CSS Industries, Inc. History

Company Perspectives:

Our vision for CSS Industries, Inc. is to earn the right to own the seasons. We want to be the company that our customers think of first for social expressions in all seasons. To earn that position, we need to be the partner that best meets our customers' needs. Key Dates:

Key Dates:

1923:

Founding as City Stores with acquisition of established department stores.

1934:

Bankruptcy reorganization gives Bankers Securities Corp. majority interest.

1944:

Renewal of acquisition strategy.

1961:

Acquisition of W & J Sloane chain of home furnishings stores.

1979:

Jack Farber acquires majority interest during bankruptcy process.

1985:

Name changes to CSS Industries as nature of business changes.

1988:

Purchase of Paper Magic leads company to focus on gift wrap and accessories.

1997:

Sale of Direct Mail Business Products Group.

Company History:

CSS Industries, Inc. designs, manufactures, and distributes seasonal and everyday social expressions and novelties. Social expressions include boxed Christmas and everyday greeting cards, Valentine's Day exchange cards for the classroom, gift wrap, gift bags, and trim, including ribbon and bows, gift tags, and tissue paper. CSS is a leading maker of Halloween masks and also creates and distributes costumes, makeup, and related accessories and novelties. Other holiday novelties include Easter egg dye kits and seasonal wall and table decorations. CSS also manufactures and markets everyday vinyl and paper decorations and children's sticker books and educational activity kits. CSS products are displayed in showrooms in New York City, Memphis, Minneapolis, and Hong Kong. Most of the company's customers, primarily mass merchants, are located in the United States and Canada.

Formed Amidst the Changes of the 20th Century

CSS Industries began as City Stores Company, a holding company for established department stores in urban centers. A phenomenon of the 1920s, such 'ownership groups' took advantage of the various cost efficiencies accrued from volume purchases of merchandise for resale, benefits reaped by retail chains and cooperative buying groups. The stores within an ownership group operated separately, however, maintaining their original trade names and identities.

Formed in 1923, City Stores started with the acquisition of three department stores: B. Lowenstein, Inc., founded in Memphis in 1855; and Maison Blanche Co., of New Orleans, and Loveman, Joseph & Loeb, of Birmingham, Alabama, both established in 1887. The following year City Stores purchased Kaufman-Straus Co. of Louisville, founded in 1879. To service the merchandising needs of the company, City Stores formed several subsidiaries to operate departments within the stores; these included City Stores Apparel Co.; City Stores Mercantile Co.; City Stores Furniture Co.; and City Stores Millinery Co.

City Stores thrived through the urban growth and prosperity of the 1920s, but suffered the consequences of the Great Depression. In 1928 the company acquired a majority interest (68.6 percent) in Lit Bros. of Philadelphia, established in 1891. City Stores liquidated two department stores acquired shortly before the stock market crash, Goerke Co. of Newark, New Jersey, and Goerke-Kirch Co. of Elizabeth, New Jersey, discontinued in 1932 and 1935, respectively. The company also liquidated its merchandising subsidiaries that sold remaining merchandise to the department stores. In 1934 City Stores reorganized in accordance with the Corporate Bankruptcy Act, which allowed one class A share or 12 old common shares to be exchanged for a new common share. Outstanding promissory notes were paid or exchanged for convertible notes. Through these arrangements Bankers Securities Corporation (BSC) acquired a majority interest in City Stores.

City Stores endured the Great Depression and, at the end of World War II, the company renewed its acquisition strategy. In 1944 City Stores acquired control of R.H. White, a Boston department store, and purchased the remaining interest from BSC two years later. The company also acquired Richard Store of Miami from BSC in 1946. City Stores purchased a majority interest in two women's specialty clothing stores, Oppenheim, Collins & Co. in 1945 and Franklin Simon & Co. of New York in 1949. The company expanded with the acquisition of Wise, Smith & Co. of Hartford, Connecticut in 1948 and Lansburgh & Bro. of Washington, D.C. in 1951. The company also added four stories to the seven-story Richard Store in Miami.

