Burlington Coat Factory Warehouse Corporation History

Address:

1830 Route 130 North
Burlington, New Jersey 08016
U.S.A.

Telephone: (609) 387-7800
Fax: (609) 387-7071

Public Company
Incorporated: 1972 as Burlington Coat Factory Warehouse
Employees: 23,000
Sales: $2.69 billion (2003)
Stock Exchanges: New York
Ticker Symbol: BCF
NAIC: 452110 Department Stores

Company Perspectives:

Our goal is to provide exceptional value for our customers, our stockholders, our associates, and our communities. We remain focused on ensuring that Burlington Coat Factory is the place to find the right combination of style, selection, and value.

Key Dates:

1972:: Monroe G. Milstein opens the first Burlington Coat store.
1983:: The company goes public and changes its name to Burlington Coat Factory Warehouse Corp.
1990:: A 438,000-square-foot national distribution center is established.
1993:: Sales surpass $1 billion.
1999:: Expansion continues; 27 new stores are opened.
2003:: Burlington decides to shutter its Decelle chain; the store count reaches 335 units. apparel increased its importance to the company during the early 1990s, in large part because fewer and fewer retailers were offering men's formal attire. By the mid-1990s, men's apparel accounted for 35 percent of Burlington Coat's total sales, a substantial portion that nearly matched the sales garnered from outerwear. With this emphasis on men's apparel and another segment, children's furniture, which, it was hoped, would cultivate Burlington Coat customers at a younger age, the company positioned itself for further growth.

Indeed, success continued into the late 1990s due in part to the company's diversification efforts and its aggressive growth strategy. Bolstered by the past success of moving into new product lines, Burlington Coat continued to add new items to its marketing mix and by this time had morphed into one of the most successful discount department stores in the United States, selling not just outerwear but family apparel; shoes; infant and children's clothing, furniture, and toys; linens; and home décor. By 1998, slightly more than 20 percent of revenues stemmed from coat sales. To spark interest in its new product categories, the company launched a new $48 million television advertising campaign sporting the tagline, "We're more than great coats."

Founder Monroe Milstein commented on obstacles Burlington Coat had overcome in becoming more than just a "coat" company in a 2000 WWD article. "Early on, when we just had coats or mainly coats, it would have destroyed us to have the warm winters like we've had the last few years." Milstein continued, "It took a long time, especially in the North, for people to get over the perception that we aren't just coats. What we found when we opened in the South in the last ten years is that we don't have that heavy coat perception because we came with a full complement, a full line of clothes."

For the most part, Burlington Coat was lauded throughout the industry for its success in the retail sector. The company did have to deal with several instances of bad press, however, including several bouts with employees claiming the company used discriminatory practices when hiring and promoting. Then in 1998, the Humane Society of the United States informed the company that it was selling parkas trimmed with dog fur from China. In an effort to control the negative publicity a situation like this could bring from animal activists, Burlington Coat immediately recalled the parkas and returned them to the vendor.

These instances did not deter Burlington Coat from pursuing additional expansion. During 1999, the company opened 27 new stores, remodeled 15 locations, and relocated five units. The company continued to bolster its store count into the new millennium and by 2003 had opened its 335th store. Along with its namesake Burlington Coat stores, the company operated five Cohoes Fashions stores; seven Decelle stores, slated to be shut down in fiscal 2004; four Luxury Linens locations; one Totally 4 Kids unit; one Baby Depot; and ten MJM Designer Shoe stores.

The company's revenues had grown steadily since the early 1990s, reaching $2.7 billion in fiscal 2003. Burlington Coat appeared to flourish despite the weak retail operating environment that threatened many of its competitors. Management believed that its business strategy--superior selection and great brands at low prices--would propel the company's growth well into the future. With a history of success behind it, Burlington Coat appeared to be well positioned for expansion in the years to come.

