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Is Peace Coming To Montgomery Ward?


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IS PEACE COMING TO MONTGOMERY WARD?

Nobody disputes that Montgomery Ward Chairman Bernard F. Brennan did a masterly job mf reviving the tottering retail giant during the mid-1980s. But with a herd of managers departing in the 1990s--including three senior executives just last year--Brennan has started to win more renown as a boss too tough to work for. On Jan. 17, though, one ex-exec did sign back on: Bernard W. Andrews returned from Circuit City Stores Inc. to assume the president's job vacated last month by Harold Kahn. A few other Montgomery Ward & Co. veterans are straggling back, too--a sign, perhaps, that Brennan realizes he needs some help.

Certainly, Ward's is no easy company to manage. Since 1991, it has suffered from declining earnings and slowing sales, even though last year, company executives say, sales jumped 10%, to $6 billion. The recession hurt, but the retailer has hurt itself by mismanaging its apparel business, which generates 30% of sales. Pricing pressures have also eroded jewelry and consumer-electronics profits. Says New England Consulting Group principal Gary M. Stibel: "Ward has a tough road ahead."

BRUTAL PACE. Brennan isn't shaken. "I have a passion for this company," he says. "It has a bright future." Since orchestrating a $3.8 billion leveraged buyout in 1988, Brennan has expanded Ward's while slashing buyout debt 80%, to $200 million. The stores, once known as ho-hum general merchandise emporiums for blue-collar shoppers, also got some added pizzazz with the introduction of new specialty formats. The Electric Avenue consumer-electronics department, for example, is part of this "store in a store" strategy that produced sound profits during the early 1990s when rivals such as Sears, Roebuck & Co. floundered.

Recent developments, though, have led some to wonder whether Brennan is still the right chief for the company. First is the problem of Ward's image in the competitive 1990s. "It's difficult for consumers to understand what Ward's stands for," says Christopher Ohlinger, president of Service Industry Research Systems Inc., which tracks consumer feelings towards retailers.

Management unrest hasn't helped. Former executives say the hard-driving Brennan burns managers out, and he isn't shy about intervening in their work. "He's a micromanager," says one former executive. "Every new product has to go before him." One source close to the company says Andrews' departure in 1990 to Circuit City was prompted by a falling out with Brennan. Says Andrews: "I've been away on a continuing education program in specialty retailing. I'd rather not deal with how I got there."

Brennan doesn't deny that he sets a tough pace. "It's a rough-and-tumble business," he says. He notes that many of those who left, including Kahn and Executive Vice-President Lester Ball, have worked in the struggling apparel operation. Like Sears, Ward's went out after name brands, trying to spruce

up its dowdy image with apparel lines from Bugle Boy, Lee, and Cherokee.

But Ward's has never had the kind of success in apparel it enjoyed in consumer electronics and furniture, where double-digit sales growth continues. Brennan admits the unit has adopted new strategies too often. Over the last year, for example, Kahn and Ball, both former R.H. Macy & Co. executives, led a move to broaden selection in apparel. But the offerings became "too eclectic," says Andrews, and confused customers. So while Sears logged dou- ble-digit apparel sales increases in 1993, growth at Ward's was mired in the low single digits. Something had to give.

Enter Andrews. During the mid-1980s, he helped forge Ward's growth strategy, and Brennan believes he can revive apparel. Brennan and Andrews want to refocus apparel around a few key brands, while pumping out more high-margin private-label goods. The strategy has worked well at Electric Avenue, where Ward's Admiral TVs sell next to pricier Sony and Panasonic sets. Brennan also named Robert Connolly executive vice-president for apparel on Jan. 6. Connolly returns to Ward's after running Wal-Mart Stores Inc.'s women's apparel business.

NO RETREAT. Life at Ward's may calm down now that Andrews is back. Brennan plans to leave retail operations in his hands and focus more on future opportunities. Still, no one thinks Brennan, who owns 30% of Ward's, is beating a retreat. He plans to expand the direct-marketing arm, the Signature Group, which sells such services as auto clubs. To help out Brennan, yet another ex-Ward's official, former Chief Financial Officer Dominic Mangone, has returned as a consultant.

But can Brennan keep his new team together long enough to revive Ward's? "My prediction is they'll leave, too," snaps a former executive. "Everyone else has." Andrews, Connolly, and Mangone should know, however, what life with the boss is like. If they can't take the heat, it's hard to imagine who will help Brennan get Ward's cooking again.Kevin Kelly and Greg Burns in Chicago


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