Coop Rebate Reflects Poor Performance

In 1988, Coop sales exceeded $60 million for the first time in history. Annual profits were more than $3 million. The student rebate stood at 10 percent.

Times have changed. But the Coop's current financial problems may very well have originated in that time of prosperity. The last four years have seen steady declines in sales, profits and the annual rebate to Coop members.

Last week, the store's board of directors approved a 1.1 percent student rebate--the lowest since records have been kept--after the Coop posted an 80 percent drop in profits from last year.

And while the Coop's approximately 122,000 active members received $1.7 million in rebate checks last year, this year they will get only $348,000.

Each year of decline, it seems, has brought a different explanation.

When the rebate fell to 7.8 percent in 1989, then-Coop President James A. Argeros reported lower profits despite record sales of $64.4 million.

When sales dropped and the rebate plunged to 5.5 percent in 1990, Argeros said the drop was a temporary result of construction costs associated with the expansion of Coop stores. The Coop's store near the Harvard Club in Boston was closed because it lost money.

New Coop President Jeremiah P. Murphy `73, who took charge last spring, has blamed this year's precipitous fall in profits on the economy.

"We're not immune to the retail environment," the former Neiman-Marcus executive told The Crimson last spring. "A lot of that is a reflection of the fact that retail is down."

As Murphy knows only too well, any organized effort to increase the Coop's sales across the board is tough to pull off.

The Coop's different departments have performed with varying degrees of success.

Sales in the music department have fallen, facing competition from monster retailers HMV and Tower Records have fallen. At the same time, the department that sells Harvard insignia merchandise--the Coop's cash cow--has flourished. Textbooks, which most students associate with the Coop, have never been a big money maker.

These financial woes all amount to a baptism by fire for Murphy.

His initial response has been to control costs, although rent increases in buildings used by the Coop and rising employee health care costs added more than $200,000 to store expenses last year.

In addition, Coop managers have frozen theirsalaries, unlike executives at many companieswhich have continued to spend freely despite therecession cash crunch.

The freeze has been in place at the Coop sincethe recession hit at the end of 1990. Murphy isreluctant to allow raises until sales increase,but said yesterday that salespeople would be thefirst to benefit.

"For the last two years, there's been a salaryfreeze at the Coop," Murphy said. "For some of theexecutives, it's been longer."

The Coop's situation is complicated by Murphy'sattempts to improve the store.

The store has renovated its stationerydepartment and rearranged its men's and women'sdepartments since Murphy took over.

Next week, half a dozen store cash registerswill be equipped with a new computer scanningsystem that will speed the pricing of items,Murphy said. A4 new computer system with scanners,customer service terminals and an inventorytracker should be operating by early December.

"We are anticipating that next week five or sixof the registers will have the equipment so we canpractice," Murphy said. "We'll know what's sellingand what's not on the inventory side."

The Coop's worst fear is that the recession haswrought a permanent reconfiguration of theSquare--one that may make it impossible for thestore to recover its losses.

And perhaps most troublesome for the Coop isthe possibility that shoppers themselves, withfading memories of the loose purse-stringed 1980s,have just become more frugal.

But Murphy remains optimistic.

"If I can get the volume back, we can get backthe profitability and the rebate," said Murphy."We're going to do better.

And history bears out his optimism. When theeconomy stalled in 1970, the rebate fell to twopercent. But within two years, the rebate hadrebounded along with the economy

In addition, Coop managers have frozen theirsalaries, unlike executives at many companieswhich have continued to spend freely despite therecession cash crunch.

The freeze has been in place at the Coop sincethe recession hit at the end of 1990. Murphy isreluctant to allow raises until sales increase,but said yesterday that salespeople would be thefirst to benefit.

"For the last two years, there's been a salaryfreeze at the Coop," Murphy said. "For some of theexecutives, it's been longer."

The Coop's situation is complicated by Murphy'sattempts to improve the store.

The store has renovated its stationerydepartment and rearranged its men's and women'sdepartments since Murphy took over.

Next week, half a dozen store cash registerswill be equipped with a new computer scanningsystem that will speed the pricing of items,Murphy said. A4 new computer system with scanners,customer service terminals and an inventorytracker should be operating by early December.

"We are anticipating that next week five or sixof the registers will have the equipment so we canpractice," Murphy said. "We'll know what's sellingand what's not on the inventory side."

The Coop's worst fear is that the recession haswrought a permanent reconfiguration of theSquare--one that may make it impossible for thestore to recover its losses.

And perhaps most troublesome for the Coop isthe possibility that shoppers themselves, withfading memories of the loose purse-stringed 1980s,have just become more frugal.

But Murphy remains optimistic.

"If I can get the volume back, we can get backthe profitability and the rebate," said Murphy."We're going to do better.

And history bears out his optimism. When theeconomy stalled in 1970, the rebate fell to twopercent. But within two years, the rebate hadrebounded along with the economy