(The following stories appeared in Jacksonville Today and Shopping Centers Today, respectively in 1993.)

Retail Profile: Stein Mart

By Bob Andelman

Hugh Jones, Jr. is always on the lookout for new business. So when the chairman and chief executive officer of Barnett Bank of Jacksonville heard that an up-and-coming retail chain would be relocating its headquarters from Nashville to Jacksonville, he did a little research on the man running the company.

Learning that Jay Stein, chairman of Stein Mart, grew up in Greenville, Mississippi, Jones figured he was in luck. Many years earlier, the banker had spent time in Greenville and knew many prominent people there. He called Stein, introduced himself, talked about the bank and then wondered if they might have any mutual acquaintances.

Joe Smith?

"Dead," Stein said.

Harry Williams?

"Dead," Stein said.

This went on for a while before Stein interrupted.

"I don't think I want to get to know you," Stein said. "All your friends are dead."

Well, Stein got over his reservations. Not only did he choose Barnett as his bank, he and Jones became close friends and Jones put the young merchant on his board of directors. Jay Stein - by all accounts a warm and likable fellow - made a lot of friends in the dozen years since he came to town. And Jacksonville, in turn, has been very good to Stein Mart, one of America's rising stars in men's and women's apparel.

The last 12 months have been particularly bountiful. Stein Mart went public in April 1992 at $13 per share; by mid-December, the price had doubled to $27. The chain opened seven new stores in 1992 and will open up to 12 more in 1993. And the No. 1 signal that Stein Mart was a nationwide phenomenon: a favorable feature story on page one of The Wall Street Journal.

Not that Jacksonville's value-conscious shoppers needed convincing. The city supports four Stein Mart stores, more than any other city, with a fifth store possible in the not-too-distant future. "The St. Johns River creates pockets of demographics," Stein Mart President Jack Williams says. "It makes it easy to create and identify markets. And because we live here, maybe we're able to size up some opportunities that we may miss elsewhere."

"If we were based in Memphis, there would be four in Memphis," Jay Stein says. (There are currently three stores in Memphis.)

Part of the company's secret, as the Journal noted, is Stein Mart's propensity for hiring women well-connected in social circles to work one day a week as "boutique ladies." Rather than working for a living, they do it for fun, to clue friends in on the latest arrivals and even for the 25 percent employee discount. Stein Mart gets the benefit of the boutiques ladies' cachet and wide circle of well-heeled and deep-pocketed friends who might not otherwise shop at a discount store.

But the real secret is in Stein Mart's selection, value pricing and tasteful display techniques. The inside of a Stein Mart more closely resembles a specialty store than a discounter such as Marshalls or Filene's Basement. Prices are low, but there aren't 15 or 20 copies of the latest design from Chaus or Nesi.

Stein Mart was founded in Greenville, Mississippi in1908 by Jay's grandfather, XXXXXXX. Before his 10th birthday, Jay - an only child - was spending every Saturday in the store, working alongside his parents. "It was truly a family business and our entire family participated," he says. "My mother worked for the company until I was born and she's still in the Greenville store every day. I always knew I was going to be in the business."

But he wasn't content to step into his father's shoes and continue business as usual. He had an eye for fashion and trends that no single store could contain. In 1977, eager to prove his worth to himself and his old man, Stein moved to Memphis and opened the first Stein Mart branch store. Two years later he went into Nashville and hired Jack Williams away from Genesco, Inc., to captain the business side of the operation.

"I needed someone to take the entrepreneurial ideas I had and translate them into a workable, viable business plan," Stein says of Williams. "I bring a fashion sense, an instinctive merchandising sense. He has the operational and financial expertise to bring it all together. We both had the good luck to find each other."

New stores opened as fast as Stein and Williams could capitalize them. They entered the emerging big cities of the Southeast - Birmingham, Charlotte, Jackson, Jacksonville, Little Rock, Charleston and Raleigh - places where Saks Fifth Avenue and Macy's weren't ready to go but where the markets were crying out for higher fashion.

XXXXX Stein reacted to his son's success in "mixed" ways.

"My father always reinforced what Jack and I were doing, although he came from a different school than we did and was more conservative than we were," Stein says. "My father saw hard times in his life. He didn't want to risk what happened to so many other companies as they expanded."

