Bounty from Britain

In 1909 the late Frank Winfield Woolworth might well have looked back with pride upon the 30-year history of his store chain. From a single unit in Lancaster, Pa., Woolworth stores had multiplied until in that year they numbered 590. Sales had grown to the startling total of $50,000,000 a year. And with possible sites for stores all over the U. S. Mr. Woolworth might well have faced the future with a justified smugness. Yet in 1909 Mr. Woolworth, a devoted worshipper of Napoleon, showed brilliant commercial strategy by opening a store in Liverpool. F. W. Woolworth & Co., Ltd., as the British unit was called, grew until last year it operated 428 "3d to 6d Stores." During most of the past two decades the earnings of the parent company have been jumping far faster than those of the British unit. Since 1927, however, only the British earnings have kept Woolworth Co. from reporting a decrease in its own figures. And when last week Woolworth shares again neared their May high of $72 (remarkable because it bettered by 25-c- the 1930 high) the reason was that the accumulated reserves of the British company were to be capitalized. Had Mr. Woolworth lived until last week, nothing could have pleased him more than this timely reward of his generalship.

Many a feature-writer has culled extra money by writing of the romance of Mr. Woolworth's rise. Yet there was little romance to it. He was a frugal, practical merchant with a good idea to work on. Success brought him the ailment common to many another U. S. tycoon--a Napoleonic complex. In 1913 this found expression. That year he built for himself a great monument, the Woolworth building, internationally hailed as a "Cathedral of Commerce." On the 24th floor he placed the company's offices. His private office represented a $35,000 departure from frugality. It was a careful duplicate of Napoleon's library, even to the three throne chairs. Looking down from the wall was a large portrait of the stern-mouthed Emperor. When in 1919 Mr. Woolworth was on his deathbed, he was pleased to know that there was a capable man to succeed him: Hubert Templeton Parson, with the company since 1892. And he would have been more pleased if he could have known that when Mr. Parson moved into the Napoleonic office he was going to take down the Emperor's picture, substitute one of the proud-eyed Founder.

President Parson, 58, fits well in the fancy office. He prides himself on keeping his desk clean, never appearing busy. He has taste. He likes the opera and dis likes tobacco. In both his $1,000,000 Long Branch, N. J. home and his $1,200,000 Paris residence are pipe-organs, tapestries. A link between Mr. Parson and the Founder is Charles Sumner Woolworth, 74, now chairman of the company his brother founded. He lives in Scranton, is seldom in Manhattan except for board meetings.

Under the management of Mr. Parson, Woolworth's stores and sales have in creased steadily. Yet the profit from the U. S. stores has dropped during the past four years, with net income being held at a fairly stable figure only by increased "income from securities owned," "interest received," and "undistributed earnings of subsidiaries." How the increased "in come from securities owned" has bolstered up the Woolworth net is shown in the table below.

Thus far 1931 sales have been running behind 1930. May sales dropped 4.7% from May last year, and sales for the first five months were down 2.1%. But last week Mr. Parson was undaunted. "The extra day which we lost in May will come in June this year," said he, "and we expect to make up practically all of our loss in sales for the year during the month of June." But despite this cheer, last week the chief bullish news on Woolworth was the announcement of the plans regarding the British company.

The essence of the transaction will be that stockholders of the British company receive a big stock dividend of preferred shares which bear the right to buy more common. The preferred will be given to N. M. Rothschild & Sons for public sale. When the deal is completed F. W. Woolworth Co. will have received about $27,000,000 in cash, a bonus on an investment carried on the books at only around $29,000,000. Rumorists quickly decided that a similar deal would take place in the German Woolworth Co., operating 60 "25 to 50 pfg. Stores." But since the German company is carried at only around $2,000,000, was formed in 1927 and has had no chance to build up such fat reserves as the British unit, it is unlikely that the time for German plum-picking has arrived. If the Woolworth directors decide to pass the British bounty on to the shareholders it would amount to almost $3 a share on the common stock which now pays $2.40. If they decide to keep it, the profit and loss surplus would jump to just under $100,000,000. Seldom in corporate finance have "hidden assets" loomed so formidable when actually dragged from darkness into the light of reality.

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