in an apartment behind the store. As was common with immigrant families, all of the children were expected to work and to contribute their earnings to the family pot. Family financial decisions were generally made by consensus, under the direction of Hannah Goldblatt. In 1914 oldest sons Maurice and Nate, then 21 and 19 years old, opened a small store near the corner of Chicago and Ashland Avenues, using $1,500 from the family pot. Administrative duties were handled by Maurice, while Nate acted as the store's merchandiser. Louis swept the floors, and Joel worked as cashier. The store catered to a largely poor, Polish-Ukrainian immigrant population, who traditionally shopped in their own neighborhood, walking to stores.
By 1922, the Goldblatt brothers recorded sales of over $800,000; five years later, sales had more than quadrupled, to $3.7 million, and a second store was added. The following year, the brothers incorporated as Goldblatt Brothers, Inc., with Maurice serving as president. Goldblatt's continued its successful discount formula; as a result, the stock market crash and resulting depression of 1929 presented an opportunity for the company to grow at a time when most businesses were failing. In that year, Goldblatt's acquired Lederer Company Department Stores, the H. C. Struve Company, and the Fields Furniture Company, all of Chicago. Two years later, the company bought up the department store operations of Loren Miller & Co. in Chicago and Kaufman S. Wolf, Inc., of Hammond, Indiana. In 1933, Nate Goldblatt brought the company's buyers to New York, together with $300,000 in cash, buying up goods from suppliers desperate to unload their inventories, a move that would have a significant impact on the company's success. In that year the company also opened a new store in Joliet, Illinois, in the former L. F. Beach department store building.
Sales jumped to $28 million in 1934, with a net income of over $1 million. The company operated seven stores, including five in Chicago, one in Joliet, and one in Hammond. Property was purchased for a store on Chicago's Southwest Side, and in 1936, Goldblatt's opened its flagship State Street store, purchased from the Chicago retail giant Marshall Fields Co. With that purchase, Goldblatt's ventured into more upscale products, with an inventory that included everything from appliances and apparel to delicatessen and confectionery products. Ten years later, with the acquisition of Chicago-based Logan Department Stores, there were fifteen Goldblatt's stores and a central distribution center, employing more than 2,500 people, and bringing in more than $62 million in annual sales, with net income of $1.25 million.
The Goldblatt Brothers developed lavish lifestyles. Younger brothers Louis and Joel took up residence in Chicago's exclusive Drake Hotel, or sailed on Joel's 150-foot yacht, while Nate's mansion in a Chicago suburb featured an indoor pool and Egyptian mummy. The company also supported many other family members, including two brothers-in-law who joined the company after their own businesses failed. Major decisions continued to be made by consensus. Quarrels erupted frequently among the brothers, but were usually settled by Hannah Goldblatt's influence.
Hannah Goldblatt's death in 1941, followed by Nate Goldblatt's death in 1944, marked the beginning of Goldblatt's decline. The quarrels among the remaining brothers grew more frequent and bitter without their mother's guidance. Joel Goldblatt took over as the company's president, handling its merchandising and administration. Sales continued to climb, to $95 million in 1949, but income did not keep the same pace, reaching only $1.5 million in that year. The company's attempt to expand into Buffalo, New York, opening one store in that city, met with limited success. The pace of new store openings and acquisitions slowed; until 1944, the company had averaged four new stores each year. By the end of the 1950s, however, the company still operated only 20 stores. Sales were flat through the decade, hovering at just over $100 million per year, while income saw a slow decline, down to $600,000 on revenues of $116 million in 1962.
Under Joel's leadership, the company attempted to expand into Chicago's suburbs, where Goldblatt's discount inventory failed to move the middle-class market. Joel was forced out of the presidency by Maurice after a bitter struggle in 1960. Thereafter, the company's leadership changed often, as the family members began to feud. New store openings stepped up, however, and by 1964 Goldblatt's operated 30 stores, including its central distribution facility, with 12 stores in Chicago, 13 throughout Illinois, two in Indiana, and one each in Michigan and Wisconsin. Sales climbed to $153 million in 1965, with a net income of $1.5 million.