Company History:

Burlington Coat Factory Warehouse Corporation operates as a leading national department store chain with 335 stores in 42 states. Along with outerwear, the company offers apparel for the entire family; shoes; accessories; a complete baby and toddler line of clothing, furniture, and toys; home décor; linens; and gifts--all at discounted prices. Burlington Coat also oversees Cohoes Fashions, a five-store chain offering upscale label fashions in Connecticut, New York, Rhode Island, and New Jersey. Founder Monroe G. Milstein and his family own a majority interest in the firm.

A 20th-Century Family of Retailers

Belying its enormous size, Burlington Coat was essentially a family owned and operated business in the new millennium, as it was more than 30 years earlier, when Monroe G. Milstein, the patriarch of the Milstein family, opened the first Burlington Coat store in 1972. Over the ensuing 30 years, the family's grip on the operation of Burlington Coat was maintained by successive generations of Milsteins, led by Monroe Milstein and his wife, Henrietta, who succumbed to cancer in 2001.

Monroe's father, Abe, first linked the Milstein name to retailing when he opened a wholesale outerwear business in 1924. Nearly 50 years later, his son was drawn to the same type of business, selling outerwear at discount prices, but in a much different era, that would witness the rise in popularity of a particular breed of retailers and launch the Milstein name toward prominence in the U.S. retailing industry. Monroe Milstein acquired the first Burlington Coat facility in 1972, a coat factory located in Burlington, New Jersey, with an attached retail outlet. Initially, Burlington Coat specialized in selling winter overcoats, a product line whose sales were heavily dependent on the weather, peaking in the winter and dropping off during the summer months as temperatures rose. Although first-year sales reached $1.5 million, Monroe Milstein was wary of the company's reliance on the vagaries of the thermometer, and quickly realized that substantial growth could not be predicted on unpredictable climatic variations.

Milstein diversified into other apparel niches, thus laying the foundation for Burlington Coat's further growth. In its first few years, the company had assumed characteristics that would dictate its future success. The company's first facilities, the coat factory and the adjoining retail outlet, were purchased as existing properties, not constructed specifically for Burlington Coat, a practice the company would employ throughout its history, leasing existing retail spaces, rather than constructing its own. This strategic flexibility enabled Burlington Coat to expand rapidly when economic conditions were favorable and quickly halt expansion when conditions soured, an enviable ability in a frequently capricious retail market. Another precedent set in the first few years was the decision to display the company's merchandise in sparsely decorated surroundings, giving Burlington Coat outlets a bare, "warehouse" feel, while enabling prices to be discounted 30 to 40 percent. The diversification of the company's product line also would prove to be a linchpin to its future success, lessening Burlington Coat's dependence on a particular market niche within the retail clothing industry and expanding the company's inventory outside apparel into furniture and linens.

Success Beginning in the Mid-1970s

These hallmarks of Burlington Coat's existence--leased, sparsely decorated stores offering a wide assortment of merchandise--were established policies by 1975, a benchmark year for discount retailers. Prior to 1975, manufacturers were allowed to fix their prices in collusion with the more entrenched, conventional retailers, such as department stores, that sold their merchandise at standard prices. Essentially left on the sidelines, discounters frequently could not stock the same products as their higher-priced competitors, and the merchandise they were able to obtain from manufacturers could not be offered to the public at prices low enough to attract their business. Under such an arrangement, manufacturers and the higher-priced retailers prospered while discount retailers were forced to traffic in inferior quality products. When federal antitrust legislation in 1975 made the agreements between manufacturers and retailers illegal, the door was opened to discount retailers, spurring their ascent to the top of the retail industry. For Burlington Coat, federal intervention arrived just as the company was gaining momentum and provided the defining difference between the two eras in which the father Abe and the son Monroe had hoped to succeed in the retail industry. For the son, it appeared the opportunity for success was now more readily attainable.