In the 1950s City Stores sought efficiency through centralized functions and consolidated certain operations through several stock transactions. In 1950 City Stores merged Maison Blanche and Loveman, Joseph & Loeb, since both subsidiaries served markets in the south. The company merged Lit Bros. into City Stores' operations in 1951. Oppenheim, Collins & Co. merged with Franklin Simon, but the two chains continued to operate under separate trade names and as separate divisions under the newly formed City Specialty Stores. City Stores later changed the name of the Oppenheim, Collins & Co. stores to Franklin Simon. Richard Store Co. and Lansburgh & Bro. merged in 1953 and City Stores merged with another subsidiary, Diversified Stores Corp., in 1960.

Except for the liquidation of Wise, Smith & Co. in 1954, City Stores expanded in the 1950s and early 1960s. The proliferation of housing developments led to the opening of new, suburban stores, such as a 75,000-square-foot R.H. White store in Worcester, Massachusetts and a Richard Store in North Miami. Acquisitions included the Bry-Block department store in Memphis and 73 percent of Specialty Stores Co. Inc. which operated the Hearns Department Store in the Bronx. For $3.5 million, an investment subsidiary acquired control of the W & J Sloane chain of furniture stores in 1961, involving more than 30 stores in California, New York, Connecticut, New Jersey, and other states along the east coast. W & J Sloane purchased a 280,000-square-foot building at a prime location on Fifth Avenue in New York City from Franklin Simon. Lit Bros. acquired four department stores in suburban Philadelphia as well as four automobile accessory stores.

The City Stores Company Fades in the 1970s

During this time City Stores experienced a steady increase in sales, from $232.2 million in 1954 to $309.1 million in 1963, but net income declined from $5 million in 1954 to a loss of $1.6 million in 1963. The company took a number of measures to improve its financial situation. In 1966 City Stores formed a new division to provide consumer credit on installment and revolving credit accounts for its various department stores. The division was funded with $3.8 million in capital stock and $1.7 million in debt. City Stores acquired Wolf & Dessauer Co. for $3.9 million in 1966, but sold the company three years later along with Kaufman-Straus. R.H. White opened a second suburban store, a 50,000-square-foot facility, in Leominster, Massachusetts, in 1968. Sales and profits fluctuated, leading to a net loss of slightly less than $1 million in 1971.

The company struggled through the 1970s as urban decay led to a decline in sales at many of the company's urban locations and inflation increased expenses everywhere. The company discontinued operations at Lansburgh's in 1973, garnering $4 million from the sale of property and other assets. The year ended with a $700,000 loss on sales of $367.4 million. In late 1976 City Stores closed the Lit Bros. store at 8th and Market streets in downtown Philadelphia, diverting customers to the company's suburban stores.

In 1975 City Stores sought to ameliorate its problems through new merchandising programs, improved merchandise presentation, and management training and selection. Merchandising involved upgrading customer selection and updating departments to attract consumers from 25 to 40 years of age. The company also increased the amount of merchandise imported from other countries by 40 percent, seeking to provide quality and value at a lower cost. City Stores sought to improve merchandise presentation within its budget constraints by refurbishing three department stores and five Franklin Simon stores, while several W & J Sloan stores were completely renovated. An experimental interior design center opened under the W & J Sloane name in Maryland. The success of the experiment led to the opening of a second unit in Monterey, California.

After several years of low profits or net losses, City Stores filed for Chapter 11 bankruptcy in July 1979. Under the reorganization plan, City Stores discontinued several retail operations, including the 42 Franklin Simon women's specialty stores, Hearns Department Store, and the eight Richard Stores. The six Loveman, Joseph & Loeb and two R.H. White department stores closed in early 1980. The company sold real estate and other assets owned by the divisions to pay debt and for continuing operations. City Stores consolidated the four B. Lowenstein Bros. stores with the seven Maison Blanche stores to form the Maison Blanche Department Stores Group and planned to upgrade merchandise at the B. Lowenstein Bros. stores to match the moderate to better merchandise at Maison Blanche stores. The company also planned to open a new Maison Blanche department store in a new regional shopping center in Memphis. After selling nine clearance centers, the 41 remaining retail operations of W & J Sloane formed the W & J Sloane Home Furnishings Group.