The elder Stein believed that to separate himself from his competition, he had to offer something different. He believed it was price. "He was one of the original discounters," Williams says. But XXXXX and Jay Stein were different men when it came to stocking their respective stores. What sold in Greenville wasn't enough for Memphis, Nashville or Jacksonville. "Jay's taste level was a little higher than that," Williams says.

When Stein went to Nashville, his concept was to sell better merchandise at discount prices. In the early days, he was able to scramble around New York, convincing people to sell him better merchandise for his southern outposts. Jay bought the ladies lines, his wife Cindy chose the gifts, Papa Stein selected the linens and Williams picked the menswear. They built a reputation by carrying New York labels that were not yet available in the South. Up until five years ago, most Stein Mart stores carried a selection of Saks Fifth Avenue labels.

"That was a minor part of the business, but it helped," Williams says. "It was exciting to have Saks merchandise on sale. You could get a shipment of that, run an ad and pack the store."

The chain opened seven new stores in 1990, five in '91 and seven in '92, bring the total number of Stein Marts to 52 in 14 states. And expansion in 1993 could mean as many as 12 new stores.

"Early in the program, we defined a couple of key ingredients we needed to be mindful of," Williams says. "We worked real hard to build an infrastructure - personnel and computers - that will support what we're doing now and going forward."

Part of their methodology has been to instill an understanding in assistant store managers of what expansion means to them: stores of their own. "Our assistant managers are chomping at the bit to run their own stores," Williams says. Incentives include generous stock option plans.

"The other major component was capital," Williams says. "We didn't want to be highly leveraged. We've always had a pretty conservative balance sheet. At times we've been criticized for not growing faster. But this is a level we're comfortable with. And we're less dependent on debt than we ever were, coming off the public offering."

Why is Stein Mart headquartered in Jacksonville?

"We didn't think we could grow the company from Greenville. Wal-Mart is the exception rather than the rule to operating in a small town.We had to move," Stein says. "I had gone to prep school (The Bolles School, Class of '63) here for two years. And 25 years ago, this wasn't the town it is today. It was very backward, very provincial."

But the eighth store Stein Mart opened was in Jacksonville. Stein and Williams spent a little extra time in the city, assessing its dramatic evolution in the years since Stein was a schoolboy.

"The first thing I observed was that the lifestyle could be terrific to raise a family and grow a business," Stein says. "If you wanted to participate, the city had a lot of lifestyle options. Not to mention the banking and financial sectors. Of equal importance, Jack and I determined we, as a company, could be important to Jacksonville. That some of the non-business goals we share could make a difference in the arts, in education, in children's health. We felt we could be a big company in Jacksonville versus a medium-size company in Nashville."

(One of the lifestyle choices the two friends made was to buy a boat, which they dubbed "Discount." But they complained to friends they could never get it to operate as efficiently as the company.)

Stein and Williams take the concept of corporate citizens very seriously. Among their many affiliations - the symphony, museums and other civic associations - Stein is partial to The Bolles School, from which he graduated in 1963, and Williams is a charter member of Dreams Come True.

Both men are devoted to children. During the year Williams served as president of Dreams Come True he doubled the number of "dreams" provided to ailing area children. And Stein Mart frequently opens its store to these children for shopping sprees.

"Jack has a soft spot in his heart for kids," Dreams Come True board member and Arthur Andersen & Co. managing partner Travis Storey says. "One of the objectives he set for DCT was that every child with a life-threatening illness in our service area would have a dream come true."

As for Stein, one year when he served on the board of directors of Wolfson Children's Hospital, he noticed an unhappy little girl in the hospital's hallway. Bending down to talk to her, he learned that she would be making an unplanned, overnight stay at the hospital. She was upset because she didn't have her teddy bear with her. Within 15 minutes, according to legend, a bear was delivered to the little girl from the nearest Stein Mart. And by the next day, Stein decided that in the future, every child staying overnight at Wolfson would receive a free teddy bear to make their visit a little more bearable. Stein Mart now donates more than 1,000 bears annually to the hospital; each one is at least 2-feet tall.

"If you can show Jay the goodness in things, he's generous to a fault," Hugh Jones Jr. says.

Being successful makes such generosity possible.

