General Mills Puts 2 Retail Chains on Block
General Mills on Thursday put its two specialty retail chains--the preppie Talbots and the woodsy Eddie Bauer--up for sale.
The move is seen as part of a continuing effort by the Minneapolis-based company to concentrate on consumer food products, such as Cheerios and Betty Crocker mixes, and restaurants, which include the Red Lobster seafood chain. Since 1985, the company has sold off Kenner-Parker Toys and Wallpapers to Go as well as other furniture, crafts and sportswear retail businesses.
“It was kind of a pleasant surprise,” said Roger W. Spencer, a securities analyst who follows food companies for Paine Webber Inc. “It’s back to basics, he said. “Retailing and manufacturing are two different corporate cultures.”
Wall Street was also pleased with the announcement. On the New York Stock Exchange, General Mills shares climbed $1.875 to close at $52.24 Thursday.
Small Contribution
General Mills purchased the two chains in the early 1970s, when food companies were diversifying into faster-growing industries. “They were very small companies with regional operations,” said company spokesman Craig Shulstad.
Eddie Bauer, who patented goose down quilt garments, founded his one-man store in Seattle in 1920. Thanks to the warm but lightweight goose down apparel, the store and catalogue operations became very popular with outdoors enthusiasts long before hiking and camping enjoyed widespread appeal later in the century. The 54-store chain, which has six outlets in Southern California, had sales of about $190 million for fiscal 1987.
Talbots--where customers enter through country-style red doors--was founded by husband and wife team Nancy and Rudolf Talbot in Hingham, Mass., in 1947. The couple catered to the “country club” set with preppie-style clothing. Talbots’ 119 stores rang up sales of nearly $300 million in fiscal 1987.
Within the past year, Talbots entered Southern California and has since opened five stores in the area.
Although General Mills expanded both Talbots and Eddie Bauer, the chains and its other specialty retail operations never contributed a significant portion to company sales and profits. In fiscal 1987, for instance, the company’s food and restaurant business accounted for nearly 90% of sales.
General Mills was also blamed for letting Talbots and Eddie Bauer fall behind other retailers in terms of fashion trends and quality. In the company’s 1985 fiscal year, Eddie Bauer was losing money.
“It’s a classic example of somebody who knows nothing about a business and who changes it completely,” said one retail consultant.
Added Spencer at Paine Webber: “They thought specialty retailing was an interesting niche where you could achieve above-average returns. But what looks good on paper sometimes turns out harder to do.”
