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our guest today is j.h baker the former president of kohl's mr baker thank you
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so much for joining us today you're very welcome now you joined kohl's as the president in 1986. that's
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correct we did a leveraged buyout in 1986 and there were three partners uh bill kellogg john herman myself exactly
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along with financial partners naturally exactly but could you tell us a little bit about your career in retail before
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that and how it prepared you for leadership at kohl's okay i graduated from the wharton school and
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went into the army and after that i got out and i wasn't sure what i wanted to do so
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i took a couple aptitude tests and everything kind of pointed toward retailing and it's very funny my mother
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had a millinery store so when i was a young boy i used to take cash and and and bring up hats from the basement and
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stuff so maybe that's where i got started but i'm not sure that's true but
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but at least i i have in my bones and so uh i started a macy training program and uh worked my way up and stayed about
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nine years at macy's and did kind of everything and i looked back and was probably the best thing because i had
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every type of job i worked in the stores i worked on the floor worked in the stock room i was a buyer i was in store
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management so i really had the opportunity i learned a lot and it really helped me in my whole career even
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though in those days you moved a little slower everybody likes to get promoted faster but there weren't as many
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openings so people didn't leave so rapidly so it took a while to get there but but i had great training after that
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i went to a store named orbax and sometimes you get a break in life i went in as the administrative assistant
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to the president it was a gentleman called bob suslow and he became my mentor and sometimes you're
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very lucky that you have somebody that really takes an interest in you and you work very hard for him and but you learn
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so much from them and uh i learned probably in the six months it was incredible about merchandising and
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dealing with people and stuff and then i became a merchandise manager and i had three
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different areas i had started with dresses and juniors and sportswear and then bob went to famous bar in st
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louis that time it was a may company store today it's all macy's because
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macy's bought but at that time it was the premier store in st louis and probably still is but it's under macy's
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and i became a general merchandise manager and did that for a few years and then bob
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became president of saks fifth avenue and i came back to my home new york i mean i did follow him around
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and my first job there which was really interesting i was the first director of stores at saks before it used to report
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to the chairman and it wasn't really set up it was they'd have a you know meeting once a
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year they'd do the reviews but that was it and we actually regionalized sacs and
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that's what they are today it's regionalized and and uh what we did in 1977 exist today
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at sacs and most retailers so that was that was quite an accomplishment and uh was a little frustrating at times
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because none of them were involved in merchandising and i'm a merchant but we helped with that too we got
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merchants into the stores then i wanted to get back in merchandising so i became a general
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merchandise manager and i had sportswear cosmetics and juniors i don't want to say it's the glory is
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only of sax i mean i i would imagine sax will be good today but we had incredible
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talent uh people a whole group of us that became presidents and chairmans of companies and we just were picking up 20
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a day and it was it was a phenomenal fun time to be there and you know we had people like roger farah who's also a
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wharton graduate who's went on to become president of ralph lauren and now uh
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tory burch and other jobs and and bert taske had a neiman's arthur madness had
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his seers and on and on we all worked together so it was like really a phenomenal thing
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then bob took over as head of battus the whole retail division i went in to work in
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corporate which is not what i wanted to do so then i went and worked and became a head of especially store division and
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also the corporate buying and then in 1986 badis decided they wanted to divest themselves of retailing
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they're basically a tobacco company and and british american tobacco uh in in
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england and the u.s part that's how it spatus was in louisville kentucky and so at the time um
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the only thing they kept was uh sacks marshall fields and thimbles one of the i think they kept that because i had a
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three-year contract i don't know maybe they didn't want to pay me out i it's funny but i had like 400 people
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reporting to me at the corporate buying office and they were all going to be let go
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and it was a strange what happened was very strange they called us in on a sunday
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somehow women's wear daily got the news that they were going to do this but they
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never told any of us so they had to make the announcement sunday then we had to go in front of our people on monday and
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tell them this was happening before they read it in the newspaper but there was no severance set up yet you know they
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had nothing arranged so it's funny i went to my boss who ran batters retail who was also fired arnold
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harrison and and i said i'm not going to fire anybody i can keep anybody on who's
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essential i'm just going to get him jobs he said do whatever you have to do and it took me six or seven months but i
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got 98 of them jobs and so it's probably one of the best things i've done be it
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was a very you know tough thing to have to do that and then i knew how to leave there
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because i saw the handwriting on the wall and in a another year they had sold sacks marshall fields have been bought
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by dayton hudson and thimbles was closed so they got out of retailing so i had three job offers and one my wife you
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know thought was pretty exciting to be head of ferragamo usa but uh i'm not a
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big tall great looking italian and so i don't think they were going to make me a
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partner and then i call bob suslow again you know and just asked his advice because
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he knew all three companies he said just wait a minute and that's when bill kellogg who became my partner and who i
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had known since 1977 we had been friends and and that's they were saving the
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third partnership for me but i had to be kind of released from my contract from badass because badass was
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staying as a partner also when when we bought the company from then they kept mistaking it
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and so i had to go and this gentleman's name was hank for gone he's the one that
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fired all of us and i i had to have dinner with him and we talked about his his about what he's done in his life and
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everything and then at the end i said hank i got great news for you i'm going
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to be your partner and he said what do you mean i said i'm going to be a big
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partner in kohl's you're a partner and kohl's will work together he says you're
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under contract to us you can't do that so i remember saying to him because he
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wasn't my friend i said well you can have me as a great partner or i'm going
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to work as hard as i can one of these other jobs as a tough competitor you have your choice and i left
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and bob called and bill called and i called what happened is he got a little pound of flesh we bought the copy of
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september and i couldn't start till october you know so that's uh how it happened and at that
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time kohl's was 39 stores doing about 280 million and losing money right something had happened to kohl's it kind
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of started out as a value department store but then because gimble's was a competitor and owned also by battis
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kimble's milwaukee they decided they brought somebody in from target to make
