| Former type | Private (1940-1964; 1984-1987) Public (1964-1984; 1987-1988) Subsidiary (1988-1992) |
|---|---|
| Industry | Retail |
| Fate | Acquired by PayLess Drug |
| Founded | Seattle, Washington, United States (1940) |
| Founder(s) | Monte Lafayette Bean |
| Defunct | 1992 |
| Headquarters | Seattle, Washington, United States |
| Number of locations | 124 (1992) |
| Area served | Western United States |
| Key people | M. Lamont Bean (president (1959-1984)) |
| Products | Pharmacy and General Merchandise |
| Employees | 3,500 (1992) |
| Subsidiaries | Pay 'n Save, Ernst/Malmo Nursery, Bi-Mart, Lamonts, Sportswest, Schuck's Auto Supply, Yard Birds, Von Tobel's, Price Savers Warehouse |
Pay 'n Save was a retail company founded by Monte Lafayette Bean in Seattle, Washington; 1940. Over the years, Pay 'n Save was the leading drug store chain in Washington and was the owner several Washington-based retailers including Lamonts and Ernst. A 1984 sale of the company to the Trump Group and a 1986 attempt to transform the retailer into a bargain-basement merchandiser resulted in a loss of nearly $50 million. By 1988, Pay 'n Save was sold to Thrifty Corporation who later sold the stores to PayLess Drug who retired the Pay 'n Save name. As a result, most of the retailer's divisions were spun-off as separate companies or shuttered. As of 2011, Pay 'n Save's membership discount chain, Bi-Mart, is the lone surviving division of the company.
At the company's peak, Pay 'n Save was operating 313 stores in ten western states under several different names including Pay 'n Save, Ernst, Bi-Mart, Lamonts, Sportswest, Schuck's Auto Supply, Yard Birds, Von Tobel's, and Price Savers.[1]
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In 1940, businessman Monte Lafayette Bean arrived in Seattle, Washington from Portland, Oregon to take over Tradewell Stores, Inc., a chain of grocery stores.[2] By 1947, Bean and his son, M. Lamont Bean, opened the first Pay 'n Save drug store at Fourth Avenue and Pike Street in Seattle.[2]
In March 1959, M. Lamont Bean became the president of Pay 'n Save and began considering operating other stores that were not pharmacies.[2] Shortly after, Bean began an interest in Ernst Hardware, a local hardware chain owned by Seattle brothers Fred and Charles Ernst.[2] Fred Ernst agreed to sell Ernst Hardware and its nine locations to Pay 'n Save in February 1960.[2] In 1962, Pay 'n Save acquired Malmo Nursery and began opening Ernst-Malmo combination stores; combining hardware, lumber, garden supplies, and nursery items in one building.[2] The first Ernst-Malmo combination store was opened at the University Village shopping center in Seattle.[2] By 1982, Ernst was operating 68 hardware stores.[2]
In 1965, Pay 'n Save acquired the Rhodes department stores chain.[3] Pay 'n Save shuttered the Rhodes flagship store in Seattle during 1968.[3] The Rhodes name was retired from the suburban branches when M. Lamont Bean renamed the stores Lamonts in 1970.[3] During 1976, Pay 'n Save acquired discount chains Bi-Mart and Yard Birds.[4][5]
In October 1982, company founder Monte Lafayette Bean died at age 83.[2] In 1983, Pay 'n Save entered the wholesale club business and opened the first Price Savers Warehouse in Salt Lake City, Utah.[2] In December 1983, Pay 'n Save acquired Schuck's Auto Supply, Inc. for about $70 million in Pay 'n Save common stock.[6] At the time, Schuck's had 58 stores in Washington, Oregon, and Idaho.[6]
In September 1984, the Pay 'n Save board voted to sell the retailer and to give a lockup option on $4.1 million shares to the Trump Group (no relation to New York real estate developer Donald Trump[7]) in an effort to stave off other bids.[1]
Pay 'n Save's largest shareholders, Stuart Sloan and Samuel N. Stroum, vowed to fight the sale of the retail company.[1] Sloan and Stroum, who own 18 percent of Pay 'n Save's stock, issued a statement telling shareholders not to "be stampeded into acting hastily".[1] On September 12, 1984, The Trump Group announced that it had withdraw its offer to purchase Pay 'n Save in order to negotiate two Sloan and Stroum.[7] On October 15, 1984, Pay 'n Save was officially sold to the Trumps for $358 million.[8]
The company's sporting goods chain, Sportswest, was spun-off in 1984 before being closed completely.[9] After a brief period, Thrifty Corporation reopened the stores under the Big 5 Sporting Goods name.[10] Sportswest was the first of several Pay 'n Save division to be sold over the next few years.[9]
In May 1985, Pay 'n Save announced it would put all its subsidiaries up for sale.[11] During this time, Dayton-Hudson division Mervyns was expected to acquire the company's 20 Lamonts stores and Southland Corporation, then-owner of 7-Eleven, expressed interest in acquiring all 58 Schuck's Auto Supply stores.[11] The first subsidiary to be sold was Price Savers Warehouse, in August 1985, to Cincinnati, Ohio-based Kroger.[12]
