The Burlington Coat Factory story is a true American rags-to-riches epic. Almost 60 years ago in Manhattan’s garment center, Monroe Milstein joined his Russian immigrant father, Abe, in the wholesale clothing business. Amherst Fashions, founded by Abe in 1924, sold coats and suits to specialty and department stores in New England and the Midwest. To earn extra money, Monroe sold his merchandise retail—at a discount—to friends and family on weekends, from a little outlet store in their building in the garment center. Monroe, a visionary long before the outlet craze, decided to expand the popular and profitable retail business and branch out on his own. In 1972 he and his wife, Henrietta, bought their first retail property in Burlington, N.J., transforming Amherst Fashions into Burlington Coat Factory.
Fast-forward to April 2006: The Milstein family’s Burlington Coat Factory, by now consisting of 367 stores and publicly traded since 1983, is acquired by affiliates of Boston buyout firm Bain Capital LLC for $2.06 billion. Of this sum, the Milstein family, still 62% owners, would receive $1.3 billion.
Abe lived to see his son and grandsons’ phenomenal success; he passed away in 1983, the same year the company went public and the wholesale business was totally phased out. Monroe, now 79, was chairman and chief executive at the time of the April 2006 sale; his sons Stephen, 50, and Andrew, 53, were executive vice presidents and chief merchandisers, running day-to-day operations. The brothers, who did not retain their positions after the buyout, reminisced and projected forward in a lengthy interview at the store’s massive but modest Burlington headquarters shortly before the deal closed.
Though Monroe retired to Florida last year, his presence continued to pervade every inch of every Burlington Coat Factory store. “Originally factory outlet stores sold only close-outs and irregulars,” Andy Milstein explained. “We were the first outlet store to sell first-run merchandise, advertising ‘buy factory direct.’ An instant success.”
Henrietta Milstein, who died in 2001, joined the company as it began to grow. A teacher and elementary school librarian, she inaugurated the children’s department, turning Burlington Coat Factory into a department store. Born in Austria, Henrietta—a Holocaust survivor—maintained her position as both the head children’s buyer and the heart of the business throughout her life.
“It all goes back to my mom,” explained Stephen. “She banked every penny of her salary as a teacher. My father used that savings for his first down payment. That was the beginning of everything.”
Monroe kept his eyes focused closely on his books. Afraid to overextend, he leased out the men’s apparel and shoe departments, using the rent income to cover his mortgage. In 1975, Burlington Coat Factory opened its second location in Copiague, Long Island, a middle-class suburb. Monroe’s eldest son, Lazar, who is two years older than Andy, was the store manager; an Orthodox Jew, he would not open the store on Saturdays, the Jewish Sabbath. At that time, local “blue laws” decreed the only stores permitted to open on Sundays were those that were closed Saturdays. The first Sunday, Andy and Stephen recalled, 300 people were lined up around the block waiting for the store to open its doors. The Milsteins had reached their first plateau on the road to mega-success.
But their philosophy remained the same. “It’s very simple —buy more of what’s selling,” said Stephen. “Before we had computers, everything was inventoried by ripping perforated tags in half and coordinating the data on corresponding index cards. We went through those cards every week —sometimes every day. ‘Put more of the best-sellers on the floor—mark down what’s not moving.’ It sounds so simplistic, but that was our selling theory from day one.”
More stores were added, at first all in New York and New Jersey. Four stores to eight stores, eight stores to 16 stores, 16 to 32, and so on, until there were Burlington stores in 42 states. “It was an evolution, not a revolution,” noted Andy. “There’s no big dramatic story. Just a lot of hard work day to day, growing and growing every year.” Stephen, who got his retail training at the former Abraham & Straus chain (now Macy’s), joined the company in 1979; Andy, a lawyer and accountant, in the late ’80s.
“Our mantra is, ‘Listen to the customer. Keep costs down. Offer the best value,’” said Andy, who still used the present tense to describe the family’s role even as their time at the helm wound down. “What sets us apart from our competition is our merchandise. We always have top-selling styles in store. No need to wait for a sale. It’s our slogan—and it’s the truth.”
When asked for their secret of working with family, Stephen and Andy both smiled, speaking of their parents with palpable love and pride. “Again,” emphasized Stephen, “we do not pull rabbits out of hats here. It all just works. Everyone has particular responsibilities and departments they take care of. My mother and father drove in together every morning, then my mother went to her office and my dad to his. They rarely had lunch together, but would meet at 6:00 and drive home, sometimes talking about what had gone on all day, sometimes not. But home was home. And business was business.”
That philosophy guided the family when Henrietta was diagnosed with ovarian cancer in the late ’90s. “My father totally changed his outlook,” Andy recalled. “Though we were always a close family, suddenly it was all about my mother and the grandchildren. Everything changed.” His father, though still dynamic as ever, “never quite regained his passion for business,” Andy recalls.
Though the Milsteins upgraded their lifestyle as business grew, they remained true to their humble roots in their homes and offices. Think Warren Buffett, not Donald Trump. Though they were able to buy bigger homes in nicer neighborhoods, they did not spend extravagantly. “My father was raised in the Depression,” Stephen said with a smile. “He drummed into us, ‘If you don’t need it, don’t buy it!’ My mother was a Holocaust survivor. Her family had been very well-off in Europe. At age nine, she was forced to leave her beautiful apartment and escape to New York, where her family had to live in a fifth-floor walk-up. She lost everything and realized material goods are ephemeral—only family lasts forever.”
Keeping that in mind, in the spring of 2005, the Milsteins decided en masse that it was the opportune moment to sell. “We were very hot—eight straight remarkable quarters—and many big retailers were being sold. We’d never really had as good an opportunity before,” explained Andy. Added Stephen, “If we could get the right price, it would become the right time. Quite frankly, timing is everything.”
Monroe Milstein was the catalyst behind the sale, his sons reported. “My father was always a visionary,” Andy said emphatically. “Though we were all in consensus, he was the driving force. He never led me the wrong way before—why wouldn’t I listen to him now?”
Bain Capital announced it would keep present management, as well as all employees. Mark Nesci, who started at Burlington as a stock clerk at age 16, and worked his way up the ladder to become its CFO, is the new CEO.
What about the next generation? Older brother Lazar, who lives in Florida, has been out of the business for years; his children are grown with careers of their own. Andy’s children are in their 20s, pursuing their own goals, and Stephen’s children are just 13 and 11. Stephen seemed most wistful—he noted that he’d taken his young son to work occasionally, and wondered if some of the “merchant DNA” has been passed to the next generation.
What are Stephen and Andy Milstein going to do every Monday morning? Each has a non-compete clause for a year and will make investments separately. Andy, a bicycle enthusiast, plans to pursue his passion and perhaps teach. Stephen said he’s not certain but gave a sly smile when asked about going back into some sort of retailing one day. “It’s in my blood. What else do I know?” he answered.
Both have also set up individual philanthropic foundations. Andy’s interests are global; Stephen tends to focus on Jewish-related charities and recently joined his father in establishing the Henrietta Milstein Day School at Abrams Hebrew Academy in Yardley, Pa.
The paradox of family business is that it involves both continuous change and an eye on tradition. Success lies in comfortably merging the two. As the Milstein family moves from retailing superstardom into new ventures and philanthropic ideals, they seem to have mastered the formula.
Ellyn Golder Saft is a freelance writer based in suburban Philadelphia.