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our guest today is j.h baker the former
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president of kohl's mr baker thank you
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so much for joining us today you're very
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welcome
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now you joined
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kohl's as the president in 1986. that's
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correct we did a leveraged buyout in
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1986 and there were three partners uh
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bill kellogg john herman myself exactly
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along with financial partners naturally
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exactly but could you tell us a little
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bit about your career in retail before
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that and how it prepared you for
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leadership at kohl's okay
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i graduated from the wharton school and
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went into the army and after that i got
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out
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and i wasn't sure what i wanted to do so
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i took a couple aptitude tests and
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everything kind of pointed toward
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retailing and it's very funny my mother
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had a millinery store so when i was a
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young boy i used to take cash and and
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and bring up hats from the basement and
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stuff so maybe that's where i got
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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
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uh
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i started a macy training program
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and uh worked my way up and stayed about
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nine years at macy's and did kind of
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everything and i looked back and was
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probably the best thing because i had
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every type of job i worked in the stores
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i worked on the floor worked in the
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stock room i was a buyer i was in store
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management so i really had the
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opportunity i learned a lot and it
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really helped me in my whole career even
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though in those days you moved a little
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slower everybody likes to get promoted
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faster but there weren't as many
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openings so people didn't leave so
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rapidly so it took a while to get there
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but but i had great training after that
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i went to a store named orbax
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and sometimes you get a break in life i
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went in as the administrative assistant
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to the president
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it was a gentleman called bob suslow and
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he became my mentor and sometimes you're
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very lucky that you have somebody that
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really takes an interest in you and you
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work very hard for him and but you learn
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so much from them and uh
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i learned probably in the six months it
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was incredible about merchandising and
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dealing with people and stuff and then i
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became
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a merchandise manager and i had three
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different areas i had started with
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dresses and
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juniors and
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sportswear
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and then bob went to famous bar in st
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louis that time it was a may company
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store today it's all macy's because
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macy's bought but at that time it was
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the premier store in st louis and
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probably still is but it's under macy's
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and i became a general merchandise
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manager and did that for a few years
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and then bob
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became president of saks fifth avenue
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and i came back to my home new york i
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mean i did follow him around
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and my first job there which was really
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interesting i was the first director of
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stores at saks before it used to report
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to the chairman
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and it wasn't really set up it was
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they'd have a you know meeting once a
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year they'd do the reviews but that was
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it
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and we actually regionalized sacs and
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that's what they are today it's
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regionalized and
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and uh what we did in 1977 exist today
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at sacs and most retailers so that was
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that was quite an accomplishment and uh
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was a little frustrating at times
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because none of them were involved in
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merchandising and i'm a merchant
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but we helped with that too we got
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merchants into the stores
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then i wanted to get back in
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merchandising so i became a general
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merchandise manager and i had sportswear
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cosmetics and juniors
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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
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will be good today but we had incredible
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talent uh people a whole group of us
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that became presidents and chairmans of
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companies and we just were picking up 20
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a day and it was it was a phenomenal fun
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time to be there and you know we had
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people like roger farah who's also a
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wharton graduate who's went on to become
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president of ralph lauren and now uh
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tory burch and other jobs and and bert
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taske had a neiman's arthur madness had
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his seers and on and on we all worked
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together so it was like really a
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phenomenal thing
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then bob
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took over as head of battus the whole
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retail division i went in to work in
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corporate which is not what i wanted to
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do so then i went and worked and became
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a head of especially store division and
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also the corporate buying
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and then in 1986 badis decided they
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wanted to divest themselves of retailing
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they're basically a tobacco company and
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and british american tobacco uh in in
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england and the u.s part that's how it
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spatus was in louisville kentucky
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and so at the time um
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the only thing they kept was uh sacks
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marshall fields and thimbles one of the
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i think they kept that because i had a
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three-year contract i don't know
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maybe they didn't want to pay me out i
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it's funny but i had like 400 people
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reporting to me at the corporate buying
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office and they were all going to be
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let go
