Tennessee Entrepreneur Excels at Proffitt’s
R. Brad Martin has played many roles--Tennessee’s youngest legislator, a real estate developer and corporate child-care entrepreneur.
He never expected to become a retailer. But since 1984, Martin has transformed Proffitt’s Inc. from a four-store, family-owned department store chain into a $1-billion public company with more than 100 branches in 23 Southern and Midwestern states.
The retailer’s latest acquisition is the 53-store, Iowa-based Younkers Inc.
Martin “knows how to build empires, and he is building an empire,” said Ken Gassman, an analyst with Davenport & Co. in Richmond, Va.
“Proffitt’s is the exceptional department store chain. Rapid growth and department stores are usually oxymorons. But he’s made it happen.”
Harwell Proffitt, the company’s former chairman and the son of founder D.W. Proffitt, remembers when he and his father merged their two Tennessee stores in 1958.
“We worked like hell all year and did a million dollars. That was our total volume. And this year we’ll do between $1.3 billion and $1.5 billion. It just blows my mind,” the 78-year-old Proffitt said. “And the thing that happened was Brad Martin.
“It was sort of like a three-stage rocket. My dad founded it [in 1919]. My brother Jack and I got it into orbit and now Brad Martin is shooting for the moon or Mars or somewhere.”
Martin, 44, didn’t set out to be a retailing magnate.
Raised in Memphis, he was first interested in politics, and got himself elected to the Tennessee House of Representatives while still a student at Memphis State University. It was two days after his 21st birthday.
Martin stayed for five terms over 10 years and left the House in 1982, eager to do something else. He spent a year as state Republican chairman, thought for a while about running for governor in 1986, but then lost interest.
Martin’s next stop was real estate--he became a successful shopping center developer and property manager. And in 1987, he co-founded Corporate Child Care of Nashville with former Gov. Lamar Alexander and Bob Keeshan, the man known to a generation of children as Captain Kangaroo.
During his time as a developer, Martin learned that the family that owned Proffitt’s was ready to cash in. It was then a small chain on the opposite side of the state in the Knoxville suburb of Alcoa.
Martin’s curiosity was piqued after his wife, Jean, came home raving about a shopping trip to a Proffitt’s in Knoxville. So he organized an investor group and bought the chain in 1984.
“The original attraction, my original involvement in Proffitt’s was really as an investor,” said Martin, who still owns about 1.2 million shares or about 12% of the company.
But in 1989, Harwell Proffitt’s son Fred retired as president and chief executive officer. “That’s when I decided that I would really sign on and come to work here,” said Martin, who commutes from Memphis but also has a mountain home in nearby Miller’s Cove.
He learned the operations side of the business and then concentrated on merchandising. By 1990, he found, “I had come to like it very much.”
He satisfied the Proffitt’s board of his long-term commitment, and the plans were laid for expansion.
“In the 1991-92 period, it was obvious to me that the department store industry was consolidating rapidly, and our markets were changing. It appeared to me that for the company to survive and flourish we needed to grow.”
Proffitt’s grew by opening its own stores, acquiring those cast off by others and buying small regional retailers. All were absorbed under the Proffitt’s banner.
Then in 1994, Proffitt’s bought the 28-store McRae’s chain based in Jackson, Miss. It was a different kind of acquisition. Proffitt’s Inc. became a holding company with two divisions--McRae’s stores and Proffitt’s stores.
Analyst Harry Ikenson, with New York-based Rodman & Renshaw, said Proffitt’s has used the strengths of its divisions to help each other. Proffitt’s stores’ forte is cosmetics, for instance; while McRae’s strength is dresses.
Another aspect is personnel, analyst Ken Gassman said. If Martin was the “visionary,” McRae’s executives were the “mechanics” to make it happen, including James Coggin, now Proffitt’s’ president and chief operating officer.
“Every time we do something like this, we think we learned something,” Martin said.
Much the same approach is being taken with Younkers, the Des Moines retailer who found a white knight in Proffitt’s against a hostile takeover attempt by Milwaukee-based retailer Carson Pirie Scott & Co.
The deal will allow Younkers to remain much as it is while enjoying some efficiencies from the combined resources and buying power as a Proffitt’s unit.
Unlike McRae’s, Younkers has no contiguous markets with Proffitt’s.
Warren Neel, a Proffitt’s board member and business school dean at the University of Tennessee, said it might be expected that Proffitt’s will “look for some strategic opportunities if we intend to fill in those gaps.”
But nothing is definite yet. And if Proffitt’s can prove to be successful in running a company like Younkers from a distance, the possibilities for future acquisitions widen.
A year ago Martin predicted that Proffitt’s would reach $1 billion in sales by the year 2000. Now it’s time for a revision: “$2 billion by 2000,” he said, “ . . . or before.”