"They're great merchants," Service Merchandise chairman of the board and CEO Raymond Zimmerman says. "They had a formula and they stuck to it. They didn't try to be everything to everybody and be something they're not. Plus, Jay and Jack are the kind of people you want to be friends with and take them home for dinner."

VERSION 2, SHOPPING CENTERS TODAY:

Stein Mart is one of the South's rising stars in men's and women's apparel.

The last 12 months have been particularly bountiful. The Jacksonville, Florida-based chain of 52 stores went public in April 1992 at $13 per share; by year's end, the price had doubled to $26. Seven new stores opened in 1992 and up to 12 more are expected in 1993. And the No. 1 signal that Stein Mart was a nationwide phenomenon: a favorable feature story on page one of The Wall Street Journal.

"They're great merchants," Service Merchandise chairman of the board and CEO Raymond Zimmerman says. "And they've come a long way in the last few years. They had a formula and they stuck to it. They didn't try to be everything to everybody and be something they're not. The new stores they're opening are gorgeous and well-run. Plus, Jay Stein and Jack Williams are the kind of people you want to be friends with and take them home for dinner."

Part of the company's secret, as the Journal noted, is Stein Mart's propensity for hiring women well-connected in social circles to work one day a week as "boutique ladies." Rather than working for a living, they do it for fun, to clue friends in on the latest arrivals and even for the 25 percent employee discount. Stein Mart gets the benefit of the boutiques ladies' cachet and wide circle of well-heeled and deep-pocketed friends who might not otherwise shop at a discount store.

"We get an awful lot of benefit from customers who like the store and tell their friends," company president and chief operating officer Jack Williams says. "But we still think it's important to get our story in the newspaper several times a week." Stein Mart does most of its fashion advertising in daily newspapers, utilizing lots of white space; TV and radio are but a minor part of its overall program.

The real secret is in Stein Mart's selection, value pricing and tasteful display techniques. The inside of a Stein Mart more closely resembles a specialty store than a discounter such as Marshalls or Filene's Basement. Prices are low, but there aren't 15 or 20 copies of the latest designs from Chaus, Evan Piccone, Polo or Nesi.

"Our mix is department store, similar to what a Burdines might carry," senior executive vice president and chief merchandising officer Mason Allen says. Allen came to Stein Mart six years ago after nearly a decade with Ivey's. "The difference is, we don't carry the commodities. We carry the cream, not racks and racks. Except for being off-price, we would be more aligned with a specialty department store, such as Parisian."

The chain, which successfully tested larger sizes for women in 1992, will experiment with bigger men's sizes this spring in 18 stores.

Stein Mart was founded in Greenville, Mississippi in 1908 by chairman of the board Jay Stein's grandfather, Sam. Before his 10th birthday, Jay - an only child - was spending every Saturday in the store, working alongside his parents. "It was truly a family business and our entire family participated," he says. "My mother worked for the company until I was born and she's still in the Greenville store every day. I always knew I was going to be in the business."

But he wasn't content to step into his father's shoes and continue business as usual. He had a natural eye for fashion and trends that no single store could contain. In 1977, eager to prove his worth to himself and his old man, Stein moved to Memphis and opened the first Stein Mart branch store. Two years later he went into Nashville and hired Jack Williams away from Genesco, Inc.'s S.H. Kress division (where he was president), to captain the business side of the operation.

"I needed someone to take the entrepreneurial ideas I had and translate them into a workable, viable business plan," Stein says of Williams. "I bring a fashion sense, an instinctive merchandising sense. Jack has the operational and financial expertise to bring it all together. We both had the good luck to find each other."

New stores opened as fast as Stein and Williams could capitalize them. They entered the emerging big cities of the Southeast - Birmingham, Charlotte, Jackson, Jacksonville, Little Rock, Charleston and Raleigh - places where Saks Fifth Avenue and Macy's weren't ready to go but where the markets were crying out for higher fashion.

Jake Stein reacted to his son's success in "mixed" ways.

"My father always reinforced what Jack and I were doing, although he came from a different school than we did and was more conservative than we were," Stein says. "My father saw hard times in his life. He didn't want to risk what happened to so many other companies as they expanded."