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and it was a strange what happened was
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very strange they called us in on a
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sunday
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somehow women's wear daily got the news
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that they were going to do this but they
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never told any of us so they had to make
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the announcement sunday then we had to
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go in front of our people on monday and
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tell them this was happening before they
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read it in the newspaper but there was
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no severance set up yet you know they
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had nothing arranged
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so it's funny i went to my boss who ran
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batters
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retail who was also fired arnold
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harrison
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and and i said i'm not going to fire
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anybody i can keep anybody on who's
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essential i'm just going to get him jobs
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he said do whatever you have to do
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and it took me six or seven months but i
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got 98 of them jobs and so it's probably
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one of the best things i've done be it
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was a very you know tough thing to have
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to do that
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and then i knew how to leave there
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because i saw the handwriting on the
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wall and in a another year they had sold
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sacks marshall fields have been bought
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by dayton hudson and thimbles was closed
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so they got out of retailing so i had
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three job offers and one my wife you
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know thought was pretty exciting to be
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head of ferragamo usa but uh i'm not a
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big tall great looking italian and so i
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don't think they were going to make me a
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partner
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and then i call bob suslow again you
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know and just asked his advice because
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he knew all three companies he said just
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wait a minute and that's when bill
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kellogg who became my partner and who i
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had known since 1977 we had been friends
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and and that's they were saving the
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third partnership for me
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but i had to be kind of released from my
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contract from badass because badass was
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staying as a partner also when when we
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bought the company from then they kept
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mistaking it
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and so i had to go and this gentleman's
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name was hank for gone he's the one that
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fired all of us and i i had to have
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dinner with him and we talked about his
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his about what he's done in his life and
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everything and then at the end i said
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hank i got great news for you i'm going
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to be your partner and he said what do
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you mean i said i'm going to be a big
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partner in kohl's you're a partner and
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kohl's will work together he says you're
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under contract to us you can't do that
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so i remember saying to him because he
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wasn't my friend i said well you can
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have me as a great partner or i'm going
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to work as hard as i can one of these
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other jobs as a tough competitor you
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have your choice and i left
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and bob called and bill called and i
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called what happened is he got a little
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pound of flesh we bought the copy of
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september and i couldn't start till
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october you know
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so that's uh how it happened and at that
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time kohl's was 39 stores
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doing about 280 million and losing money
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right
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something had happened to kohl's it kind
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of started out as a value department
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store but then because gimble's was a
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competitor and owned also by battis
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kimble's milwaukee they decided they
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brought somebody in from target to make
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it a mini target well you know you don't
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need a mini target so fortunately
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actually as it turned out for us we had
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kohl's had a couple of bad years you
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know year and a half for bad sales and
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profits down so nobody wanted to buy us
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so we were able to buy it at a
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relatively good price and then batter
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stayed in as a partner so if i could ask
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a quick question what was your
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assessment
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of what needed to be done
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to to fix the problem at kohl's
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what was the
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situation in retail in the 1980s and
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where did you see the upside for growth
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well you know there was a company called
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mervin's who do know that company it was
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owned by well it was a separate company
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and dayton hudson bought it along when
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they had target and both and mervin's
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was this value department so it was
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about a four billion dollar company
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and it was kind of what we aspired to
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you know hoping we could do better
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naturally but but you know of giving
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great brands at great prices uh having a
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low cost structure and so that we could
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do all these things and having a
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simplistic shopping environment so we
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had talked about that because i had
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known calls for quite a few years and
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that's what it had been and then it had
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lost that so when we walked in
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it was got a lot of problems but we
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realized that we had to change the
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merchandise and get back to what well
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better than what we were but really get
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these great brands we had things because
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we were um you know like a mini target
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you know we had food you know we had big
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candy departments we sold tobacco you
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know all things that didn't fit into
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anything we did so we had to really do a
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kind of a total changing back to the
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merchandising that we were but of course
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take it to a new level now we had a guy
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who was funny walter levy associates who
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we had known for years
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he and and he was he was a guy who could
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advise you and things and we'd use them
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at sacs and other places and we told
