Romance at Korvette

To Eugene Ferkauf, founder, controlling stockholder and audacious boss of E. J. Korvette Inc. (TIME cover, July 6, 1962), success as the hero of U.S. discount selling is no bargain. It gives him less and less time to do what he really wants to do. He likes to play hooky from the office, go out to mind his stores. Dressed in his $32.50 Korvette suit, he fusses, fixes problems, scolds and cajoles salespeople. He fondles marked-down books and basketballs as if they were emeralds; in the art galleries of his stores, he browses proudly around the Picassos, Chagalls and other bric-a-Braque. "I," says Ferkauf, "love to go to the marketplace."

Since the boy from Brooklyn launched his first Korvette in 1948, his company has moved westward to the Mississippi, expanding to 42 stores and 63 supermarkets from Hartford to St. Louis. All this requires a lot of administration, and Ferkauf is much too restless to sit around and tend to the details of the nation's fastest-growing retail chain. Result: though Korvette's sales since 1962 have more than doubled to $720 million, its profits in this year's first fiscal half (ending in January) have dropped 14%, to $7.9 million, and its stock is down from last year's high of 501 of last week's close of 221. Ferkauf himself is the first to assign the trouble to "a lack of communication among a very small management group --way up on top."

Shaky Foundation. In his frustrating search for competent, congenial top administrators, Ferkauf since 1964 has shuffled--or shucked off--one chairman, two presidents and three vice presidents. Last week his personnel merry-go-round was still spinning. Out went Chairman Hilliard J. Coan after only twelve months on the job, and two more vice presidents. Ferkauf is personally charming, but is a hard man to please.

Meanwhile, Ferkauf was negotiating to merge Korvette with Spartans Industries, which makes low-cost clothing, owns 93 discount stores and last year had $226 million in sales. Ferkauf's interest was less in Spartans itself than in its chairman, Charles Bassine, 57, whom he describes as "a benign kind of boss with inspirational qualities and a great organizational reputation." The two men are more than merely old friends. Ferkauf's eldest daughter is engaged to Bassine's son. Ferkauf thinks that Bassine may be just the administrator he has long been looking for--and so, in future years, may be Ferkauf's son-in-law.

If the merger comes off, Bassine will have quite a chore. Korvette's furniture division sags with losses; its supermarkets barely break even, though Ferkauf says they are now "trending upwards." Privately, Ferkauf concedes that his empire was built too fast on a shaky foundation. The business was also damaged by its taking on some expensive airs. It tried simultaneously to upgrade its merchandise, add costly services, dress up its stores, and make expensive pushes into such distant cities as Detroit, Chicago and Baltimore. As a result, it hit wall-to-wall competition from established stores and supermarkets.

Right Prize. Ferkauf likes to say that "problems are potentials," and suggests that Korvette's will be solved by Bassine and himself. For his part, Bassine denies rumors that he will spin off Korvette's supermarkets, declaring that, "If we marry the lady, we sure enough are going to go with her children." His terms are tough. He insists on getting the title and powers of chief executive officer. In the past, Ferkauf has refused to let anyone have all that. Now he says that Bassine can be the big boss in the office, while Ferkauf himself returns to his first passion--visiting the stores. Says he of his prospective partner: "We speak with one voice."

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