On November 1, 1985, Pay 'n Save successfully spun-off Bi-Mart, Lamonts, and Schuck's to form a new company, Northern Pacific Corporation.[13] With all divisions combined, the new company had sales of about $450 million, making it one of the Northwest's largest retail operations.[13] Just eight days later, Pay 'n Save's flagship drugstore chain became controlled by a company equally owned by the Trump Group and a partnership headed by William Zimmerman, owner of California discount chain Pic 'N' Save.[14] The sale left Pay 'n Save with 69 Ernst Home Center stores, three Yard Birds stores, and wholesaler Northwestern Drug Co.[14] By January 1986, Pay 'n Save Corp. was renamed Seattle Standard Corp.[15]
After 19 months as a privately held company, Pay 'n Save announced plans to return as a public company in May 1986.[8] The company planned to sell 3 million shares at from $16 to $18 a share.[8] As part of the transaction, the company purchased Bi-Mart, a former division of the original Pay 'n Save Corp.[8] The original company sold its first shares of common stock to the general public in 1962 and reverted to private ownership on October 1984.[8]
On May 15, 1986, days after announcing plans to go public again, Pay 'n Save announced it would be taking on a new image and announced plans to remodel its 108 stores, which would include a new blue-and-green pain scheme.[16] The company also announced its new emphasis on bargain goods and plans to raise $225 million by selling convertible bonds and 10-year notes.[16]
In June 1986, Pic 'N' Save, filed a lawsuit against Pay 'n Save's investment banker, contending that materials outlining Pay 'n Save's stock offering misrepresent the role of Pic 'N' Save's former chairman, William Zimmerman.[17] When Zimmerman left Pic 'N' Save in August 1984, he agreed not work for a competing company for one year, but the company's interests had been attempting to determine whether Zimmerman violated the agreement.[17] The suit, filed in state Superior Court in Los Angeles, said that the "Zimmerman merchandising strategy", a key part in Pay 'n Save's business plan, includes Pic 'N' Save trade secrets and other confidential information.[17] On July 1, 1986, Pic 'N' Save had filed a civil lawsuit against Pay 'n Save, William Zimmerman, and related parties, asking for more than $50 million compensatory damages and $50 million in punitive damages.[18]
By the end of July 1986, Zimmerman and the Trumps again turned Pay 'n Save into a public company by selling $52 million in stock, despite a dramatic decline in sales since they took over.[19] The company later reported a $12.8 million loss in the first quarter ending August 2.[19] Mike Reynolds, senior reporter for New York industry publication Chain Drug Review, blamed the company's decline on Zimmerman's approach displaying tables of low-cost imported items.[19] By December, the company's president, Maynard Jenkins, resigned for a job in California and the company's discounted items would no longer be carried.[19]
In January 1987, Pay 'n Save reported a lost of nearly $50 million in the last year.[20] At the time, chief executive Gerald Nathanson said Pay 'n Save management believes a new merchandising strategy and restructuring "will strengthen Pay ' n Save and improve its future performance significantly".[20] In February 1987, Pay 'n Save announced the closure of all stores in Montana and Wyoming.[21]
In June 1987, Pay 'n Save revealed its "back to basics" merchandising plan.[22] The chain planned to revert their 106 drug stores back to the familiar blue-and-green color scheme, complete with new signs, and better lighting.[22] The company's stores would focus on departments such as candy and snacks, stationery, household chemicals and greeting cards, while the pharmacies would remain the foundation of each store.[22] The company's remodeling process was blamed for a loss of $9.6 million in the company's third quarter.[23]
In April 1988, Pay 'n Save was put up for sale.[10] The sale attracted interest from Thrifty Corporation, who previously acquired Sportswest from Pay 'n Save in 1984.[10] On May 13, Thrifty announced plans to acquire the company's 110 Pay 'n Save drug stores and 37 Bi-Mart discount stores for stock worth $232 million.[24] Thrifty also announced plans to keep the Pay 'n Save and Bi-Mart names and the company's current employees.[24] In the previous year, Pay 'n Save was left with a $27 million loss and a $49 million loss in 1986.[24]
In August 1988, Gerald Nathanson, Pay 'n Save president and CEO, resigned from from the company.[25] Richard Dortch, who began working with Pay 'n Save as a store clerk in 1969, was elected president of the 124-drugstore chain in January 1991.[26]
By February 1992, Pay 'n Save was once again for sale.[27] Days prior to the February 5 announcement, the company announced a loss of $88 million after a $250 million after-tax special charge.[27] By March, PayLess Drug Stores, a then subsidiary of Kmart, emerged as a possible buyer for some or all Pay 'n Save 125 drugstores.[28] PayLess officials were not able to comment at the time.[28]
In June 1992, PayLess Drug Stores officially acquired the money-losing Pay 'n Save drug stores from Thrifty Corporation.[29] Leonard Green & Partners, a Los Angeles investment firm that specializes in management buyouts agreed to acquire Thrifty Corporation's other division, including Pay 'n Save's Bi-Mart.[29] Following the sale, the Pay 'n Save stores were renamed PayLess Drug.[29]
M. Lamont Bean, the company's president from 1959 to 1984, died on February 5, 2004 at age 79.[2]