Nearly every American lives within a short drive of this capital efficient retailer… a household name that sells around 40,000 items… has been crushing the competition for decades… and continues to dominate amateur and professional markets alike.
A Booming Chain for Pros and Fixer-Uppers
90% of the Population Lives Within 10 Miles of a Store
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On May 22, 1990, Rosalind Webb rode the No. 48 bus downtown to work for the last time.
Rosalind didn’t know it, but she was about to be fired from the shipping department of the Bonwit Teller department store in Philadelphia, where she had worked faithfully for the past 30 years.
Later that Tuesday morning, she’d climb back on the homeward bus with no job, no pension, and no health insurance (unless she decided to pay $181 out of pocket every month).
“All those years I had health insurance and didn’t need it,” she later told the Philadelphia Inquirer. ”Now I need it and don’t have it.”
It wasn’t Rosalind’s fault that her long-standing job – and her retirement – vaporized. Her employer, the Bonwit Teller department store – along with several other venerable chains like B. Altman & Co. and Sakowitz – was owned by L.J. Hooker, a company that was filing for a hefty $1.2 billion bankruptcy..
And as part of its Chapter 11 reorganization, Hooker had brought in a cost-cutting guru who went by Ming the Merciless.
Ming was the mustachioed villain from the Flash Gordon television series – and also the chosen nickname of “reorganization expert” Sanford C. Sigoloff, whose crisis-management firm guided troubled companies through bankruptcies in an effort to turn them around.
In addition to his TV-baddie alias, Sigoloff also answered to “The Skillful Scalpel” and “Mr. Chapter 11.” And he was yelling “You’re fired!” years before Donald Trump made that catchphrase popular on The Apprentice.
Bankruptcy was big business from the late 1970s to the late ’80s – a decade that produced the largest crop of filings since the Great Depression. A long-overdue update to the U.S. Bankruptcy Code in 1978 had made it easier for companies to file and reorganize – and potentially, restart instead of disintegrating.
Along with the billion-dollar bankruptcies came $500-an-hour consultants… like Sigoloff, who, in true movie-villain style, carried around a 260-page cost-cutting manual that workers dubbed the “Infamous Black Book” (IBB for short).
Sigoloff’s money-saving strategy was simple: Fire everyone. Just a few months after taking over the reins at L.J. Hooker and assuring employees that “Paychecks will be issued at the same time as if no [bankruptcy] proceeding had been filed”… Sigoloff terminated 12,000 employees at the company’s department stores, leaving just 62 people on staff nationwide.
Sigoloff’s damn-the-employees, fix-the-company, line-my-wallet strategy worked beautifully… for the most part.
Throughout the ’70s and ’80s, he resuscitated a series of high-profile, near-defunct companies, including movie studio Republic Corporation, manufacturer Wickes Companies, and conglomerate Gulf and Western Industries.
In the process, he made a good living. As the Philadelphia Inquirer reported in a 1991 expose, during just one year of the 1980s “bankruptcy boom”, Sigoloff’s small firm took home $6.5 million in consultant fees.
While Rosalind Webb and her former coworkers filed for unemployment, Merciless Ming and his associates charged exorbitant prices for completing the tiniest of tasks. Some of Sigoloff’s line items included $1,500 for making phone calls, $450 for unpacking a box of files, and $3,000 for a day of “reviewing the master calendar.”
But every bad guy gets a taste of his own medicine sooner or later…
As elderly Rosalind Webb, cheated out of her well-deserved retirement, could have told Sanford Sigoloff… it’s not smart to fire great employees just so you’ll have room to bill $500,000 for “time the associates spent in planes.”
It was during the 1975 reorganization for retail conglomerate Daylin, Inc. that Ming the Merciless made his big mistake.
Wielding the Infamous Black Book, Mr. Chapter 11 chewed his way through Daylin personnel, firing half of the struggling company’s 16,000 employees. But he didn’t stop with the underperforming divisions. In 1978, he also canned the CEO and CFO of one of Daylin’s few profitable chains, the Handy Dan hardware store.
Why fix something that’s not broken? (Especially when dealing with hardware salesmen?) Sigoloff claimed that the two executives had authorized an improper anti-union fund, which they denied.
But more likely, he just saw two $400,000 salaries that could be slashed… and an extra $800,000 that could be diverted into consultant fees.
So… “You’re fired,” said Ming the Merciless.
The two newly unemployed men walked out of the hardware store and, two months later, started what has become a capital efficient, world-dominating business that’s now worth $295 billion. That’s the business we’re recommending in this issue.
None of Sanford Sigoloff’s “successful” turnarounds remotely approached the market cap of this American mainstay. And when he developed Alzheimer’s years later – this story is probably one of the last things he forgot.
Taking Home Improvement to a New Level
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