City Stores was dismantled completely through the bankruptcy process after Philadelphia Industries Inc. (PII), a private investment corporation, acquired 54 percent stock ownership of City Stores in November 1979. Jack Farber, president of PII, became chairman of City Stores and was elected CEO in February 1980. Farber closed or discontinued department store operations in 1982 and discontinued west coast operations of W & J Sloane. He sold a portion of W & J Sloane's Fifth Avenue real estate and refurbished the leased portion. The company rebounded from a net loss of $15.9 million in 1981 to a net income of $5.6 million in 1982 due to the sale of real estate, savings from discontinued operations, and a $3.8 million credit from the early payment of long-term debt. In 1984 Farber discontinued some retail operations of W & J Sloane and sold remaining operations to R.B. Furniture. The sale of related real estate and assets, as well as the sale of the Lit Bros. downtown Philadelphia store, which net the company $5 million, provided funds to pay debt and for new acquisitions.

City Stores acquired a 27 percent interest in Seligman & Latz (S & L) in 1984 and 1985 in anticipation of a merger. In addition to the Adrian Arpel cosmetics division, S & L operated nearly 1,000 beauty salons at department stores in the United States and Europe and 400 fine jewelry stores in national department store chains. The merger never transpired as S & L did not meet a number of requirements in the agreement, including goals to improve earnings. City Stores sold its interest in S & L and Farber pursued a series of acquisitions that permanently changed the nature of the company, renamed CSS Industries in 1985.

A New Company with a New Name in 1985

Under Farber CSS Industries developed into a diversified company through the acquisition of established businesses. CSS completed its first acquisition in January 1985 with the purchase of an 86 percent interest in Rapidforms, Inc. of Bellman, New Jersey, from PII for $8 million, including $5 million in convertible preferred stock. Rapidforms designed and manufactured a variety of business forms, with many customers placing orders with their names and addresses printed on the forms. Rapidforms sold office supplies and business forms to manufacturers, wholesalers, retailers, and small businesses nationwide through direct mail catalogs and brochures. In 1986 Rapidforms acquired Russell and Miller, a direct mail distributor of printed paper products, for $3.3 million in cash and consolidated Russell and Miller's Seattle and Los Angeles operations at Los Angeles for cost efficiency.

With the $12.1 million acquisition of Ellisco Co. from PII in 1986, CSS Industries diversified into another area of business. Ellisco manufactured metal containers in standard forms, such as for paint, shoe polish, and food cans, and specialized in the manufacture of metal containers in accordance with customer specifications. The company served small- to medium-sized companies in the United States and Canada and obtained approximately 12 percent of its business from the U.S. government and government agencies. Ellisco's manufacturing locations included sites in Pennsylvania, Maryland, Ohio, and West Virginia. Ellisco also distributed metal and plastic containers manufactured by other companies.

With new acquisitions and internal improvements, sales and net income at CSS continued to grow. In 1986 sales reached $33 million with net income of $4 million. In 1987 sales at Rapidforms increased 40 percent, with 18 percent of the increase originating from the first full year of operations at Russell and Miller under CSS ownership. Overall sales increased 74 percent to $58.8 million, with 58 percent of the increase resulting from acquisitions in 1986. Net income reached $6.3 million in 1987. With the company operating profitably CSS continued to diversify as well as to expand within existing industry groups.