After 1964, however, Goldblatt's stopped its expansion, building no new stores for more than a decade. The only new additions to the chain came through the company's 1967 acquisition of H. P. Wasson & Co., Inc., and its seven Indiana-based department stores. During this time, many retailers, including Sears Roebuck & Co., were expanding rapidly, and new discounters such as Kmart and Venture were moving into the Chicago market, siphoning off many of Goldblatt's traditional customers. Sales continued to grow, however, from $190 million in 1967 to $214 million in 1970. Net income for those years, however, dropped from $3.2 million to $627,000.
The family's squabbles continued into the 1970s. By the end of that decade, the leadership of the company had changed many times, passing among various members of the family, including Louis, who served twice, and Maurice's son Stanford Goldblatt. Investment of earnings back into the company was minimal; instead, the company paid out profits in stock dividends, with the majority of stock being controlled by the Goldblatt family. Stanford Goldblatt took over as president and chief executive officer from Louis Goldblatt in May 1976. Stanford attempted to change the Goldblatt's image, introducing upscale and designer merchandise, a move that failed and forced the company to take a dramatic markdown on its inventory. Added difficulties for the company came from its policy of carrying its own receivables, with 300,000 outstanding accounts worth $50 million. An extra burden came from the many members of the Goldblatt family included on the corporate payroll. By 1977, despite posting its highest sales ever of $290 million, the company's net income dropped to $77,600 from $1.9 million the previous year. Despite this, the company paid out a 28 cents per share dividend in that year. Again, the following year, despite posting a loss, the company paid out a 13-cent dividend.
By December 1977, Stanford was ousted by Louis Goldblatt. An offer by the French Agache-Willot company the following year to buy out a majority interest in Goldblatt's was rejected; nevertheless, the company lacked the capital to upgrade its existing stores or to expand the chain. Analysts at the time attributed much of the company's difficulties to the Goldblatt family's dominance. The banks agreed, and, as conditions for a three-year, $10 million revolving credit agreement, forced the company to bring in management from outside the Goldblatt family, while also demanding that the company cease paying out dividends. Harrold Smith, formerly of Robert Hall and Wal-Mart, was named president in 1978 and chief executive officer in April 1979, but left four months later, citing the Goldblatt family's continued interference as a reason. Smith was replaced by Louis Duncan, who had been vice-chairman of Household Finance Corp., but Duncan lasted less than a year. Lionel Goldblatt, son of Nate Goldblatt, who had worked for the company as a buyer for men's shoes, took over the chairmanship in 1980 and led the company to its bankruptcy declaration in 1981.
By the time it filed for bankruptcy, the company reported liabilities of $52.5 million opposed to assets of $53.3 million, with $30 million owed to creditors. The chain was down to 22 department stores, and accounted for less than five percent of the Chicago area's retail sales. Eight more stores were sold off by the end of that year. Goldblatt's brought in William Hellman, former head of Bond's clothing stores in New York, who had also spent 17 years with Goldblatt's, to head the company during its reorganization. Under the terms of its reorganization, the company sold off eight more of its remaining stores, paying 52.5 cents to the dollar to its creditors. Among the stores to be sold was its State Street location, which was originally intended to become Chicago's new public library, but eventually was purchased by DePaul University. The company kept six stores, which were reopened in the spring of 1982 and included its original Chicago Avenue location, to which it moved its corporate headquarters. Under Hellman, Goldblatt's returned to its original sales concept. Stores were reduced in size to two floors, and inventory and pricing targeted the poor and immigrant populations of the stores' neighborhoods. The six stores--all in depressed Chicago neighborhoods--opened with less than $2 million in inventory, half of which sold out on the day of their reopening.