The elder Stein believed that to separate himself from his competition, he had to offer something different. He believed it was price. "He was one of the original discounters," Williams says. But Jake and Jay Stein were different men when it came to stocking their respective stores. What sold in Greenville wasn't enough for Memphis, Nashville or Jacksonville. "Jay's taste level was a little higher than that," Williams says.

When Stein went to Nashville, his concept was to sell better merchandise at discount prices. In the early days, he was able to scramble around New York, convincing people to sell him better merchandise for his southern outposts. Jay bought the ladies lines, his wife Cindy chose the gifts, Papa Stein selected the linens and Williams picked the men's wear. They built a reputation by carrying New York labels that were not yet available in the South. Up until five years ago, most Stein Mart stores carried a selection of Saks Fifth Avenue labels.

"That was a minor part of the business, but it helped," Williams says. "It was exciting to have Saks merchandise on sale. You could get a shipment of that, run an ad and pack the store."

The chain opened seven new stores in 1990, five in '91 and seven in '92, bringing the total number of Stein Marts to 52 in 14 states. And expansion in 1993 could mean as many as 12 new stores.

"Early in the program, we defined a couple of key ingredients we needed to be mindful of," Williams says. "We worked real hard to build an infrastructure - personnel and computers - that will support what we're doing now and going forward."

Part of their methodology has been to instill an understanding in assistant store managers of what expansion means to them: stores of their own. "Our assistant managers are chomping at the bit to run their own stores," Williams says.

"The other major component was capital," Williams says. "We didn't want to be highly leveraged. We've always had a pretty conservative balance sheet. At times we've been criticized for not growing faster. But this is a level we're comfortable with. And we're less dependent on debt than we ever were, coming off the public offering."

Going public was a big cultural change for the chain, although Stein has been looking towards selling stock since 1981. Williams say that while Stein Mart has adapted to being publicly-held, the concept of the stores "hasn't changed one inch. Jay still goes into the market and spots trends. Jay is a wonderfully instinctive merchandiser who can spot trends and value." That view is reiterated by the professionals who do business with Stein Mart.

Recent expansion targets for Stein Mart have included New Orleans, the Tampa Bay area (a second store will open in 1993), Houston and Atlanta. Typical stores are 36,000 square feet. The chain is comfortable in both build-to-suits and retrofits of existing space. In fact, the chain's first 11 stores were rehabs. And of the stores scheduled to open in '93, only Fort Myers, Florida, is new construction. Houston and Augusta are rehabbed Service Merchandise locations and the Atlanta site was formerly a Winn Dixie.

"They're in some of the shopping centers we own," Publix Supermarkets real estate manager James Leckey says. "They've also taken some stores where we've gone dark. And they're in some of the same centers we're in; they basically go after the same clientele we do. The only down side is that we have a center with them in Jacksonville where they drew so many people at Christmas we didn't have enough parking for our customers."

A typical Stein Mart customer is going to be in the store several times a month or a week, according to Williams. "They like to run in and see what's new since their last visit," he says. "Where we want to be in a community is in a spot that is conveniently located to some of the better demographic areas of a city. Our preference is to be around a grocery that appeals to an upscale market. Things that pull people in frequently. We can feed our traffic off to other stores; we want other stores that can feed off to us."

Williams is disinclined to entertain bids from mall developers.

"We're not mall tenants as a rule," he says, "although we're in a few. We're (primarily) in strip centers. And we don't feel power centers are where we need to be."

Shopping center developer Dan DuPree, president of Atlanta-based Cousins/New Market, has done six deals with Stein Mart, from Boca Raton to Cincinnati.

"I think they add a phenomenal amount to any center," DuPree says. "They have a very clear vision of who their customer is. They market to a niche we don't think anyone else serves in a non-mall center. They're a great magnet for soft goods retailers. Jack and I disagree on where power centers ought to rank as locations for their stores. I think they're good long-term moves for them." DuPree must be pretty convincing; five of his six Stein Mart deals are in power centers. "And they're as honorable a group as exists in the business today," he adds. "You can legitimately do business on a handshake with them and you always get what you bargained for."

"Their word is gold as gold," Leckey confirms. "You never have to look over your shoulder with them."

DuPree recommends not just Stein and Williams as businessmen he likes to cut deals with; he also shops in their stores.

"I have never been in one of their stores and not spent $100," he says.