CSS added gift wrap and related products to its line of businesses with the 1988 acquisition of Paper Magic Group. CSS purchased the company for $38 million, acquiring all of the preferred stock and 84.5 percent of the common stock. Paper Magic designed, manufactured, and distributed seasonal and everyday paper products for gift giving and holiday celebrations. Christmas products included gift tags, folded gift boxes, ribbon and bows, and boxed Christmas cards. In addition to seasonal wall and table decorations, the company produced Valentine cards for classroom exchange, everyday greeting cards, stationery supplies, and elementary school supplies. Paper Magic distributed its products under the Artis, Eureka, and Grand Award brands. The company also obtained licenses to produce certain products with imprints of known cartoon characters, including Care Bears, Teenage Mutant Ninja Turtles, and Walt Disney characters.

CSS's other subsidiaries expanded through acquisition. Rapidforms purchased a 75 percent interest in Standard Forms Inc., with printing and distribution operations in Ramsey, England and Le Havre, France. Ellisco acquired the Penn Corp. & Closures, Inc. and Wheeling Closure Corp. for $4.7 million in 1988, followed by the 1990 acquisition of Ballonoff Home Products for $4 million cash in 1990. CSS recorded sales of $159 million in 1990 and net income of $18 million.

CSS continued to grow through acquisition of companies related to its existing areas of operations. Paper Magic acquired Spearhead Industries for $14.8 million in 1991. Based in Eden Prairie, Minnesota, Spearhead was involved primarily in the creation and distribution of Halloween masks, costumes, makeup, and novelties as well as Easter products, such as egg dye kits. Acquisitions by Ellisco included certain assets International Machine and Toll Works and certain assets of Atlantic Cheinco Corp. CSS sold some assets of the latter, resulting in more than $700,000 in profit from the sale.

After Farber merged PII into CSS in 1993, CSS continued to buy and sell businesses and business assets, which eventually settled into two operating divisions, the Consumer Products Group and the Direct Mail Business Products Group. Acquisitions by Rapidforms included particular assets of the Business Envelope Manufacturers and all assets of the Histacount Corporation. Ellisco discontinued its line of can products with the sale of related equipment and inventory. CSS sold the subsidiary to U.S. Can in 1994 for $34 million, providing funds to further existing operations. In 1993 CSS acquired Berwick Industries, Inc., a ribbon and bow manufacturer whose customers included mass merchants, drug store chains, and wholesale floral, craft, and paper markets. Although under financial and managerial duress, CSS stabilized operations at Berwick while being integrated into Paper Magic. CSS added to its line of Halloween products in 1995 with the purchase of certain assets of Topstone Industries and Illusive Concepts; the latter specialized in crafted Halloween masks.

CSS took a major step toward expansion in the field of gift wrap and accessories in 1995 when Paper Magic acquired Cleo, Inc., a leading manufacturer of gift wrap and trim, primarily for the Christmas season. CSS acquired the company at below net book value, for $133 million, including $108.5 million in cash and the balance in a short-term promissory note. Although Cleo's revenues reached $189 million in 1995, the company had operated at a loss for several years. CSS closed five of Cleo's six manufacturing and packaging plants and four of five warehouses and merged production into Paper Magic and Berwick operations. It was after the acquisition of Cleo that CSS organized its subsidiaries into two divisions, the Consumer Products Group and the Direct Mail Business Products Group.

Social Expressions the Company's Focus in the Late 1990s

The Consumer Products Group emerged as CSS's primary focus of operations. In January 1997 Paper Magic acquired Color Clings Inc., designer, manufacturer, and distributor of vinyl home decorations to mass market merchants in the United States and Canada. Sales at Color Clings reached $30 million in 1996. Rapidforms sold its European operations early in 1997 and, in December, CSS sold the Direct Mail Business Products Group for $84.6 million. With a 90 percent ownership in Rapidforms, the ensuing transactions garnered net cash proceeds, after taxes, of approximately $60 million.

CSS instituted a restructuring program in 1997 that involved the sale of real estate, the discontinuation of poorly performing product lines, and integration of certain functions of Berwick and Paper Magic. The sale of inadequately used facilities resulted in net proceeds of $17.3 million in 1998, while the discontinuation of some product lines resulted in a two percent decline in sales, from $400.6 million in 1998 to $392.6 million. The plan to combine Berwick and Paper Magic failed to obtain expected cost or operational efficiency and the company returned to a decentralized structure with new leadership.

