"From a practical point of view, no one really needs anything in America," said A. Alfred Taubman, the Detroit multimillionaire who last year became the new owner of Washington's Woodward & Lothrop Inc.
"You don't need another store. You don't need another dress. You don't need another apartment. You really don't need anything," the 59-year-old shopping center developer said. But, he noted in an interview last week, there are times when opportunities arise, even for those who are well provided for, opportunities so good they are impossible to pass up.
"I didn't need a Woodward & Lothrop," he said. But when the chance to buy the 16-store chain came up last year, "I felt I could be helpful, that I could settle a difficult situation for the company. I felt I could stabilize the company."
Initially, Taubman's offer to buy Woodies only created more difficulties for the company, as dissident shareholders -- all descendants of the chain's two founders -- opposed his bid, arguing it was too low.
But after a vociferous and costly four-month battle, Taubman bought what he now proudly calls "the strongest retail chain in the strongest retail market in America" for $227 million.
Despite the shift in ownership for the 104-year-old retailer, Taubman said its customers and employes will see little, if any, change in Woodies' operations.
The chain will continue to be run by the three executives who have managed it for the past five years: Edwin K. Hoffman, David P. Mullen and Robert J. Mulligan.
"It may be surprising, but I don't have any plans in the future to change anything," Taubman said. "I don't plan on spending a tremendous amount of personal time there or to be personally active."
The wide-ranging interview in his New York office -- one of several offices he has around the world -- was the first time Taubman had spoken with the press about Woodies since he made his move to buy the firm nearly nine months ago.
Among the points he made:
* Woodies' growth, for the near term, will come from within, since the company has no immediate plans to open new stores. Nor does he have any plans to change the retailer's traditional image.
* Taubman currently has no intention of selling any of Woodies' valuable real estate, although he may use some of the property as collateral to obtain new financing for the company.
* Woodies' White Marsh unit near Baltimore continues to be a problem store, failing to attract a sufficient number of shoppers to make it profitable. But the decision on whether that store should be closed is up to Hoffman.
* The company is drawing up new development plans for the parking lot behind its Chevy Chase store. Despite continued community protests over the lot's development, Taubman says Woodies will build some sort of structure there -- with any luck, one that will satisfy local citizens.
* When Taubman made his bid for Woodies, he never expected such strong opposition from the Woodward & Lothrop families. But in the end, he said, the battle cost them a substantial amount of money. "Unfortunately, the family were the real losers" -- even though their opposition forced Taubman to pay more for the money than he had proposed initially.
The day last week when Taubman talked about Woodies was also the day he and other U.S. Football League owners were gathered in his New York office to name Harry Usher the league's new commissioner. The interview was punctuated with frequent interruptions from other USFL owners, who thanked Taubman for overseeing the change in commissioners.
Despite the interruptions, Taubman switched easily from subject to subject, keeping careful track of where he left off -- perhaps a necessary skill for a man who owns an increasing number of diverse businesses.
Besides Woodies, Taubman is the majority owner of the USFL's Oakland Invaders -- a team that just merged with Taubman's money-losing, but 1983 pennant-winning, Michigan Panthers. "The only thing I have learned from this experience is how to make a small fortune," he recently told a group of students at the Harvard Business School. "You start with a large fortune, and then buy a football team."
He also owns Sotheby's, the world's largest international art auction house, which he purchased in 1983 for about $125 million.
The nation's oldest fast-food franchise, A & W Restaurants, also is part of his portfolio. Since he purchased the chain in 1982, Taubman has been trying to upgrade its 700 units, to turn them into the fresh-food kings of fast-food restaurants. The food served by A & W's competitors provides a "frozen protein fix," Taubman said. The strength of his competitors, he added, is their "consistent mediocrity. . . . To the consumer, that's an important promise.
But the most important part of Taubman's portfolio, by far, is his core of 20 regional shopping centers, including two in this area: Fair Oaks Mall in Fairfax and Lakeforest Mall in Gaithersburg. Scheduled for completion soon is yet another regional center, the Marley Station Mall outside Glen Burnie, 40 miles from Washington. Its three main stores will be J. C. Penney Co., Bamberger's and The Hecht Co. "It doesn't include a Woodward & Lothrop," Taubman said.
It is an impressive collection of investments, especially when one considers that Taubman started his own commercial construction company in 1952 with a $5,000 loan. When he started building regional shopping centers, he decided to ignore the pattern established by his competitors, such as the Rouse Co., and build malls with 150 to 200 stores -- three times the size of his rivals.
"By offering a critical mass of chain and local merchants, we could dominate a market," he reasoned. Consumers selected his malls, he said, because "even though the trip to the center might be a slightly longer drive, all shopping needs and opportunities could be met in one stop." TT hroughout his career, Taubman said, he has operated on T the philosophy that "a shopping trip involves fantasy, fun, entertainment and leisure-time activity. In fact, the purchase is often secondary to the experience."
What's more, he recently told the group of Harvard students, "our consumer society is not driven by the satisfaction of basic needs. It is fueled by the fantasy, flight and excitement of a possible purchase. People will buy, on impulse, products and services they feel might make them happier."
That is the basic principle under which Taubman has operated. Today, those principles have made him one of the richest men in America. Forbes magazine estimates his net worth to be more than $500 million.
But Taubman doesn't like to talk about his wealth, once telling an interviewer, "The only way I can evaluate my financial worth is by dying, and I'm not going to do that."
