If it is now the patriotic duty of Americans to get out and shop, then the performance of two Memphis retailers, Fred's and AutoZone, suggests that working people are rallying around the flag. The rich, meanwhile, need to get it in gear. Pricey retailers like Saks, run by part-time Memphian and University of Memphis alumnus Brad Martin, are in a tailspin. The contrasting performance of the low-end and high-end retailers this year is startling. Martin was a dazzler. After college, he went into politics and became the youngest member of the Tennessee General Assembly. Then he went into retailing and turned Proffitts into one of the most successful department store chains in the South. In 1998 he bought Saks Fifth Avenue, the very essence of high-end New York retail. The national media ate up the story of the charming Southerner who took such a bite of the Big Apple. There are no Saks or Proffitts stores in Memphis, but Martin continued to maintain a home and key business contacts here with Morgan Keegan and Memphis-based Southeastern Asset Management. Morgan Keegan's research department recommendations helped push the stock price to over $40 a few years ago. Southeastern Asset Management bought into Martin's story in a big way. The parent company of the Longleaf family of mutual funds owns 27 million shares of Saks, or 19 percent of the company. Warren Neel, the current commissioner of finance and administration for the state of Tennessee, is on the Saks board of directors. Martin himself owns another 3.6 million shares. He earned $2,603,721 last year, about half what he made in 1998 when Saks' stock price peaked. Saks even paid its former chief operating officer, Robert Mosco, $1,875,000 when he resigned last year. What has Saks done to justify such salaries? Not much. Sales have grown to $6.5 billion a year, thanks to the merger. But Saks had income of only $75 million last year, and its three-year income growth is negative 45 percent. The stock price is around $7.75, down 27 percent this year and more than 80 percent off its all-time high. A $100 investment in Saks in 1996 was worth $122 five years later, compared to $255 for the Standard & Poor's 500. Fred's, on the other hand, caters to a low-income clientele that has probably never even seen the inside of a Saks. The typical customer is a single woman making less than $30,000 a year. She spends just $11.60 each visit, but Fred's sales were up 25 percent in September, and its net income has grown 15 percent a year for the last three years. Fred's stock price is up nearly 100 percent in 2001, and in the five previous years it was up 432 percent. The company's modest CEO, Michael Hayes, doesn't make enough to pay Brad Martin's taxes. When Hayes and other investors bought Fred's 12 years ago, his salary was set at $200,000 a year, with no bonus and no stock options. It hasn't changed since then.Another Memphis company that caters to working people of modest means is also having an exceptional year. The stock price of AutoZone has doubled this year. Comparable store sales are up 8 percent. CEO Steve Odland says it's "sort of a myth" that AutoZone does better when the economy is bad. "The company doesn't seem to be tied to any economic cycle," he said recently. Maybe not, but the stock keeps right on climbing. What's ahead for the local economy? Some of the most eye-opening comments came from University of Memphis economist Richard Evans at a meeting of the Memphis City Council's Budget Committee Tuesday. Evans said local sales-tax revenues were down 2.8 percent last year, which means "as far as local retail, we were in a full-blown recession." Had it not been for the big property-tax increases in the city and county, "it would have been a very bad year indeed." He then turned to the current Memphis economy and the impact of the terrorist attacks. Saying he hoped that terrorists would not hear him, Evans said he finds it hard to believe that crazies are not putting powdered anthrax into FedEx envelopes and packages. "I just can't believe that it is not already in the news," he said. Evans noted that the government's anti-terrorist scenarios have included a terrorist attack on the FedEx hub. "FedEx is such an obvious target that we may suffer quite severely," he said. Evans said it is unlikely that "we will get away without any disruption of our local economy" given the possibility of terrorism, the added cost of security to businesses and the airline industry, and the downturn in tourism, which he said is in a "depression." Others, however, have suggested that FedEx will pick up business because of new restrictions on passenger airlines that carry mail. The U.S. Postal Service plans to shift more business to cargo carriers such as FedEx and UPS.

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