250-Store Montgomery Ward Chain to Close After 128 Years

Montgomery Ward Inc., the country’s first catalog retailer, said Thursday it will close up shop after 128 years in business and numerous attempts to reinvent itself.

Just 18 months after emerging from bankruptcy, Wards’ Chairman and Chief Executive Roger Goddu said weak holiday sales and a tough retail environment clinched the decision to shut the 250-store chain.

“Sadly, today’s action is unavoidable,” Goddu said in a news release.

About 450 employees were laid off immediately from corporate office jobs, according to the Chicago-based company, which is owned by General Electric Co.’s GE Capital Unit. Wards employs about 28,000 people.

“It’s kind of a slice of Americana,” said Charles Knittle, Wards’ senior spokesman. “It’s sad and it’s pretty tough for people.”

Remaining employees will hold on to their jobs through final liquidation sales, which are expected to take place gradually over the next couple of months, Knittle said. Wards operates stores in 30 states and runs 10 distribution facilities. There are more than 50 Wards department stores in California.

“Big fish eat little fish, and old concepts tend to be replaced by newer concepts,” said Sid Doolittle, a Chicago-area retail consultant and a Wards employee from 1955 until 1982, when he left as a corporate vice president and catalog manager. “It’s been a slow-motion train wreck for 25 years, but it survived a long time.

“I learned what I know about retailing from my paper route and my 27 years with Montgomery Wards,” Doolittle said.

As part of Thursday’s actions, Wards filed for Chapter 11 relief in U.S. Bankruptcy Court in Delaware.

Longtime customers like Pat Duval, who has been shopping at Ward’s since moving to Santa Ana 36 years ago, lamented the company’s impending demise.

“It’s like a household name. I’ll be sorry to see it go,” Duval, 57, said outside the Santa Ana store. “They have very down-to-earth items, and the prices are very reasonable. A lot of stores at the mall carry specialty items. . . . These are your everyday practical items.”

Montgomery Ward began as a one-sheet mail-order catalog in 1872 with 163 items, the concept of Aaron Montgomery Ward. Ward ran the company with his brother-in-law until his death in 1913.

The seeds of the company’s troubles were firmly planted by the turn of the century, however, as Wards was outpaced by another Chicago company, Sears, Roebuck & Co.

Sears, under the leadership of a former Wards chief executive, developed retail stores at a time when Wards continued to bet on the mail-order industry.

Wards waited until 1926 to open its first store, in Plymouth, Ind. By 1930, it had expanded to about 550 stores.

The company, though, remained a catalog operation in many rural areas well into mid-century. Ted Deggendorfer, 69, of Westminster said that when he lived in tiny Kellogg, Idaho, in the late 1940s and early 1950s, he would stop at Ward’s “catalog branch” in town.

“It was a small, one-room facility with a counter and catalogs,” said Deggendorfer, now retired. “We would either look at the catalog first [at home] and then go and order or just go down to the store.”

But the outlet didn’t stock anything. Customers would pick up their merchandise there after it arrived from Spokane, Wash., Deggendorfer said.

The company, however, firmly entrenched itself as part of American culture. In 1939, for example, Wards copywriter Robert May wrote a poem that created the character of “Rudolph the Red-Nosed Reindeer.” It was handed out to children at Christmastime.

Wards ran into further trouble in the 1940s and ‘50s, when Chief Executive Sewell Avery predicted that a recession would follow World War II and refused to open new stores. Wards missed out on the postwar economic boom and saw its sales shrink 10% in the next decade, while Sears’ sales doubled.

The chain continued to battle Sears throughout its life. At one point in the 1970s, Wards was led by Chief Executive Bernard Brennan, brother of Sears leader Edward A. Brennan.

More recently, the chain faced younger competitors with fresher ideas, including Wal-Mart Stores Inc., Target Corp. and other mid-range sellers. Specialty stores such as Best Buy and Circuit City also cut into Wards’ business.

“Montgomery Ward has lost its reason for being,” said Kurt Barnard, president of Barnard’s Retail Trend Report. “It has nothing to distinguish itself.”

On Thursday, as word spread about its demise, a demonstration of the company’s troubles played itself out as shoppers flocked to nearby competitors.