While his investments may appear to be eclectic, Taubman repeatedly has said that they make sense when grouped together because they all involve retailing -- selling some sort of product, whether it be football, fine art or root beer, to consumers.
For this reason, he said, his acquisition of Woodies is a perfect fit.
Often described as catering to the most conservative segment of Washington's already very conservative market, Woodies is the area's leading department store.
And Taubman has no plans to change that image any time soon. "I don't see any quick changes as of right now. I think the formula of the store is excellent. It has the customer loyalty it has because of the formula, and I can't conceive of any changes in that. . . .
"There is a tendency, especially in the retail business, to make things different -- to mimic the avant-garde leaders," he continued. "That has generally proved to be an error in the retail business. A store has to create an independent image -- it has to reflect the needs and demographics and fashions of its customers. What might be popular and exciting in New York could be totally wrong in Washington."
Washington's unique fashion code makes it a good retail market, Taubman said -- especially considering the large influx of new workers every four or eight years. Women from Los Angeles, for example, who come to Washington to make a career in politics will find they need a whole new wardrobe, Taubman officials note. That means money to retailers. What's more, unlike cities in warmer climes, Washington has four distinct seasons, which means retailers have more opportunities to sell clothing.
These factors may explain why the metropolitan area continues to attract new retailers, Taubman said.
Yet competition from newcomers doesn't concern Taubman, who noted that Woodies is the oldest department store here. "We're there with 16 stores, with some only five miles apart. We're in all the right locations; anyone coming in to compete will get the second-best locations -- and at a higher cost."
Taubman said the possibility of expanding Woodies "has been discussed. Certainly there will be opportunities, but there are no immediate plans for expansion," around the area. He also said that opening stores outside the area -- perhaps in some of his other regional shopping centers -- "is possible. . . . Certainly we will look at that opportunity, but we have no immediate plans." II nstead, for the time being, the company has decided to set I aside a substantial amount of money to continue to upgrade Woodies stores "to make them more attractive and more exciting and expand their inventories and services."
For now, he said, "growth is going to come from within."
However, if Woodies eventually does decide to expand, it is unlikely that it will abandon the large store concept, despite the lower costs of building smaller stores.
"It is difficult to down-size a store such as Woodward & Lothrop and still have all the goods and services customers have grown to expect," he said. "Perhaps there is a place for smaller stores in smaller markets, but generally it is really difficult to build a store much smaller. The customer is ultimately disappointed."
Woodies itself has been disappointed by sales at its White Marsh store, Taubman said, admitting industry rumors that the chain is not doing well at Baltimore mall.
"It is not a strong market; there is a real lack of people out there," he said. Bamberger's is doing better business, he contended, "because it is a unique store, the only one in the market."
Although business did improve last year, "there has always been a question as to whether the store remains opened or closed. . . . It is for Mr. Hoffman and his organization to make the decision to continue to make it into a profitable store or close it."
Meanwhile, Woodies is studying ways to make one of its star stores -- the Chevy Chase unit at Western and Wisconsin avenues -- even more profitable.
"I have a lot of familiarity with that store," he said with a smile, noting that his very first involvement with Woodies dates to an attempt 12 years ago to develop a retail-office complex on the parking lot behind that store. Community opposition to that development -- which has continued to this day -- prompted Taubman to bow out. NN ow that he has bought Woodies and is once again N involved with the Chevy Chase store, Taubman says he is determined to come up with an acceptable development on that site. "My feeling is that the area deserves more than just that big parking garage. We're looking at the possibilities from scratch" -- the most recent plans to built two six-story office buildings have been thrown out.
"Someday, something is going to be built there," he said emphatically. "It's just a question that it be handled in an intellectual way with community support."
Taubman said he is equally determined to hold on to Woodies' valuable real estate. The dissident Woodies shareholders who fought Taubman's bid argued that he was buying the store only to obtain the property at a low price. Taubman would then sell it off at a handsome profit, the dissidents predicted.
But Taubman said that is not his intention. "If we sell off the real estate of the stores, it's like selling off one of my arms. The stores are our business. We'd never considered selling the stores."
Yet, he added, "we might finance the stores. When the company was public, it used its stock as a means of financing. Now, as a private business, we might finance the stores. But we have no intention of ever selling them."
Nor does he intend to turn around and sell the company to another retailing chain, as some employes still fear. "I wouldn't have bought the company if I intended to turn around and sell it. . . . We have no intention of selling the business we just bought."
Although he says he is not bitter about the protracted and nasty battle that ensued after he made his offer for Woodies, his voice rose as he talked about the four months of legal wrangling with Woodies management, on the one hand, and the dissident shareholders, on the other. In opposing the merger, the shareholders argued, among other things, that the $59-a-share offer was far too low when the market value of the real estate was figured in.
But Taubman disagreed. "I was not getting a real bargain. Ignored in all the controversy was the fact that the purchase price was really more than the $227 million I paid the shareholders. I also paid off Woodward & Lothrop's debt" -- which he said amounted to more than $60 million.
Taubman said he was "quite surprised" by the opposition. "I didn't expect it. First, I felt it was a very fair price. Also, they the dissidents had people on the board of directors who were representing them. They had an opportunity to react. But up to the time I made my bid , everything had received a favorable reaction. . . ."
The battle has not diminished Taubman's willingness to look at other retailing acquisitions down the road.
"We're constantly looking at things," he said. "We're interested in any kind of solid, traditional business that has a license of market share like Woodward & Lothrop does. . . .
"I'm very proud to be the owner of Woodward & Lothrop. That's the top and the bottom line."