Take Another Look - at Zayre!

(In our case, one last look at Zayre for the time being, with some nice photos from 1981.) Ah, the asterisk. Throughout history, nothing else has etched “Buy! Buy! Buy!” in the mind of the American consumer in quite the same way. Even today, its hypnotic pulling power is employed by a wide range of entities, from gargantuan retailers to well-loved retail fansites. And from the late 70’s through the end of its existence, the asterisk was Zayre’s calling card, with an association that endures even today. For a time, it actually helped.

By the mid-70’s Zayre, a billion-dollar company by that time, was in trouble. Profits were down sharply, stockholders were upset, and Zayre’s image with the buying public was a mess. The country was in the midst of a gloomy recession, which mortally wounded a number of discount retailers. More than a few of Zayre’s problems were self-inflicted, however, as company chairman Sumner Feldberg later admitted, with brutal candor, to the New York Times – “Our stores were not exciting and each did relatively little volume…attempting to stay alive, we squeezed the payroll and this created low operating standards for the stores”.

In a bid to reverse Zayre’s fortunes, the Feldberg family turned the company reins over to an outsider for the first time. In 1978, Maurice Segall, a Canadian-born vice president of the American Express Company and former executive of Steinberg’s, a large Quebec-based grocery/discount chain, was installed as Zayre’s president and CEO. Attracted by the prospect of a turnaround for the Zayre stores, but even more so by the potential of the fledgling T.J. Maxx chain, (a then 12-store Zayre subsidiary launched in 1976)and the 200 Hit or Miss stores, Segall jumped in and set about the task.

One of Segall’s most successful strategies was to strengthen Zayre’s presence in urban markets, which by 1983 contributed nearly 30% of the company’s sales and an astounding 60-plus percent of its profits. Already having a strong established urban base of Zayre-built stores, the company benefited from the flight of other chains from these areas, including one Chicago example cited by the Wall Street Journal, where Zayre took over a May Company-owned Venture store that had just posted a loss on $7 million in sales. After a year of operation as a Zayre, the same store was profitable on nearly double the sales. Smart merchandising played a major part, of course –the company scaled down its home repair and lawn mower departments, owing to the fact that many urban dwellers rent their homes. At the same time, Zayre significantly expanded its apparel offerings in these stores, providing a wide clothing selection for areas where store choices were often limited.

Segall’s master plan for Zayre included some relatively minor tweaking of the company’s geography, coupled with a major revamp of its store mix. Zayre pulled out of the St. Louis and Minneapolis markets altogether. The Warwick Shoppers Worlds, Bell/Nugents, and fabric stores were all disposed of. A major ramp-up of the Hit or Miss and T.J. Maxx store programs was launched, with the T.J. Maxx store count ballooning from 12 to nearly 170 units by 1985.

And of course, there was the “extreme makeover” of the Zayre stores themselves, a forty-million dollar revamp phased in over a four-year period beginning in 1978 (although it had been “previewed” on a couple of stores a year or so earlier). The orange-and-brown rainbow color scheme and the venerable asterisk would become familiar sights in communities (and in TV commercials) throughout all Zayre-dom. It was an outward sign of a new optimism at the now very profitable Zayre. For his efforts, Segall was awarded the chairman’s title as an addition to those he already held in November 1986.

Zayre’s “second golden age” proved to be short-lived, as the virtual bottom fell out in 1988. From a nearly $130 million operating profit the previous year, Zayre posted a disastrous $13.9 million loss. The late 70’s remodels were by now looking old. Zayre had become overly dependent on deep-discounted specials, to the point where customers spurned anything the chain sold at regular price. Most troubling were the apparel lines, where Zayre was losing ground rapidly to Kmart’s Jaclyn Smith line and also to Dayton-Hudson’s growing Target chain and their “Honors” line, an early example of that company’s affordable trendsetting prowess. In a May 1988 article outlining Zayre’s woes, the Wall Street Journal quoted a college student named Marie as she pointed at the Zayre store in Cambridge, Mass. “Look at it,” she said. “If my friends saw me coming out of a place like that, they’d never talk to me again”. Ouch.

By this time, it was clear to most that the real gem of the Zayre organization was the TJX Companies (T.J. Maxx), in which Zayre held an 80% percent stake, having sold a chunk of it to the public in 1987. Talk of a corporate breakup of Zayre began to circulate. It took a hostile takeover attempt by the infamous Haft family to actually bring it about. In August 1988, Herbert Haft announced his family’s intention to buy a major stake in Zayre. In the previous couple of years, the Hafts had made similar runs at Safeway and Stop and Shop, among others, and at the same time they pursued Zayre they had Kroger firmly in their sights as well. In each instance these companies were forced into a defensive position, with Safeway and Stop and Shop being taken private (Safeway later went public again and Stop and Shop would sell out to Royal Ahold) and Kroger forced to restructure. Although the Hafts never ended up controlling these firms, in most instances they walked away with a pile of cash, which was probably their intention in the first place. Zayre’s response was to break up the company. In mid-September, Zayre announced its sale of their discount (Zayre-branded) stores to Ames Department Stores Inc. of Rocky Hill, Connecticut, in a cash and stock transaction.

Ames’ purchase of Zayre made them the third largest discount chain behind Wal-Mart and Kmart, but it placed a tremendous strain on Ames, like “a guppie (sp) swallowing an Atlantic salmon”, to once again quote from the Journal. Ames closed 74 underperforming Zayre stores and (mildly) facelifted the remaining 315. Beyond the name change, which was applied to most but not all Zayre stores to mixed opinion, Ames failed to appeal to Zayre’s small but loyal band of customers in some important ways. They discontinued the Zayre credit card, through which 5.5% of Zayre sales had come, not an insignificant percentage. The tradition of keeping Zayre’s stores open 24 hours a day in the days leading up to Christmas was abandoned. Most importantly, Zayre’s “promotional” approach – special sales, mailed circulars, markdowns and TV ad blitzes was discarded in favor of Ames’ “everyday low price” approach. In April 1990, with the strain of the Zayre acquisition lumped in with the generally poor economy of their core New England market, Ames filed for Chapter 11 bankruptcy, the first of two times they would do so. Two years later, Ames sued the advisers who promoted the Zayre transaction. In 2002, Ames closed their doors for good. The TJX Companies are still going strong.

Just for fun, here are a few Zayre commercials from their “renaissance period” - The “Take Another Look” campaign from 1978, a great 1980-ish Chicago Grand Opening ad featuring the fastest stockers in the world, and a Christmas ad from 1984. And here’s a link to a great post on Eddie’s Rail Fan Page, featuring a great night shot of a 60’s vintage Zayre revamped to the 1978 image, right down to the asterisk door handles! This empty parking lot shot brings back memories of driving home on late winter nights in my early 20's, pondering the great questions of life, like this bit of eighties profundity I read recently (can't remember where) - "Should I stay or rock the casbah?"