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it a mini target well you know you don't need a mini target so fortunately actually as it turned out for us we had
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kohl's had a couple of bad years you know year and a half for bad sales and profits down so nobody wanted to buy us
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so we were able to buy it at a relatively good price and then batter stayed in as a partner so if i could ask
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a quick question what was your assessment of what needed to be done to to fix the problem at kohl's
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what was the situation in retail in the 1980s and where did you see the upside for growth
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well you know there was a company called mervin's who do know that company it was
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owned by well it was a separate company and dayton hudson bought it along when they had target and both and mervin's
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was this value department so it was about a four billion dollar company and it was kind of what we aspired to
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you know hoping we could do better naturally but but you know of giving great brands at great prices uh having a
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low cost structure and so that we could do all these things and having a simplistic shopping environment so we
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had talked about that because i had known calls for quite a few years and that's what it had been and then it had
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lost that so when we walked in it was got a lot of problems but we realized that we had to change the
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merchandise and get back to what well better than what we were but really get these great brands we had things because
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we were um you know like a mini target you know we had food you know we had big candy departments we sold tobacco you
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know all things that didn't fit into anything we did so we had to really do a
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kind of a total changing back to the merchandising that we were but of course take it to a new level now we had a guy
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who was funny walter levy associates who we had known for years he and and he was he was a guy who could
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advise you and things and we'd use them at sacs and other places and we told
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them what we thought you know we came up with our plan let's get an outside guy
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to look at it you know they always want to tweak it but they said sounds great because it was a great need for a niche
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for a value department store and that's what we were some people calls the discount store
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but we were not i fought that very hard and of course we were a department store
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just you know we had checkout lanes we used the carts because that came from kohl's was
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basically a supermarket chain so there's this low-cost culture which helped me as
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the merchant because you know i could give great value to our customer our cost structure was lower than our
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competition that was a big edge to have what was your strategy to take goals from a regional
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chain to a national one how did you go about well i think the first thing we did was
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fix it right first thing we had to do was fix goals and we were fortunate a couple of things
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happened that that were very fortunate for us you know there is some luck in life i have to admit though we worked
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eight days a week you know it didn't come easy you know so that's retailing but uh but true
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but what happened is gimbals went out of business which was our main competitor was gimbals and and and bergner's at the
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time so you lost one of your big competitors and most of our stores were in wisconsin
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so we were without a comp one of our competitors so that helped us a lot and the other competitor wasn't the toughest
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store to compete against i hope i don't insult anybody and then uh so that was one thing
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at the same time when gimbles went out of business we knew all the good people there because they were part of batters
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so we got some excellent merchants and store people then a year later marshall fields was
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combined with with dayton hudson and we got a lot of great people from there within that same year mervin's had a
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texas operation but it wasn't doing well and they closed it so we got people from
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there so in a very short time we got people from gimbals from marshall fields and from mervin's to this little store
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in milwaukee called kohl's and that was a real break so we went from pretty low talent
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to terrific talent in a very short time and then we came up with what we thought
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what we wanted kohl's to be this value department store offering great brands
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at great prices and came up with a racetrack uh look of a store meaning you walked in and just
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walked around in a circle and every department had frontage and and what made us different in a way is
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that in most department stores you might find sportswear in three locations four
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locations sportswear one location men's one location juniors one location children's one location accessories in
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the middle so it was ease of shopping and we also built we had stores that intercepted the mall so you got
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people there in and out and going home and you know so made it easy for them and we did a lot of advertising okay and
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and and that was something our advertising in the past was not very good so we got new people
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in that whole department we revamped it and came up with you know an advertising
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look that was exciting key items and depth and and then we had a merchandising philosophy
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we saw i mean i spent my whole life in in department stores and two of the big weaknesses in those days
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is that they were never in stock on basics and when you had ad goods you ran out of ad goods or didn't have them and
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you would frustrate people all the time so one of the things we came up with that we said we'd be 90 in stock on
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basics and you know we put in systems and we did a good job of that and you funded it and and you did it and when
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you did add goods you advertised out of your assortment so it wasn't like we
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brought in special purchases we advertised what we owned out of our assortments and buyers knew if they
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didn't have ad goods they'd be in my office monday morning and they didn't
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want to be in my office monday morning i wasn't as pleasant when when you didn't
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have bad goods and so realizing how important it was and also that we made sure our prices were sharp
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and that people didn't undersell us because we could beat their prices if we
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had to and and and and we because of our cost structure so then uh in two years which is amazing
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we paid off our debt one of our big partners were the simons you know the simon malls which are the
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biggest people today and they were our partners because they had like seven or eight of our stores and that's how that
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happened and so main street do you remember when federated went into bankruptcy yes
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and so one of the companies they had one of the small companies called main street and they were in chicago detroit
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and minneapolis this is exactly where the simon said we should be going and they had stores similar to ours but
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much better locations federer was very powerful and it was our concept of merchandising you know value price
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but they didn't understand the low cost culture so they had kind of the department store expenses so they didn't
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make any money they lost money because they have lower prices and higher expenses
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and but we had the chance to buy them and buy them at a very good price because nobody really wanted them but we
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had to vote on it and baddest because they still had marshall fields at the time
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didn't want to give us you know real estate in in chicago but between the simons and us we were able to we had
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over 50 percent we bought it brought morgan stanley and as a partner and we had slightly the majority wouldn't give them
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the majority we said the three of us want to have that because we're running
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it and that's how the new partnership happened and to your question then uh we were starting you know we had debt
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again but in a couple of years we went public and then the reason we went public is so we could expand and we
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could start to grow and we'd have the money you