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them what we thought you know we came up
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with our plan let's get an outside guy
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to look at it you know they always want
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to tweak it but they said sounds great
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because it was a great need for a niche
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for a value department store and that's
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what we were some people calls the
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discount store
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but we were not i fought that very hard
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and of course we were a department store
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just
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you know we had checkout lanes
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we used the
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carts because that came from kohl's was
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basically a supermarket chain so there's
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this low-cost culture which helped me as
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the merchant because you know i could
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give great value to our customer our
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cost structure was lower than our
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competition that was a big edge to have
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what was your strategy to take goals
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from a regional
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chain
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to a national one how did you go about
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well i think the first thing we did was
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fix it right first thing we had to do
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was fix goals and
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we were fortunate a couple of things
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happened that that were very fortunate
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for us you know there is some luck in
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life i have to admit though we worked
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eight days a week
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you know it didn't come easy you know so
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that's retailing but uh but true
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but what happened is gimbals went out of
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business which was our main competitor
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was gimbals and and and bergner's at the
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time so you lost one of your big
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competitors and most of our stores were
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in wisconsin
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so we were without a comp one of our
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competitors so that helped us a lot and
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the other competitor wasn't the toughest
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store to compete against i hope i don't
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insult anybody
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and then uh so that was one thing
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at the same time when gimbles went out
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of business we knew all the good people
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there because they were part of batters
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so we got some excellent merchants and
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store people
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then a year later marshall fields was
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combined with with dayton hudson and we
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got a lot of great people from there
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within that same year mervin's had a
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texas operation but it wasn't doing well
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and they closed it so we got people from
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there so in a very short time we got
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people from gimbals from marshall fields
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and from mervin's to this little store
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in milwaukee called kohl's and that was
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a real break so we went from
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pretty
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low talent
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to terrific talent in a very short time
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and then we came up with what we thought
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what we wanted kohl's to be this value
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department store offering great brands
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at great prices and
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came up with a racetrack uh look of a
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store meaning you walked in and just
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walked around in a circle and every
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department had frontage and
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and what made us different in a way is
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that in most department stores you might
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find sportswear in three locations four
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locations sportswear one location men's
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one location juniors one location
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children's one location accessories in
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the middle so it was ease of shopping
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and we also built we had stores
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that intercepted the mall so you got
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people there in and out and going home
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and you know so made it easy for them
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and we did a lot of advertising okay and
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and and that was something our
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advertising in the past was
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not very good so we got new people
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in that whole department we revamped it
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and came up with you know an advertising
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look that was exciting key items and
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depth and and then we had a
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merchandising philosophy
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we saw i mean i spent my whole life in
00:13:54
in department stores and two of the big
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weaknesses in those days
00:13:58
is that they were never in stock on
00:14:00
basics and when you had ad goods you ran
00:14:02
out of ad goods or didn't have them and
00:14:04
you would frustrate people all the time
00:14:06
so one of the things we came up with
00:14:08
that we said we'd be 90 in stock on
00:14:11
basics and you know we put in systems
00:14:13
and we did a good job of that and you
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funded it and and you did it and when
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you did add goods you advertised out of
00:14:20
your assortment so it wasn't like we
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brought in special purchases
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we advertised what we owned out of our
00:14:27
assortments and buyers knew if they
00:14:29
didn't have ad goods they'd be in my
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office monday morning and they didn't
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want to be in my office monday morning i
00:14:34
wasn't as pleasant when when you didn't
00:14:36
have bad goods and so realizing how
00:14:39
important it was and also
00:14:41
that we made sure our prices were sharp
00:14:43
and that people didn't undersell us
00:14:45
because we could beat their prices if we
00:14:47
had to and
00:14:49
and and and we because of our cost
00:14:51
structure
00:14:52
so then uh in two years which is amazing
00:14:55
we paid off our debt
00:14:57
one of our big partners were the simons
00:14:59
you know the simon malls which are the
00:15:01
biggest people today and they were our
00:15:03
partners because they had like seven or
00:15:04
eight of our stores and that's how that
00:15:06
happened
00:15:07
and so
00:15:09
main street do you remember when
00:15:11
federated went into bankruptcy yes
00:15:13
and so one of the companies they had one
00:15:15
of the small companies called main
00:15:17
street and they were in chicago detroit
00:15:19
and minneapolis this is exactly where
00:15:21
the simon said we should be going
00:15:24
and they had stores similar to ours but
00:15:26
much better locations federer was very
00:15:28
powerful and it was our concept of
00:15:31
merchandising you know value price
00:15:34
but they didn't understand the low cost
00:15:36
culture so they had kind of the
00:15:38
department store expenses so they didn't
00:15:40
make any money they lost money because
00:15:42
they have lower prices and higher
00:15:44
expenses
00:15:46
and but we had the chance to buy them
00:15:48
and buy them at a very good price
00:15:50
because nobody really wanted them but we
00:15:53
had to
00:15:54
vote on it and baddest because they
00:15:56
still had marshall fields at the time
00:15:59
didn't want to give us you know
00:16:01
real estate in in chicago but between
00:16:04
the simons and us we were able to we had
00:16:07
over 50 percent we bought it brought
00:16:10
morgan stanley and as a partner and we
00:16:12
had
00:16:13
slightly the majority wouldn't give them
00:16:14
the majority we said the three of us
00:16:16
want to have that because we're running
00:16:18
it and that's how the new partnership
00:16:20
happened
00:16:21
and to your question
00:16:23
then
00:16:24
uh
00:16:25
we were starting you know we had debt
00:16:27
again but in a couple of years we went
00:16:29
public and then the reason we went
00:16:31
public is so we could expand and we
00:16:33
could start to grow and we'd have the
00:16:35
money
00:16:58
you