CSS divided its product lines into four groups. The Paper Magic Group--Fall Spring and Everyday Product Division, located in Minnesota, encompassed products for Halloween, Easter, and everyday occasions. The Paper Magic Group--Winter Product Division, based in Scranton, Pennsylvania, focused primarily on boxed Christmas cards, gift tags, and children's Valentine exchange cards. Cleo, Inc., in Memphis, concerned itself with Christmas gift wrap and gift bags, and Berwick Industries, Inc. continued to manufacture ribbon and bows. The company also created a new position, corporate vice-president of licensing. David Erskine was named CEO and president in 1999, replacing Jack Farber, who remained as Chairman of the Board.

CSS continued to develop and expand its seasonal product lines in 1999. New Easter egg decorating kits included a speckle kit and decoupage kit with flowers and stripes. In August 1999 CSS acquired Party Professionals Inc., designer and distributor of elaborately crafted latex masks and related costumes and accessories marketed under two brand names, Don Post Studios and The Great Coverup. The company's customer list consisted of party and specialty stores and sales ranged from $5 million to $6 million per year. Paper Magic introduced a new line of boxed Christmas cards called Pine Hollow. The upscale look of the cards featured holographic trim and unusual embossing. The success of the line led to the development of a gift wrap line for Christmas 2000. CSS also planned a line of photographic cards, Holiday Images, and a line of inspirational cards, called Joyful Greetings.

Principal Subsidiaries: Berwick Industries LLC; Cleo, Inc.; The Paper Magic Group, Inc.

Principal Competitors: American Greetings Corporation; CPS Corporation; CTI Industries Corporation; Delaware Ribbon Manufacturers, Inc.; Disguise, Inc.; Equality Specialties, Inc., Fun World, Inc.; Jean Marie Creations, Inc.; Hallmark Cards, Inc.; Hollywood Ribbon, Inc.; Rubie's Costume Co., Inc.; Signature Brands, LLC.

Further Reading:

• Autry, Ret, 'CSS Industries Inc.,' Fortune, April 8, 1991, p. 82.
• 'Berwick Industries, Inc.,' Textile World, August 1993, p. 10.
• Briggs, Rosland, 'Philadelphia Holiday Goods Firm Awaits Christmas Boost,' Knight-Ridder/Tribune Business News, October 26, 1998.
• 'CSS Elects David J.M. Erskine as President and Chief Executive Officer,' Business Wire, May 13, 1999, p. 1550.
• 'CSS Industries Inc.,' Philadelphia Business Journal, December 3, 1990, p. 24.
• 'CSS Industries Inc.,' Philadelphia Business Journal, October 21, 1991, p. 35.
• 'CSS Industries, Inc. Acquires Party Professionals,' Business Wire, August 18, 1999, p. 1454.
• 'CSS Industries, Inc. Announces Organizational Changes,' Business Wire, November 4, 1999, p. 1648.
• 'CSS Industries Inc.: Company Agrees on Merger with Philadelphia Industries,' Wall Street Journal, October 28, 1992, p. B4.
• 'CSS Industries Inc.: Gibson Greetings Cleo Unit Agrees To Be Purchased,' Wall Street Journal, October 4, 1995, p. B4.
• 'CSS Industries To Buy Ellisco,' Wall Street Journal, August 15, 1986, p. 1.
• Hendrickson, Robert, The Grand Emporiums: The Illustrated History of America's Great Department Stores, New York: Stein and Day, 1979.
• 'The Low-Risk Way To Play Volatile Small Stocks,' Money, April 1993, p. 80.
• Nulty, Peter, 'CSS Industries Inc.,' Fortune, August 17, 1987, p. 86.

Source: International Directory of Company Histories, Vol. 35. St. James Press, 2001.