The financially struggling Montgomery Ward & Co. announced yesterday that it is getting out of the catalogue business, which launched the nationwide chain 113 years ago.
As part of a major reorganizational campaign aimed at renewing the profitability of the nation's sixth-largest retailer, Ward's said it would discontinue its catalogue operations by the end of 1986, laying off 5,000 employes, or about 6 percent of its work force.
The company will go ahead with its planned distribution of fall and Christmas catalogues this year, officials said. But its last official catalogue will be issued in December and will be followed by a number of special liquidation catalogues in the spring.
"The catalogue business has lost money since 1980 and has shown no promise of change," said Ward's president and chief executive, Bernard F. Brennan.
Despite circulation of 5 million and revenue of $1.2 billion last year, the catalogue operation has been unprofitable since 1979, losing an average $50 million a year, Brennan said. Since 1979, the catalogue division incurred a total loss of $257 million, Ward's officials calculated.
The elimination of the catalogue division is part of a major effort to eliminate all of Ward's unprofitable lines of business to permit the retailer to become a profitable, independent entity, free of any financial support from its parent, Mobil Corp., which bought the company for $1 billion in 1976.
Ward's has been a money-loser for Mobil, which has had to pour more than $600 million into Ward's to offset more than four years of losses. Finally, in 1983, Ward's earned $40 million; in 1984, the retailer posted a $53 million profit on $6 billion in revenue.
As a result, Mobil last May made it clear it wanted to reorganize Ward's to make it profitable so it could be sold or stand on its own without any support from its parent. To meet that goal, Ward's earlier this year announced it would shut down its 300 catalogue stores, eliminating about 1,200 jobs nationwide. It also announced plans to sell its 44-store discount chain Jefferson Ward's, and said it would get rid of pieces of its retail, credit and insurance business that couldn't contribute to profitability.
Ward's got started in 1873 when Aaron Montgomery Ward, a traveling peddler, sent a single-page list of ready-to-wear clothes to Midwestern farmers who were angered by the lack of selection and high prices charged by local general stores. Last year its catalogue totaled 300 pages.
"It may be the end of an era, but I view it as the beginning of a new challenge for Montgomery Ward," said Brennan. "Discontinuing the catalogue business gives us greater flexibility to accelerate development of the Montgomery Ward of the future -- a group of value-driven specialty stores capable of financial independence from Mobil. The substantial cost savings, operational efficiencies and cash flow improvements we expect to realize will strengthen our balance sheet and facilitate our five-year investment plan to convert our stores to the specialty-store concept."
The first of Ward's new specialty stores is scheduled to be unveiled in Annapolis in two weeks. Annapolis was chosen because it was one of Ward's best markets.
Instead of being a full-service department store, Ward's Annapolis store will be designed as a series of seven different specialty departments within a single store. The specialties will include apparel, appliances, automotive, electronics, home care, home furnishings and recreation and leisure.
Brennan also revealed yesterday that Ward's plans to experiment with smaller stores than it has traditionally operated, opening three small stores later this year that will hold only a couple of specialty departments under one roof. These will be the first new stores Ward's has opened in several years.
The elimination of the catalogue operations came as no surprise to financial analysts or mail-order experts, who hailed the move.
"This is a very, very positive step," said financial analyst John S. Landschulz of Mesirow & Co. "The company has limited resources, so it must put it where it can get the best return -- and that's not the catalogue business."
Mail-order expert Maxwell Sroge, who is a consultant to a number of mail-order firms, called the move "long overdue." The catalogue, along with those issued by Sears, Roebuck & Co. and J. C. Penney Co., "are the dinosaurs of the mail-order business. Almost 80 percent of the catalogue business is done by specialty catalogues; the giant catalogue is the vestige of the past.