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Business

Revolving door at top may have hurt Kaufmann's

| Friday, May 10, 2002

Kaufmann's was once a division near to the hearts of the uppermost May Department Stores Co. brass.

In recent years, however, Kaufmann's has been a revolving door for May executives shipped into Pittsburgh from other divisions, and almost as quickly shuffled back out to bigger assignments.

The official word from May is that Pittsburgh never stood a chance to host the combined Filene's/Kaufmann's department store division because Filene's 45 New England stores rang up $200 million more in annual sales last year than the 51 Pennsylvania, New York and Ohio stores under the Kaufmann's nameplate. May's decision to combine the two divisions, announced last week, will mean the elimination of 1,200 jobs in Pittsburgh.

The trend of higher Filene's sales reaches back five years.

A case can be made that Kaufmann's top leaders during that same five-year span were relatively new to the chain with little experience in the local market, allowing Kaufmann's performance to slip in relation to its sister chain in Boston.

Jack Mullen, Kaufmann's senior vice president of sales promotion, says the May company, with eight divisions (consolidating to six by August), is structured to be capable of providing talented executives promotion from one division to another to gain seasoning.

Greg Drahuschak, a stock market analyst at Janney Montgomery Scott in Pittsburgh, on the other hand, said promoting within a single division, particularly in retail, where having a sense of the local market is critical, might be a smarter way to operate.

"Knowing the culture of the company you're dealing with is very important," he said. "If you have had the chance to learn the market from the bottom up — from stock boy to sales clerk to apparel buyer — so much the better."

Until 1998, May had been led by Chairman David Farrell for 19 years. Farrell made his bones in the retail industry in a career that started in Pittsburgh in the 1950s. He rose through Kaufmann's ranks, serving as president from 1969 to 1975 before earning his promotion to May headquarters in St. Louis.

On the other hand, current May Chairman Gene S. Kahn formerly served as chief of Filene's operations in Boston.

After Farrell's departure, Kaufmann's was led for nearly 20 years by Chief Executive William T. Tobin, who also climbed through the Kaufmann's ranks, and helped grow the chain beyond western Pennsylvania, largely through acquisitions of smaller chains in Buffalo, Cleveland and other areas in New York and Ohio.

In just five years sinceTobin's retirement in 1997, three different men have held the chief executive post at Kaufmann's — none of whom had any prior experience within the chain. Tobin was replaced by Richard Bennet III, who left for St. Louis less than three years later to become company vice chairman. Bennett had come to Kaufmann's from another May subsidiary.

Bennett was replaced by Craig Israel in May 2000. Israel had been a senior vice president at Foley's in Houston before coming to Pittsburgh. Israel's stay in Pittsburgh lasted just one year before he went on to lead another May chain — Robinsons-May.

He was replaced last year by Andrew Pickman, previously a long-time Filene's executive, who will move on to Foley's in August when the Kaufmann's administration facility closes.

Kaufmann's said Thursday it has hired Pittsburgh outplacement firm Lee Hecht Harrison to provide employment assistance to some of the 1,200 workers who will lose their jobs.

Two years ago Lee Hecht helped relocate hundreds of StarKist employees from the Cincinnati area to Pittsburgh as H.J. Heinz Co. consolidated its North American business units here.

"Kaufmann's is taking a sensitive approach to caring for its employees," said Rebecca Sohn, director of Lee Hecht's Pittsburgh office.

According to a filing with the state Department of Labor and Industry, the first group of employees to be let go will be 347 people in Kaufmann's credit center, including 278 collectors, 43 executives, 10 clerical employees and eight hourly supervisors, among others.

Those jobs will cease July 12.

Lois Huff, a consultant for Columbus, Ohio-based Retail Forward Inc., says that in the long term, May is going to need a national brand to succeed, which would mean further consolidation of its divisions and the possible elimination of store nameplates.

There are currently no plans to scrap the Kaufmann's name, according to May.

"Long term, department stores have to undergo some radical changes. There are a lot of economies of scale to be obtained for department stores that specialty stores like The Gap and Victoria's Secret enjoy," she said.

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