Stein Mart: From $43 to $1.3 billion in three generations
Jay Stein’s family embodies the American dream. His grandfather immigrated to the U.S. and opened a general store in Greenville, Miss., in the early 1900s. Some 70 years later Stein began transforming the family’s single shop into a chain of department stores that sell upscale brands at bargain prices. Stein Mart (SMRT) has grown into a publicly traded company with 266 locations in 29 states and $1.3 billion in revenue. Even after coronary bypass surgery, Stein, 68, couldn’t make retirement stick. He’s back running the company and, seemingly, as ambitious as ever. His story:
My grandfather Sam Stein immigrated to New York City in 1905 with $43 in his pocket. He came from what was then Russia, now Poland, to escape all the persecutions of the day. I took the family to Ellis Island 100 years later to the day to celebrate. After, we went to the address listed next to his signature in the logbook, and it’s now right by a Louis Vuitton store in downtown Manhattan. He should have bought the building.
My grandfather was a runner on Wall Street, delivering paperwork, but he didn’t like New York. It was too big and bustling for him. So he saved all his nickel tips until he had enough to leave, and went to Memphis. There was this firm that would give immigrants a bag of merchandise — things like needles and thread and socks — and they’d go out, sell, and send the money back. My grandfather would take a steamboat every week down the Mississippi Delta and sell to farmers and farmhands whatever he could carry.
He got off the steamboat in Greenville, Miss., and saw that the town was building a new synagogue. He said to himself, “They must be good to their Jews here, and it looks like a great town.” He settled and kept going out to the farms until someone in town said, “You need a general store,” and lent him the money to do that.
He married and had four kids, and the store was part of the whole family’s life. Life was really good for our family in this great, sweet Southern town. Unfortunately, in 1933, during the Depression, my grandfather had a heart attack and died. My father, Jake, the oldest, was on a football scholarship at the University of Alabama, and he quit school and came back to work in the store.
Eventually the town expanded, and a better location opened up down the street. My father told his brother and sister to open up the new store, and he would take care of selling out the merchandise in their old space. That going-out-of-business sale did so well that a light went on for my father. He told his brother and sister to keep running the new store, and he would make the old space a promotional store. He had stumbled on the off-price model that would make us a hit — selling to people who needed great merchandise at really deep discounted prices.
I came along in 1945, and my early life was based around school, home, and working. I was always in [my dad’s] store. Something needed to be done, you did it. We didn’t have a lot of job titles. In the late 1950s, early 1960s, we expanded in the same location. My uncle was visiting, and he asked if they had a name for the new building. When my father told him no, my uncle said, “I’ve got a friend of mine who’s opening stores in Arkansas; his name is Sam Walton and he calls his Wal-Mart.” That’s how Stein Mart got the name. Before that it was Stein’s.
I went to prep school in Jacksonville, where I live now, and college at New York University. I came back to Greenville in 1967, and I remember the first day. I parked the car, crossed the street, and I said, “What’s my life going to be like?” I thought about it for 30 seconds, opened the door, and there it was — whatever “it” was going to be.
The arrangement wasn’t particularly peaceful. My father wanted to keep the operation small and didn’t think we needed records. He felt very comfortable doing business the way he’d been doing it the last 30 years. His work ethic was traumatic for me. He was a workaholic and would never leave the store. When I went on dates on Friday night, they’d have to start at 9 p.m. because my father would still be working and I felt guilty leaving before him. My father was a his-way kind of guy, and if you deviated at all, he wouldn’t be pleased. On the other hand, he was sought after in every respect in the community and in the congregation for his enlightenment. But when it came to the store, he wouldn’t budge.
Part of our merchandise was selloff from Saks Fifth Avenue, and Saks kept trying to get us to take more. For years I kept talking about opening a store in a larger city, and one day my father said, “Let’s go look.” In 1977 we went to Memphis and found a vacant 30,000-square-foot space. My father looked at it and said, “We’ll take half of it.” I said, “What are we going to do with half of it? We ought to take the whole thing!” Right in front of everybody we went at it again. The landlord made it economically feasible so we could take all of it.
Opening day was magical. Thousands of people showed up. Everyone would go straight to ladies apparel. I said, “Oh, my God, we’re going to run out of ladies’ goods in three days.” I went back to New York to buy more merchandise and didn’t know where to begin. I was introduced to Phil Dobular, a buyer who specialized in off-price deals and was in between positions. He knew everyone in the New York market. He was, and still is, the funniest individual who ever lived. The combination of Brooklyn and Greenville was unbeatable. He worked with me for 25 years.
In Greenville we’d hire our friends’ wives who wanted to work during Saks’ promotions. They saw the merchandise first and got discounts. On opening day in Memphis this lady Jane Carruthers comes to me. She was right out of the Junior League — the apex of Memphis culture and society. She said, “Can I work here? I’ve got a few friends that would like to, too.” They were the most charming, lovely four ladies I’ve ever met. That was the birth of the Boutique Program — we’d hire local women and they would spread the word. It gave us wonderful credibility, and they enjoyed it. Whenever we’d open a store, the Boutique Program just worked. It was a really important part of our early growth.
We started to focus more on systems and processes. Our first hire in Memphis was a fabulous manager, Carl Davis. He helped us enormously and took us to the next level. He started doing inventory management, which my father didn’t want in Greenville. At that point we needed more expertise. We hired Jack Williams between stores No. 3 and 4 to handle operations. My father said, “What’s he going to do?” My father didn’t understand it if he wasn’t going to work on the floor selling. But my father would listen to Jack and respected him. Sometimes his most important function was telling my father we were going to open a new store. Jack was a friend, counselor, and partner. He semiretired three years ago, but he still comes into the office almost every day.
We hit No. 10 and kept going. We went public in 1992 with about 46 stores. We did the IPO to attain personal liquidity for our family and establish a currency for expansion.
I had a bypass 15 years ago and thought, Maybe I shouldn’t do this day to day, and maybe there’s other people who can do it better. We tried with three different CEOs and failed for every available reason. They weren’t merchants. You’ve got to have a merchant running a retail operation. After our third unsuccessful try, I took the position of interim CEO. Sixteen months into it a reporter came to me and asked, “When are you going to drop the interim title?” I said, “Right now.” I didn’t realize the consequences, and our general counsel came in and said, “We have to make a public announcement!”
Our folks really embraced me coming back. It’s just been perfect. We’ve got the best organization we’ve ever had. I’m a lot happier than I was the first time we built it. I’m more secure, more self-assured. Now we’re at 266 stores, and we’re going to open about 10 this year and 15 next year. I think we can double our size. One day we’ll find a business partner that can keep the same standards and atmosphere, and we’ll merge our company. I’m in no hurry, and I’m very particular. We’ll do the right thing. It’s legacy. It’s got our name on it.
People work with you, not for you. In the early days if we had made the wrong hire just once, we would have been done. Hire good people who are a lot smarter than you are. Treat them well, love them, and embrace them.
Location, location, location. When you make a bad buy as a merchant, it can take six weeks to sell out. But a bad buy in real estate can take 10 years to get out of. Bad locations cost you a lot of money.
Grow slowly. We got to 10 stores and said, “Perhaps we can open 10 more.” Don’t wake up one morning and say you want 100 stores, because you’ll stretch yourself and your resources too quickly.
This story is from the April 7, 2014 issue of Fortune.