Since this is the season for a ritual called The Annual Stockholders Meeting, most board chairmen are preparing to become hostages of their owners for a few minutes or a few hours.
Annual meetings have been dictated since the era of common law as the forum where directors are to be elected and certain important decisions made that require approval by the owners or their representatives. At private companies that do not sell shares to the public, the required annual gatherings pose few problems but legal paperwork. At publicly owned corporations, the annual meetings are said to be evidence of corporate democracy at work.
For some firms, the theory works, Marriott Corp., to cite one local example, usually attracts several thousand stockholders to annual meetings and the sessions often are like a huge family clan gathering. They are lively, with a mix of tough questions about corporate decisions, praise for some recent accomplishment of the Marriott family and advice to management on needed menu improvements at a Hot Shoppes in Wheaton Plaza.
At most companies, however, annual meetings are timid affairs. Some are held in quarters small enough to discourage attendance.In any event, virtually all important corporate decisions are made at separate meetings and not out in front of the stockholders and press.
So, while many chief executives and their subordinates fret about these meetings, they seldom are confronted with surprises. President Herbert Haft of Dart Drug Corp., a publicly owned company, has managed to guarantee there will be no surprises. During a quarter century of business, including 20 years with public stockholders owning part of his company, Haft never has had to do battle with a persistent annual meeting questioner. Although Dart doesn't invite stockholders to an annual meeting (a custom at a handful of other firms, too), necessary formalities are conducted each year at a private session for which the invitation list is limited primarily to family owners who control the firm.
Area stock brokers generally give Dart low marks for investor relations, citing the company's low dividend rate and lackluster stock performance over the years. Dart officers also shy away from the press. sBut Haft readily agreed to an interview and Washington Business was able to ask some of the questions that might have come up at an annual meeting.
Dart has good news to report along with a long history of working for the consumer in fighting fixed prices (all the way to the Supreme Court) and establishing the right of retailers to set their own prices below suggested levels of manufacturers.
Dart practices discounting on the best-selling items with a vengeance that makes the company somewhat of a maverick in retailing and Haft somewhat unpopular. But Dart's success is evident. According to trade estimates, Dart hardware/home center sales are second in the Washington market to Hechinger Co.
But the bigger news is that Dart's new Trak Auto stores (7 open now, maybe 18 by year's end) is taking over as retail auto parts leader here; Dart's Crown books division has become the area's largest book retailer, after fending off attempts by book publishers to stop Haft from cutting prices on best-sellers (18 stores open or opening in the next few days) and in the basic retail drug business, some industry estimates of sales volume put Dart ahead of Peoples Drug Stores and Drug Fair in the metropolitan area alone but not in the wider region.
"We're moving, gaining market share, providing merchandise at lower prices on a continuing basis," Haft stated. A key to his success, Haft added, is that Dart stocks top brand names (such as Hallmark in greeting cards), which few discounters have. He shuns production of house brands unless Dart can offer the same quality as top national brands as well as a substantial price savings. On shaving cream, for example, "quality-for-quality there's no substantial savings with generic brands," he contended.
In the year ended Jan. 31, Dart profits were a record $3.56 ($2.04 a share) on sales of $231 million compared with earnings of $2.48 million ($1.35) on sales of $208.6 million. Like most area businesspeople, Haft does not expect a serious economic slowdown this year. "The world has not come to an end, the public is buying, they're just more conscious of value and price," he said of consumers. At Dart, the current buying mood has been translated into booming auto parts sales (devices to increase mileage) and an upsurge in nonfiction book sales (how to improve one's self, infaltion-fighting, real estate values are popular topics), to cite some examples.
On stockholder relations, Haft said: "I have an open mind and an open door and that accomplishes the same thing as a formalized annual meeting where the turnout would be minimal."
Haft said management has no intention of buying back all of its outstanding shares and "going private." In February, Dart offered to buy back 200,000 class A common shares or 13 percent of those outstanding because the stock was "undervalued." Dart picked up 119,000 shares the same way a year ago and Haft or his family now control more than 30 percent of the class A shares. He and his family also own all class B stock, which is vested with total voting power in the company (except on increasing authorized shares of either class, which must also be approved by class A owners).
LAST WEEK: The possibility that interest rates had peaked after a bitter, costly winter began to have an impact on many investment decisions. Stock prices, as measured by the Dow Jones index of 30 blue chips, gained 7.42 to 791.55 for the week after a 15.75 selloff last Monday. The Johnston, Lemon index of 30 Washington blue chips finally reversed a downward plunge that started in February, rising to 103.79 from 99.652 the previous week.
Among regional stocks, volume leaders were Virginia Electric & Power, up 50 cents a share to $11 with 722,000 shares traded, primarily because of its high dividend yield attraction when other investment returns may have peaked; Federal National Mortgage, down 62.5 cents to $13.625 on a volume of 649,000, after reporting a sharp decline in earnings and MCI Communications, up 37.5 cents to $6.375 to 587,000 shares, as a major trial on MCI's antitrust suit against American Telephone reached a crucial stage in Chicago.
Macke Co. was the biggest percentage gainer, up 20.8 percent or $1.375 to $8 a share, as the possibility of a deep recession dimmed and the outlook for food service and office furniture sales improved. On the down side, Washington Post was off 5.8 percent or $1 to $16.25, after company Chairman Katharine Graham told analysts here that first-quarter earnings will be down substantially, mainly because of expense associated with new projects.
Money markets and bonds staged a strongrally because of what the people at Commercial Credit Co. in Baltimore described as "the widely held belief that economic activity has started to drop sharply," as March retail sales fell 1.3 percent (mostly autos).However, Commercial Credit and Washington business leaders cautioned that the apparent weakness may be overstated and that interest rates may continue to rise. One D.C. executive, engaged in banking and credit, said the prime interest rate for blue-chip borrowers probably will go to 22 percent.
In commodities, precious metals prices climbed early last week as investors saw rising tensions in Iran and the threat of U.S. military action. But prices retreated slightly Wednesday through Friday. Grain prices rose after reports that the U.S. purchased wheat from farmers at prices high above the cash markets.
Money market mutual funds, meanwhile, suffered the first decline in assets in 27 months for the week ending March 26, according to Donoghue's Money Fund Report.