At the Panorama Mall in Panorama City, the Wards store was quiet while the original Los Angeles Wal-Mart bustled with shoppers.

Inside Wards, 49-year-old Jerry Triska, who had come in to pay off a credit card charge, said he grew up with the company but was not surprised by its demise. He said he and his wife now come to Wards only for the occasional sale.

“We’re usually at Kmart or Target,” he said. “The prices are better over there.”

The announcement was news to some. Wards employees at the Panorama City store had not heard of the chain’s closure--apparently not even the personnel department. Pacoima resident Michael Cooks and his girlfriend walked out of the store with employment applications. They said they’d been told to fill them out and check back soon, as the store was definitely hiring.

“I’m surprised,” said Cooks, 40. “My mom shopped here all the time.”

Dan Jewell, 49, an appliance salesman who has worked for the company for 22 years, said holiday sales were strong in his department and surmised that reports of the chain’s demise was probably a hoax.

“This is the slow season for appliances, and I’ve been doing great,” he said.

“It’s changed only for the better,” Jewell said. “We’re more efficient than we used to be. We’re cleaner, and our product movement from store to store is very efficient. It wasn’t like that in the old days.”

The company had its ups and downs over the years, he said, but from Jewell’s perspective, managerial fine-tuning in the last three or four years had resulted in positive changes.

Those changes came with many owners. In the 1960s, Wards merged with Container Corp. of America and later was acquired by Mobil Oil.

In 1988, GE Capital helped finance a $3.8-billion leveraged buyout, led by senior management. By 1995, the company’s earnings dropped by almost 90%.

Goddu joined Wards in 1996 and, failing to refinance $1.4 billion in loans, filed for bankruptcy in 1997. The company closed 100 stores, developed a new format and attached the jazzed-up name “Wards.” GE Capital bought the company outright for $1 billion in 1999, bringing it out of bankruptcy. For fiscal 1999, Wards reported $3.2 billion in sales. For the last year it reported earnings, in 1998, the company had sales of $3.6 billion but still lost $971 million.

The company’s action upset some patrons like Deggendorfer, who often goes to the Ward’s store in Huntington Beach. “You don’t think an established company like this would go out of business,” he said, though he recognized the competition from mass merchants like Wal-Mart and Costco.

He still buys his clothing at the store, but he no longer can find the outdoor, fishing and hunting equipment he used to purchase. His Ward’s store doesn’t carry that merchandise any more, he said.

Contributing to this report were Times’ correspondents Gail Davis, Alex Murashko, Richard Fausset and Traci Isaacs, and Bloomberg News.

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Storied History

Montgomery Ward, one of the largest privately owned retailers in the United States, announced Thursday that it will close its doors. Here is a look at the company and its history: n 1872: Aaron Montgomery Ward and his brother-in-law establish the first dry-goods mail-order catalog business with $2,400 in capital. The first catalog is a single-sheet price list of 163 items.

1883: Company’s 240-page catalog lists 10,000 items.

1928: Opens 244 stores. By 1929, it has 531 stores.

1931: Sewell Avery becomes CEO, correctly predicts the Depression but is convinced a recession will follow World War II.

1939: Advertising copywriter Robert L. May creates “Rudolph the Red-Nosed Reindeer” for a poem to be handed out to children.

1945-1955: Avery refuses to open new stores. Company’s sales shrink 10%, Sears’ sales double.

1985: Company unveils specialty store strategy and discontinues catalog operations.

1991: Resumes mail-order catalog business, sells it in 1996.

1994: Montgomery Ward opens first Electric Avenue & More stores, acquires New England retail chain Lechmere.

1997: Company files for Chapter 11 bankruptcy.

1998: In an attempt to revitalize the chain, company introduces new store format with new “Wards” moniker.

1999: GE Capital Services purchases Montgomery Ward, brings it out of bankruptcy.

2000: Montgomery Ward announces plan to file for Chapter 11 bankruptcy protection, shutter 250 stores in 30 states.

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Sources: Associated Press; Hoover’s Business Profiles; Company financial documents

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Research by NONA YATES/LOS ANGELES TIMES