"Beans and jeans."
That's what one local stock-broker said this week, discussing the surprise decision by Giant Food, Inc., to discontinue its department store business here, started in 1961.
The food chain obviously is retrenching a bit, throwing over-board not only $45 million in annual sales at its four major stores but also the loyalty of customers who appreciated good prices on hard goods and low prices on durable apparel.
Company officers hope some of these sales will be rung up on the cash registers at smaller general merchandise departments attached to many area Giant supermarkets, which will continue to be operated.
Moreover, Giant plans continued expansion for one relatively young non-food business - a successful chain of 26 Levi jeans stores, the Pants Corrals. Another venture in non-food retailing, Giant catalog showrooms, ended two years ago.
Thus, beans and jeans will be getting more attention from Giant management and the drain on profits that developed at the four department stores - some $1 million in the 44 weeks ended Dec. 31 - will be halted. By using these funds on more profitable lines, the company will marshal resources to keep fighting for its share of the local food dollar.
When officers of Giant decided to expand beyond traditional food retailing in the early 1960s, they were aiming at more stable profitability for their company through diversification. The food business, with traditionally slim profit margins, also is volatile. Good years are followed by bad, as unseasonal weather causes sharp spurts in food prices or bumper crops bring cheaper goods a few months later.
Although Giant seldom provided separated data on its food and non-food lines of business, the department store operation apparently was profitable enough to encourage the addition of two new stores in the early 1970s, in Bowie and Tysons Corner.
Soon, however, a number of factors began to indicate a grim future in the department store business here - at least for those firms without th higher profit margins associated with more affluent goods. Recession and inflation sharpened the fighting spirit and marketing tools of major mass-market retailers, and only the strongest are going to survive in a world increasingly dominated by K-mart, Wolco, Zayre, Memco, J.C. Penney, Sears and Ward's - all of which happened to target Washington as a market where they wanted to expand in the 1970s.
As the mass retailing expanded, Washington's rapid population growth came to a halt. Now there will be less growth of the market-place in future years to be divided among more retailers. Even though Washington's relative affluence has been well documented and the propensity to spend here is evident, the day when the area was "over-stored" had to arrive.
Rather than pour money into a venture that would have to be expanded to become profitable - if then - Giant will cut its loss and concentrate on food stores and adjacent pharmacy, general merchandise garden centers and the jeans chain.
The decision may cost up to 450 Giant employees their jobs, but the firm said it will consider department store workers for positions elsewhere that become available through attrition, turnover and newstores openings.
For Giant stockholders, the news from the company president Israel Cohen is the annual profits in the year ending Feb. 25 may be trimmed by about a dollar per share - reflecting the costs of selling department store merchandise at reduced prices starting this week, the cost of the closings and a transition period during which Giant hopes to find tenants to lease the four properties involved - West Lanham, Rockville Pike, Bowie and Tysons.
Sales for the full year were estimated by Cohen at $980 million compared with $896 million a year earlier, when Giant profits totaled $10.6 million ($3.21 a share) In the current fiscal year Giant's earnings have been ahead of the previous year at $2.25 a share in the 36 weeks ended Nov. 5 compared with $2.02 a year earlier.
If the rate of earnings growth continues in the final weeks of the fiscal year, the department store writeoff of perhaps $1 a share could mean that annual earnings per share will not be substantially reduced from last year.
Cohen said proceeds from the going out of business sales will be added to working capital ($41 million on Nov. 5) and later will be used to step up installation of computer checkouts at grocery stores, to construct a new frozen food distribution facility, and to increase the rate of expansion for food-pharmacy units.
Despite the good fact Giant management tried to show in the wake of the department store decision, however, the sudden move stirred some stockholders to sell their shares yesterday. Giant stock on the American exchange fell $1 to $17.50 on a volume of 2,100 - not much in today market but unusual for the lightly traded Giant, which averages 200 shares traded on many days.