Success came, but at a moderate pace, at least in comparison with the rate of growth the company would realize later. By 1983 annual sales had climbed to nearly $300 million, and the company was becoming a giant in the retail industry. It went public that year, with the Milstein family purchasing a majority of Burlington Coat's stock and the company's name changing from Burlington Coat Factory Warehouse to Burlington Coat Factory Warehouse Corporation.

Two Supreme Court rulings in the early 1980s took much of the strength away from the 1975 decision that had essentially put an end to price fixing between manufacturers and traditional retailers. The new decision put the onus of proving vertical price fixing on the accuser, which invariably was the discounter. This greatly diminished the ability of discount retailers to mount a serious threat against the more established partnership between manufacturers and department stores; once a manufacturer terminated a contract with a discounter, the discounter was left with little recourse except to engage in lengthy and costly litigation. Perhaps more disturbing to discount retailers, such as Burlington Coat, was a shift in fashion trends toward high-priced merchandise, a potentially deleterious development that stifled growth throughout much of the decade. During the early 1980s, when consumers developed an affinity for high-priced, designer labels, Burlington Coat recorded modest sales growth, as the once bright prospects for discount retailers noticeably dimmed.

Evolving into a Retail Empire: Late 1980s-Early 1990s

While sales growth was slow, it was better than average during these lean years for discounters nationwide. Sales barely eclipsed $300 million in 1984, then inched upward, climbing to $480 million by 1987. This lull in business, however, was only temporary, for in the next five years Burlington Coat's sales volume would more than double, as the company evolved into a retail empire. Several of the reasons for this exponential growth were attributable to strategic decisions made by Burlington Coat's management, but others were attributable to changing conditions within the retail industry that brought Burlington Coat and other discount retailers to the fore.

Efforts toward diversification were intensified, as the number of linen stores within Burlington Coat stores rapidly increased, growing from 55 in 1989 to more than 140 by 1991. Men's apparel, particularly men's suits, became an important contributor to company sales, and stores began to offer merchandise entirely beyond the scope of many apparel retailers, including such items as children's furniture. Perhaps the most important contributor to Burlington Coat's dramatic growth was a recession in the late 1980s and early 1990s that arrested consumer demand for expensive designer apparel. As the economy suffered and many consumers were left with significantly less discretionary income, discount retailers flourished. Burlington Coat, still continuing to lease its retail space, moved to take advantage of the situation, quickly increasing the number of its stores.

As Burlington Coat's sales figures spiraled upward, the company made two key moves to increase the efficiency of its operation. Burlington Coat improved inventory controls and took advantage of economies of scale by constructing a 438,000-square-foot national distribution center in 1990. Located a mile and a half from the company's original coat factory and store in Burlington, the distribution center was supported by a new computer system Burlington Coat had instituted in 1988 in anticipation of the new distribution center. The computer system enabled Burlington Coat to process as many as 125,000 pieces of merchandise each day at its distribution center and helped position the company to continue to grow during a period that saw many other businesses fail.

Annual sales flirted with the $1 billion mark in 1992, then reached $1.2 billion the following year. There were 185 Burlington Coat stores in 1993, ranging in size from 16,000 square feet to 133,000 square feet, and plans were in place to continue expanding throughout the mid-1990s. Typical Burlington Coat stores offered 10,000 to 20,000 garments from as many as 300 different manufacturers at a 35 percent to 40 percent discount. In 1993, Burlington Coat signed an agreement with Mexican retailer Plaza Coloso S.A. de C.V., an operator of supermarkets and department stores, to open a Burlington Coat store in Juarez, Mexico, the company's first store outside the United States. The following year, after purchasing a ten-store discount chain called Mid-Island, Burlington opened an experimental freestanding men's store that offered men's outerwear, sportswear, and tailored clothing, a service not offered by many discount retailers.

Diversification Paying Off: Mid-1990s and Beyond

As the company entered the mid-1990s expecting to open 25 to 30 stores between 1994 and 1996, an emphasis was placed on its men's apparel segment, particularly men's suits. Men's

Burlington Coat Factory Warehouse Corporation History

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