Calling It Quits

By John S. DeMott

What are the mathematical odds that two brothers would head the archrival retailers Sears and Montgomery Ward? Put away the calculators; it will soon happen. In June, Bernard Brennan, 46, takes over as boss of Montgomery Ward, where he was once an executive vice president. His brother Edward, 51, has been chief operating officer of Sears since last August, and will succeed Chairman Edward Telling later this year.

Bernard's selection is central to a strategy by Mobil, which owns Montgomery Ward, to sell the money-losing subsidiary. In naming him, the second largest U.S. oil company (1984 sales: $56 billion) hopes to shape up Montgomery Ward and thereby make it attractive to potential buyers. Mobil officials say that it may be two or three years before the retailer will be strong enough to stand alone financially.

Mobil's decision came as no surprise to Wall Street. Montgomery Ward has been almost nonstop trouble since the oil company paid $1.7 billion for it in 1974. Since then, Mobil has pumped an additional $609 million into the company in an attempt to make it profitable, but Montgomery Ward has lost a total of $415 million under Mobil's rule.

The old-line retailer was founded in 1872 in Chicago by Aaron Montgomery Ward, a salesman who presciently anticipated the potential in mail-order sales to farmers. Later that year he published the first comprehensive general- merchandise catalog, 22 years before Richard Sears did. It was one of the last times Montgomery Ward was ahead of Sears.

The company, known affectionately to its customers as Monkey Ward, grew rapidly at first, but then became stagnant. From 1941 to 1957, it did not open a single new store, while Sears moved aggressively into the booming suburbs of postwar America. When recession and high interest rates rocked retailing in the 1970s, Montgomery Ward could no longer hang on alone. After Mobil took it over, the retailer earned $105 million in 1978, but it soon slipped into the red again. The company was too big, too mismanaged, too out of tune with what consumers wanted. In 1981 Stephen Pistner, president of Minneapolis' Dayton- Hudson department store chain and a retailing wizard, was brought in to turn Montgomery Ward around. He hired Brennan, then chief executive of the Sav-A- Stop outlets in Jacksonville, to help him in the task.

The Pistner-Brennan team moved to reorganize the chain, eliminating 23,000 jobs, reducing the number of retail stores from 365 to 322, and cutting distribution centers from 150 to 33. In 1983 the company earned a paltry $40 million on $6 billion in sales, and last year it made $54 million on almost the same amount. In contrast, Sears earned $1.5 billion on sales of $38.8 billion. After launching the Montgomery Ward reorganization, Brennan left to run Household Merchandising, the company that embraces T.G.&Y. and Ben Franklin variety stores. The president's job at Montgomery Ward opened up in January, when Pistner resigned to become senior vice president of the Rapid- American retail empire.

Brennan plans to push forward the policies he helped initiate at Montgomery Ward. Says he: "I'm very excited about going back and continuing the strategies that we started when I was there before. Our real focus is on merchandise, improving the products we offer." To make Montgomery Ward more profitable, he will probably reduce the payroll still further from the present 78,000 and perhaps close as many as 300 of the 2,099 catalog outlets. He will probably concentrate the firm's efforts in the Midwest, its strongest region.

Mobil Chairman Rawleigh Warner Jr., who began his company's involvement with ( Montgomery Ward, may be watching it end from a distance. He announced last week that he will step down as chairman next year, when he reaches 65, to be replaced by Allen Murray, 54, the current president.

With reporting by Betsy Kraft/Chicago and Raji Samghabadi/New York