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Archiver > SKAGGS > 1997-09 > 0874716822


From: <>
Subject: Skaggs Saga part 1d
Date: Fri, 19 Sep 1997 20:53:42 -0400 (EDT)


In addition to farming, Samuel M. Skaggs tried his hand at managing a store
and post office in Cato, Missouri, before settling along the eastern side of
Newton County, Missouri. Missouri would prove to be their hove for
approximately twenty years until they moved to the Pacific Northwest.
Samuel Skaggs entered the Baptist ministry sometime between 1888 and 1900.
His family resided in Newtonia township in 1900. Nearby was the family of
his brother, Eldridge, who moved from Tennessee after 1897. Newell Skaggs
may have joined them after the death of his first wife. His second marriage
took place in the fall of 1899 with Samuel M. Skaggs as the officiating
minister.
Of the first eleven children born to Samuel and Nancy Skaggs, nine were
living in 1900. Their six sons were referred to later by their initials
rather that their given names. However, some unusual switches took place
under this practice. The surviving eldest son was named P. Oscar Skaggs at
his birth in 1881, but was later know as O. P. Skaggs. Aron Sylvester
Skaggs, born in 1886, became S. A. Skaggs. The most interesting change
involved the next to the youngest son named Samuel Olnie Skaggs at his birth
on 14 November 1895. The name Olnie became Lennie. The next step was to
refer to his as L. S. Skaggs.
Sometime after 1907, Samuel and Nancy Skaggs moved their family to American
Falls, Idaho. The logistics required to feed such a large family plus a
desire to help the local settlers led the Reverend S. M. Skaggs to start his
own grocery store. Perhaps in imitation of his family’s trend, Samuel built
a store "with his own hands, on rented land, with borrowed money." From this
tiny store (18 x 32 feet) in Idaho in 1915 evolved the ninth largest
retailing firm in the United States in 1979. Much of the original business
consisted of buying carloads of groceries and retailing them directly to the
public from the railroad tracks. After selling the store to his third son,
Marion Barton Skaggs, for 41,088, Samuel M. Skaggs moved to eastern Oregon.
The six Skaggs brothers were strong-willed men imbued with the Protestant
ethic. Not only were they decisive and quick to take action, but they found
it difficult to relax and enjoy most forms of recreation. They were
intensely competitive, among themselves as well as with other. Both O. P.
Skaggs and M. B. Skaggs claimed to have been the first in the family to found
a grocery chain. O. P. Skaggs started in Idaho Falls or Elko, Nevada with
Skaggs Cash Stores, each additional store bearing an even number. M. B.
Skaggs in partnership with the other brothers, formed Skaggs United Stores,
each additional store bearing an odd number
O.P. Skaggs thrived on the purchasing ability and competitive power of his
multiple stores. His trademarks were the orange-colored store fronts, the
well scrubbed floors, and no credit. One store manager, John Zitting, was
fired when it was discovered that he was buying a car on time payments.