The reorganization effort faced a major obstacle when real-estate prices plunged during the recession of the early 1980s, leaving Goldblatt's $3 million short of the capital it needed in order to fulfill its creditors' liens. In 1983, however, the company was rescued from liquidation by Jupiter Industries. Headed by Jerrold Wexler, Jupiter was a multi-billion-dollar company with real estate holdings that included the Playboy Building, the Lake Point Towers residential apartment complex, much of Michigan Avenue, and some two dozen Chicago hotels, as well as properties in New York and Los Angeles. Jupiter arranged for a $3 million loan, borrowed against Goldblatt's assets, in exchange for 46 percent of the company. Jupiter also received approximately $60 million in tax-loss carryforwards. These were put to use the following year, with the $9.8 million purchase of Milgram-Kagan Corp., which operated a chain of 131 Florsheim, Naturalizer, and Cobbie shoe stores in seven states. In 1985, the company purchased, for $38 million, the Sussex Group furniture division of Household Merchandise Corp., including four furniture store chains. One of these chains, American Stores based in Texas, was sold off immediately, while the company retained the chains Huffman-Koos, Colby's Home Furnishings, and Barker Brothers.
By 1985, Goldblatt's had pulled out of bankruptcy and was once again profitable. In order to protect its acquisitions from its continued liabilities, the company was restructured, with the parent, JG Industries, Inc., acting as a holding company for Goldblatt's, Milgram-Kagan, and its Sussex Group of furniture stores. William Hellman was named president and CEO of the new company, while Jerrold Wexler functioned as chairman of the board. Lionel Goldblatt remained as chairman of Goldblatt's, and served as vice-president on JG's board of directors. In 1985, JG recorded sales of nearly $229 million, with net income of $2.4 million. The following year, Huffman-Koos was taken public, selling 43 percent of its shares. The company divested its Colby's Furniture Stores in 1987, dropping its net sales from $250 million in 1986 to $231 million in 1987.
Goldblatt's opened four new stores by 1988; three of these were essentially reopenings of former Goldblatt stores. Its strategy, as Hellman told the Daily News Record, was "to appeal to customers from the welfare level to just under the middle class." Its inventory consisted primarily of closeouts, irregulars, and "opportunistic purchases," including those from diverters of national, name-brand and private-label products. As the country entered the recession of the early 1990s, however, JG's other properties were less profitable. As early as 1991, the company sought to sell off its Milgram-Kagan division, and the remains of its Sussex Group division. Barker Brothers had been sold in 1990 for $12.6 million. The company purchased the Charles Kushins, Inc., shoe store chain for $9 million in 1988, but was forced to close the chain less than two years later, taking a charge of $6 million. JG recorded a loss of $10 million in its 1990 fiscal year, and net sales continued to drop, down to $137.7 million in 1991, with a net income of $510,000. Only Goldblatt's--which had opened two more stores&mdash⁄owed signs of success, with sales rising to more than $58 million, accounting for roughly one-third of JG's total sales.
The company's attempt to restructure its Milgram-Kagan division toward profitability failed, and in 1993 Milgram-Kagan filed a Chapter 11 liquidation plan and ceased operations. By then, JG had been pared down to two remaining divisions: Goldblatt's and Huffman-Koos, which was slowly climbing out of the crippling effects of the national recession. In 1993 Huffman-Koos' 13 stores contributed $91 million to JG's sales of $169 million. However, JG posted losses in each year from 1992 to 1994, including a loss of $7.6 million in 1992. In September 1995, the company sold Huffman-Koos to Breuner's Home Furnishings Corp., a holding company which also included 12 "Breuner's" and "Arnold's" furniture stores operating in California and Nevada.
As JG neared the end of 1995, its sole remaining subsidiary was its Goldblatt's Department Store chain, which then included 14 stores posting approximately $77 million in sales. Despite remaining profitable, Goldblatt's has faced increasing pressure from competitors such as Venture and Target, as well as from continued decreases in spending among its core customer base. With no new store openings planned through 1996, it remained to be seen whether "The Incredible Bargain Centers" could retain their position as leading inner city retailers.
Principal Subsidiaries: Goldblatt's Department Stores, Inc.
- Buck, Genevieve, "Neighborly Tack Revives Goldblatt's," Chicago Tribune, October 1, 1995, p. C1.
- Key, Janet, "Goldblatt's: Bravado to Bankruptcy," Chicago Tribune, December 27, 1981, Section 5, p. 1.
- Sharoff, Robert, "The Midwest Closeout King," Daily News Record, March 2, 1988, p. 24
Source: International Directory of Company Histories, Vol. 15. St. James Press, 1996.comments powered by Disqus