Art of the deal.

AuthorMildenberg, David
PositionCover story

In his spare time over the last 20years, Art Pope mowed down Democratic control of state government. His day job building a discount chain in places others failed is paying off, too.

Retired carpenter James Caulder walks six blocks to the Roses store in west Charlotte three or four times a week looking for "odds and ends." On a recent weekday afternoon, he left the store with some cookies, mothballs and trash bags. "I don't know what I'll end up buying, but if I see something I want, I buy it." Several steps away, shopper Grace Coleman drops two large bags of clothes into the trunk of her late-model Lincoln Continental. "I live in Roses," she says with a laugh. "I come about twice a week, and I know where everything is at. Could you just tell the owner that they need to take coupons?"

Maybe that's a good idea, though owner Art Pope, whose family has been selling "odds and ends" in North Carolina since Calvin Coolidge's presidency, clearly knows a thing or two about retailing. Yes, that Art Pope, the Raleigh businessman whose [dollar]50 million-plus of financial backing, political acumen and hard work paved the way for the Republican takeover of state government.

Loads of stories have explored Pope's political history, most notably a 9,500-word New Yorker piece in 2011 that detailed how his support for conservative Republicans and public-policy groups steered North Carolina in a pro-business, limited-government direction. Our interest focuses on how Pope's Variety Wholesalers--the holding company whose flagship chain is Roses--is faring amid unprecedented retail tumult.

Pope won't share financial specifics for his company, which has no public stock or debt, so Variety's performance is hard to measure. But the optimistic tone he and President Wilson Sawyer express in a rare media interview, confirmed by talks with retail-industry observers, suggests that Pope's retail empire of about 370 stores in 16 states is doing just fine. Based on conservative estimates of industry sales per square foot, annual revenue almost certainly exceeds [dollar]700 million and possibly tops [dollar]1 billion. Pope offers this much: "Our returns on investment and margins are very healthy. We've been able to buy companies that are in distress and achieve a good return on investment, or buy bankrupt companies and turn them around"--though Variety hasn't made an acquisition in more than a decade.

But wait: Isn't brick-and-mortar retailing collapsing? In recent years, Charlotte's Belk, Dickson and Levine clans have sold the family jewels, namely Belk department stores, Harris Teeter supermarkets and Family Dollar shops. Co-owned Sears and Kmart operate about 1,400 stores--2,000 fewer than in 2012. Shares of Macy's have plummeted more than 50% below peak levels. Dollar Tree traded at [dollar]96 when it bought Matthews-based Family Dollar in July 2015; it traded for about [dollar]73 in mid-June.

The big winner crushing the competition is online retailer Amazon.com Inc., whose stock has quadrupled over the last five years. The Seattle-based company was valued at [dollar]470 billion in mid-June, about twice as much as Bentonville, Ark.-based Wal-Mart Stores Inc., which has more than 5,200 U.S. stores and revenue of [dollar]486 billion last year.

Art Pope, as cool, calm and collected a guy as you'll ever meet, shows no sign of panic. He likes Roses position of offering low-priced goods in stores that are smaller than Walmart or Target, but bigger and stocked with more variety than Dollar General or Dollar Tree. Roses stores lack panache, offering a feel that is more dollar store than department store. The aisles are filled with discount apparel, basic food, health and beauty items, and an ever-changing assortment of seasonal items such as air-conditioner units, lawn chairs or whatever company buyers pick up in liquidations or close-outs.

"As times change, products change, pricing changes, the economy changes. You can stay competitive and stay in business if you keep up with the times and are willing to change," Pope says.

What's noticeable about Roses, though, is how little it is changing. There is no e-commerce. No acquisitions since 2003. No newly constructed stores, only rehabs. No customer-loyalty program. Same CEO and same chief operating officer since 2006. The company headquarters is in the same downtown Henderson space where P.H. Rose opened his third store.

Moreover, the company's strategy hasn't changed (cheap, cheap, cheap!) enabling customers to "improve their lifestyles at a price they can afford," Sawyer says...

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