M.B. Skaggs was twenty-seven years old when he bought his father’s store. In
contrast to his brother, his trademarks were blue-colored store fronts and
displays of merchandise in the aisles. One of the original goals of their
father was to offer cheaper prices for cash to the local wheat farmers who
were hard-pressed by the available credit terms. M. B. Skaggs added: "That
was my good father’s principle. I guess I was more selfish—certainly more
practical. I saw that opportunity lay in doing the same basic things as my
father had done. But I think I also realized, even then, that if I would be
content with a very small margin of profit I could build a correspondingly
larger business.
By 1926, O. P. Skaggs had been bought out by his brothers, and Skaggs United
Stores had expanded to 357 firms in ten states. Although minuscule compared
to modern standards, each new store was expected to be not only successful,
but to develop the capital and personnel for a future store. Part of their
success was based on able store managers who were attracted by the policy of
inventorying every sixty days and paying a bonus of thirty percent on the
profits. One of those former managers later reported that "it was always
comforting to know that the Skaggs brothers were working the same long hours
as their managers . . . their hearts were really in the business.
In 1926, Skaggs United stores merged with 322 units of a Southern California
firm formerly known as Sam Selig stores to become the present-day Safeway,
with M. B. Skaggs as its first president. Skaggs held that position until
1934. The next year, the youngest brother L. L. Skaggs founded a Midwestern
chain of drug stores known as Osco,, presently associated with Jewel
supermarkets. Long’s Drug Stores of California were started by a son-in-law
of M. B. Skaggs.
The devastating effects of the Great Depression were partially blunted for
the Skaggs by the vigorous family drive and the cash, no credit policy of
their father. This policy is still in force. Although the current
definition has been refined to mean that " the Company does not directly
extend credit to its retail customers, but does honor bank credit cards. The
"bank holiday" of 1933 crippled all businesses to same degree by preventing
them from drawing on their cash reserves, but some Skaggs firms were able to
quickly build up side bank accounts from their incoming daily cash flow while
many businesses based heavily on credit went under.
After a stint with the armed forces during world War I, L. S. Skaggs returned
to the grocery business and became part of the future Safeway management.
His marriage to Vivian H. Howe resulted in the birth of their only child, L.
S. Skaggs, Jr. The appointment of L. S. Skaggs, Sr. As intermountain
division manager for Safeway brought them to reside in Salt Lake City in
1930. In 1939, L. S. Skaggs, Sr. Resigned from Safeway to enter the
drugstore business. Two associates from Safeway joined with him to buy four
of the Pay Less Drug Stores from his brother L. J. Skaggs. L. S. Skaggs,
Sr.’s first four stores were located in Salt Lake City; Ogden, Utah; Great
Falls, Montana; and Boise, Idaho. Pay Less was incorporated in 1947 and in
1970 was re-christened Skaggs Companies, Inc.
L.S. (Sam) Skaggs, Jr. Was only twenty-six when the sudden death of his
father at the age of 54 required him to assume the leadership of the
corporation in 1950. His widowed mother, Vivian H. Skaggs, was elected to
the board of directors in the same year. L. S. Skaggs, Jr. had worked in the
family business from the age of fourteen, completed two years at Westminster
College in Salt Lake City, served in the Chemical Warfare Service of the
armed forces in World War II, and had been married barely a year when this
new responsibility came. Lack of experience at high corporate levels did not
deter him from accepting the challenge and setting even higher goals. How
well he succeeded can be partially summed up in the following figures: the
inheritance of 11 drug stores with 9.5 million dollars in annual sales in
1950 was expanded to 202 drug stores and 39 super-centers (combination drug
and grocery supermarkets) with over one billion dollars in annual sales in
1978.
The 1970s were particularly important expansion years for Skaggs Companies,
Inc. Skaggs and Albertson’s formed a partnership in 1970 to pioneer the
supermarket concept of both drugs and groceries under one roof
(super-centers). Between 1974 and 1978, Skaggs Companies doubled in size
and went over the one billion dollar sales mark annually for the first time
in 1978. In 1977, they parted amicably with Albertson’s, each coming away
with twenty-nine drug-grocery supermarkets. At the end of 1978, 95 percent
of the Skaggs stores were located in suburban areas in 21 different states.

Drawing on the expertise gained from the tie with Albertson’s, L. S. Skaggs,
Jr. initiated a merger with American Stores in order to penetrate the eastern
market. This merger was approved on 29 July 1979 by over 80 percent of the
shareholders. American added 785 food stores and 139 drugstores to the 241
Skaggs stores. Despite this imbalance, Skaggs is the surviving company.
However, it was the decision of L. S. Skaggs, Jr. to retain the name of
American Stores to appropriately reflect the coast to coast scope and
emergence as a national leader of the new company. L. S. Skaggs, Jr. is
presently Chairman of the Board as well as Chairman of the Executive
committee over the ninth largest retail organization in the United States.
American business thrives on competition. The result of this merger may
represent the epitome of the competitive drive in modern capitalism. The
head-to-head competition between the nation’s new number four supermarket
and the number one chain, Safeway, and between the second largest drugstore
franchise and the number six chain, Long’s , stems from original connections
with the Skaggs family. It would be interesting to know how much business
competition has generated by this same family through spin-offs of firms
founded by them or created by executives once associated with them.
The leadership behind the dramatic growth from tiny grocery to mammoth
corporation has earned the title of entrepreneurs for the six sons of Samuel
M. Skaggs and his grandson, L. S. Skaggs, Jr. Each has contributed to the
economic philosophy behind the success of the various Skaggs companies and
the development of retailing in the West. Overall this philosophy might be
summarized as: (1) sell at lower prices for cash, (2) be satisfied with a
small profit margin resulting from large volume sales, (3) allow a certain
amount of autonomy and other incentives to attract strong managers, and (4)
move to , or acquire retail outlets in suburban shopping center. Such a
philosophy is not unique to the Skaggs family, but their early recognition of
its potential along with their native talents, hard work, and on-the-job
training produced an unusual degree of business success and social mobility.
As one financial columnist recently reported, "the Skaggs family is hardly
known to the American public. But it has probably had more influence on
American retailing than any other family.
Many fascinating areas surrounding this family remain to be explored. The
social and geographic origins of James C. Skaggs attempt to understand the
rise of this family as well as the contributions of the families which
intermarried with them. Further research in both of these generations,
particularly, require more attention in any attempt to understand the
financing of successful retailing forms and the direction of modern American
business history.

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