Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.twt.news From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Herbie Haft: D.C.'S DISCOUNT MAN Date: Sun, 15 Nov 92 16:56:27 EST Message-ID: \SE A;MONEY \HD Herbie Haft: D.C.'S DISCOUNT MAN \SH If you read, drive, eat or drink, the Hafts have a store for you \BY Elisa Williams \CR THE WASHINGTON TIMES Having built a retail and investment company with $700 million in assets and more than $1 billion in sales, Herbert H. Haft isn't shy about his ability to spot a good deal. "I've bought, oh, I don't know, maybe 10 of these. They do everything," the 71-year-old Mr. Haft said, pointing to a display of $1 plastic watches during a visit to a Virginia variety shop. "I gave one to my wife, and she laughed. Take your pick. They come in red, blue . . . whatever you want." To those who know Mr. Haft as the financial shark behind Dart Group Corp., the Landover company that made millions from high-stakes plays for corporate takeovers, this fascination with cheap watches seems out of character. But it's not. This Washington retail legend, who has been the target of hundreds of lawsuits and has been celebrated as a champion of the consumer, is full of surprises and contradictions. For example, Mr. Haft lives in a mansion on Embassy Row in the District and shuttles about town in a conspicuous, chauffeur-driven limousine. But he says he often eats lunch at Pizza Hut or McDonald's. He brushes off accusations of profiteering but recalls in detail the time a community group accused him of failing to follow through on a promised gift to his former high school. And though he has a reputation as a cutthroat businessman, virtual strangers feel free to call him Herbie. The result is an anomaly who continues to capture the attention of business leaders and blue-collar workers alike. "He's an extremely talented merchant. He always manages to be ahead of everyone else," said Paul Gambal, an investment adviser with Kahn Brothers and Co. Inc., a Washington firm that has been buying Dart Group stock. But Mr. Gambal was quick to admit that Mr. Haft has a somewhat tainted reputation. "A lot of people won't even consider investing in Dart because of the Hafts." Considered diligently secretive, Mr. Haft opened a window into his professional life last month to promote Total Beverage, his latest discount retailing venture. Holding a notebook with an outline of points to make, Mr. Haft quickly abandoned his planned speech about the beer-and-wine store to give a history lesson on his days as a drugstore owner. "You might not know this: I was the first discounter," he said, gleefully recounting how he was slapped with some 100 lawsuits from drug companies that wanted to stop him from selling their products at a discount. In the 1950s, discounting was illegal in states that had "fair-trade laws" requiring retailers to use the manufacturer's suggested price. A costly legal battle in which he lost several rounds threatened to devastate him financially. After the case reached the Supreme Court, the Justice Department sided with Mr. Haft and charged one of the plaintiff drug companies with fixing wholesale prices. That philosophy of undercutting competitors' prices prevails at Total Beverage. "See this: Dom Perignon for $69.98. We've shopped the market and found that most were selling the same bottle for $89.99," Mr. Haft said. "We believe that people respond to low prices, the best selection, the best value. You've got to do what's right. . . . I've got many, many letters from people thanking me for what I did for drugstore prices." Consumers may have benefited from Dart Drug's low-price crusade, but so has Mr. Haft. The strategy enabled him to build a 73-store chain from a single location at 18th Street and Columbia Road NW, despite competition from established retailers such as Peoples Drug. In 1984, he sold the business to its operating managers for $160 million. Some say the impressive sum he snared for Dart Drug, which had an estimated $100 million in assets, led to the chain's demise. Dart Drug, which was renamed Fantle's Drug Stores, filed for bankruptcy protection from creditors in 1989 and closed down a year later. "They raised prices," Mr. Haft said. "You can't fool customers." Parting with Dart Drug freed Mr. Haft to pursue other retail companies. Armed with his drugstore profits and capital raised from selling bonds, Mr. Haft made plays for May Department Stores Co., Jack Eckerd Corp., Safeway Stores Inc., Federated Department Stores, Supermarkets General Corp., Dayton Hudson Corp. and Stop & Shop Cos. Inc. The unsuccessful takeover attempts, which ended when Mr. Haft agreed to sell back his stock in the targeted companies, yielded $106.5 million in profits, according to the Securities and Exchange Commission. The cost of getting rid of Mr. Haft was high. Loaded with debt from buying out Mr. Haft, some of his targets had to adopt massive cost-cutting campaigns. Several labor unions sued the Hafts, and publicity from the takeover attempts gave the family the reputation of being self-serving profiteers. Mr. Haft said the accusations are out of line. "Those companies were inefficient. We saved jobs because as a result of our actions they were forced to become efficient." Although Dart Group Corp. never acquired a major retailer, it has built its own collection of retail chains, including Crown Books, Trak Auto and Shoppers Food Warehouse. The company's retail chains have grown steadily in the past few years, but much of its profits come from its financial subsidiary. Results for fiscal 1992 were down in part because the company bought back a large chunk of its bonds. Mr. Haft's desire for privacy shows in the way he organized Dart Group. The Haft family controls all of the company's voting shares and much of its nonvoting stock, which trades on NASDAQ. And the Hafts keep tight reigns on management. Mr. Haft's wife, Gloria, is vice president. His older son, Robert, serves as Dart Group president; his daughter, Linda, is senior vice president. Mr. Haft's other son, Ronald, runs Combined Properties Limited Partnership, a family real estate company that owns several of the shopping centers where Crown Books and Trak Auto lease space. Mr. Haft, who learned about retailing by working in his father's drugstore, beams with pride when he talks about his children's involvement in the business. Training started early, with details of business discussed at meals and family gatherings, he said. And the tradition is being passed down to grandchildren who hold shares in the company. But the family's close ties to the business have irked some owners of Dart Group stock and caused many portfolio managers to avoid it. As a result, the stock is a bargain, said Mr. Gambal of Kahn Brothers, whose company specializes in what it describes as "blemished" stocks. Among the blemishes on Dart Group are the Hafts' high salaries, their reputation for self-serving activities and their control of all the voting stock and a large percentage of the nonvoting stock. "Here is a company that has plenty of cash. It's paid off most its debt, and the only negative is the reputation of the Hafts," Mr. Gambal said. With a reputation for aggressive maneuvers and a war chest of cash, retail industry observers speculate that Dart Group may be hunting for acquisitions, especially given the large supply of distressed retail companies and cheap shopping centers. But Mr. Haft refuses to give away any secrets about his plans or to comment on speculation. "I'm not going to talk about that." ****BOX DART GROUP Headquarters: Landover Chairman: Herbert H. Haft President: Robert M. Haft Sales: $1.16 billion, up 11 percent from previous year 69 percent of Trak Auto Corp. common stock * 54 percent of Crown Books Corp. common stock * More than 50 percent of Shoppers Food Warehouse Corp. common stock * 100 percent of Cabot-Morgan Real Estate Co. * 100 percent of Dart Group Financial Corp. Figures are for the year ended Jan. 31, 1992. This article is copyright 1992 The Washington Times. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. 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