H E Harris in the 1970s
If memory serves me correctly (and it was 35 years ago) Harris did a bit less than $10 million per year and had net operating margins of nearly 15%. In this day of web companies which have no manufacturing facilities and few employees, 15% margins can seem tame, but in the 1970’s margins like that were impressive. What General Mills’ bean counters didn’t realize was that, though Harris was a very bright stamp dealer and excellent businessman, his margins were the result of having put away an enormous inventory in the 1930’s, 40’s, and 50’s. His huge margins were the result of selling of these low cost goods that were carried on the books at nearly nothing. If that inventory had to be replaced at then current wholesale prices, Harris’s incredible profit margins couldn’t be maintained. Wesley Mann was the unlucky fellow who first realized that what looked like a great buy for General Mills was actually accounting driven not philatelically driven and despite his best efforts Harris never had the profitability that General Mills had expected. More about what Wesley did to combat H E Harris’ profit fall tomorrow.