Prospecting Pays

For stockholders of Federated Department Stores, Inc., the news was the best yet. At their annual meeting in Manhattan last week, President Fred Lazarus Jr. reported sales up 28% to $246 million (for the year ending Nov. 2), profit up a whopping 90% to $11 million. This made Federated the third biggest moneymaker in the department-store field (first and second: May Dept. Stores Co., Allied Stores, Inc.).

For part of this, stockholders could thank the general high level of U.S. retailing. But they could also thank round-faced little Fred Lazarus, 62, ablest of Ohio's famed Lazarus brothers, Simon, Robert and Jeffrey. When Fred Lazarus stepped into Federated's presidency in 1945, the organization was little more than a device by which its five members,*through cross-ownership of each other's stock, protected themselves against regional slumps.

Rich Ore. But Lazarus had bigger ideas. He wanted Federated to 1) organize a central research office and 2) expand into the hinterlands. His theory: big U.S. cities have all been staked out, but there were still rich veins to be tapped in medium-sized cities.

From half a century of mining such veins, Fred Lazarus knew how rich they were. At ten, he was earning 25-c- every Saturday as a collar salesman in his family's Columbus store. At 18, he went to work selling shoes. Soon an executive, he had a big hand in the firm's expansion. Now covering over four city blocks, the store is the biggest business in Columbus. In 1929, when the Lazarus family bought Shillito's, Fred Lazarus moved to Cincinnati, turned Shillito's from an also-ran to the town's frontrunner.

To try to do the same for Federated,

Lazarus set up a new department of acquisitions, put a squad of experts to work analyzing prospective markets. He also thought that Federated should pay well for his work, rowed with Bloomingdale's Samuel Joseph Bloomingdale (TIME, July 16, 1945) over a stock-option bonus plan which would have paid Lazarus & Brothers according to increases in Federated sales. In the end, the stockholders backed Lazarus and he went to work to earn the bonus by expanding into Houston.

First, Lazarus offered to buy out Houston's old Foley Bros. Dry Goods Co. When the firm refused to sell, Lazarus bought a store site, threatened to come in as a competitor. Worried Foley's then sold for $4,300,000. (Lazarus also got an option on another site tagged at $1,250,000, talked Woolworth's into buying it for $3,000,000.) With Foley's he plans to test his newest theory that department stores must mechanize or operating costs will zoom when the current abnormal volume falls off.

Federated is now building a new $9 million home for Foley's. Windowless, glass-walled and crisscrossed with chutes and conveyors, it will be the last word in department-store merchandising. Customers will be able to park their cars in the Foley garage, make their purchases, find them in their cars when finished. But Fred Lazarus has not been satisfied to wait for the new store to boost business. Foley's sales are already running close to double the rate they were when Federated took over, and profit this year is up to nearly $500,000.

-Wm. Filene's Sons Co., Brooklyn's Abraham & Strauss, Inc. and Lazarus' own family enterprises, Columbus' F. & R. Lazarus & Co. (including its wholly owned subsidiary, Cincinnati's John Shillito Co.), Manhattan's Bloomingdale Bros., Inc.

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