Donald S. Shaffer
1943–

Former president, chief operating officer, and acting chief executive officer, Dollar General

Nationality: American.

Born: 1943.

Education: University of West Virginia, BS, 1965.

Family: Married.

Career: Sears, Roebuck and Company, 1969–?, various positions; ?-1989, general manager of Detroit region retail stores; 1989-1994, national manager for women's apparel; Sears Canada, 1994-1997, president and chief executive officer; Western Auto Supply Company, 1997-1999, chairman and chief executive officer; Heilig-Meyers Company, 1999-2000, president and chief operating officer; 2000-2001, president and chief executive officer; Dollar General, 2001-2003, president and chief operating officer; 2002-2003, chief executive officer.

■ At Sears, Roebuck and Company, Donald S. Shaffer moved through the ranks holding various positions, including general manager of the Detroit region retail stores. He joined the executive ranks with his appointment in 1989 to the position of national manager for women's apparel. This appointment was a defining point for Shaffer's career with Sears and beyond. As Sears continued its restructuring into the 1990s, Shaffer alternately took on the leadership of Sears Canada and the Sears subsidiary Western Auto Supply. His guidance helped to redefine both organizations and laid the groundwork for their more recent strong market positions. When he ended his career with Sears, Shaffer took on leadership roles in two more companies in need of major change—the furniture retailer Heilig-Meyers and the discount retailer Dollar General.

THIRTY YEARS WITH THE SAME COMPANY

Like many of his generation, Shaffer began his career with a long-term commitment to one company. For 30 years Shaffer's success as a manager and executive was tied to the success of Sears and its affiliates. Sears had insignificant roots. In 1886 Richard Sears, a delivery agent, bought and then sold an order of watches that had been refused by a Minneapolis jewelry store. Growing from this almost accidental beginning, more than a century later Sears was operating more than eight hundred mall-based retail stores and auto centers, more than 1,200 stores in non-mall specialty retail markets, and operations that included product installation and repair, home improvement, catalog and direct response, and online shopping.

Shaffer joined the Sears team when the megaretailer was at the tail end of several decades of major expansion that changed the company's focus from mail-order to retail outlets and turned a catalog retailer into a conglomerate. In the 1980s and 1990s, the rapid growth enjoyed by the company since its inception slowed markedly. The resulting restructuring eliminated approximately eight hundred field management positions and provided incentives for early retirement to hundreds of associates. In 1989 Shaffer was one of six national managers appointed when the retailer refocused the structure of its retail business units into vertical groups. Under the new structure district managers and retail stores were accountable to and reported directly to Shaffer. This arrangement enhanced business-to-business expertise within retail departments.

As the national business manager for women's apparel, Shaffer was responsible for "implementing the business group's plans, goals, and directions through regional and district business managers," according to Weekly Home Furnishings Newspaper. The chairman and CEO of Sears Merchandise Group, Michael Bozic, said in the same article, "The new structure will allow us to better execute strategies that will make us more competitive and more profitable." Bozic gave Shaffer the task of being a creative, responsive, efficient, and accountable executive, goals Shaffer apparently reached, because he was named president and CEO of Sears Canada in 1994. Sears Canada was one of Canada's largest multichannel retailers. In the year 2000 the Canadian retailer operated 125 full-line stores, 176 specialty stores, 1,500 independently owned catalog agents and dealer stores, a merchandise catalog with a circulation to 4.1 million households, and online shopping.

CAREER EXPERIENCE LEADS TO TURNAROUND EXPERTISE

Shaffer remained at Sears Canada until 1997, when he became chairman and CEO of the troubled Western Auto Supply division of Sears. Under Shaffer's leadership, this wholesaler of auto parts merged with Advance Auto Parts. Shaffer's brokering of this merger set up a win-win situation for the two major auto parts chains, providing Sears with a 40 percent share in Advance Auto Parts and taking the Western Auto Supply parts stores under the Advance umbrella. According to the Advance Auto Parts 2001 annual report, the merger negotiated by Shaffer secured the position of Advance Auto Parts "as the second-largest retailer in the automotive aftermarket…. This acquisition alone almost doubled the number of stores we operated and expanded our trade area by 20 new states in the Midwest and Northeast. Within eleven months, six months ahead of schedule, we converted 545 [Western Auto Supply] stores into Advance Auto Parts stores" (http://www.advanceautoparts.com/investor/financial_info/index.html?page=/investor/financial_info/AR_menu.html).

END OF THREE DECADES WITH SEARS

His job with Western Auto Supply completed, Shaffer left Sears in April 1999 to become president and COO of Heilig-Meyers Company, a furniture company based in Richmond, Virginia. This choice proved to be more challenging than expected when Heilig-Meyers filed for Chapter 11 bankruptcy protection in August 2000, one month after Shaffer assumed the additional duties of CEO. Shaffer brought his considerable expertise to bear in an effort to guide the furniture retailer through the bankruptcy process to a financial comeback. His goal was to restructure the organization and move forward with a viable business. During the year leading up to the bankruptcy and after the filing, Shaffer instituted a number of modifications of business practices, including changing the accounting method and completely revising the company's longstanding credit policy, which had the company holding so much consumer debt that it operated as a bank.

The Heilig-Meyers policy of providing credit to its customers had been known to generate as much as one-third of the company's profit in the 80 years it had been doing business. With the growth of credit cards, the once profitable practice had become a liability, one that Shaffer considered long overdue for removal. In an article in Twice, Shaffer described his leadership goals by saying, "Heilig-Meyers accomplished several objectives relating to the implementation of the strategic initiatives associated with a core-store turnaround plan. Among these was the reopening of four Las Vegas and ten St. Louis test stores." For a company operating under Chapter 11 bankruptcy, it is important to gain time for restructuring and to retain control of the business resources needed for restructuring. Shaffer's leadership was not enough to bring the furniture giant out of the red; however, a bold decision and executive action saved the only profitable division.

DECISIVE ACTION SAVES PART OF HEILIG-MEYERS

"Despite our significant progress," Shaffer stated in an April 2001 press release, "we determined that based on the slowing of the economy and considerable weakening of the retail market, a successful reorganization of the traditional Heilig-Meyers furniture stores could not be completed within a time frame that would allow us to fulfill our fiduciary responsibility to our creditors and other stakeholders." With this decision, Shaffer and his team gave in to the overwhelming challenges created by disappointing earnings, an inability to secure alternative financing sources, and two major debt payments totaling $140 million. Saying that they "will be in a much better position to come out of this with a viable, healthy and sound company rather than go through another 12–18 months of potential further deterioration," Shaffer closed the 375 remaining Heilig-Meyers retail stores, and the furniture giant, in a little more than a year, almost ceased to exist.

Shaffer did meet his goal of emerging from the bankruptcy with a viable business, even though Heilig-Meyers itself was no more. He decided that the RoomStore format would be the centerpiece of the company's recovery efforts. The RoomStore chain was acquired in 1997 and launched as a Heilig-Meyer division in 1998. The RoomStore concept allowed customers to purchase entire rooms of furniture and accessories. Sales for the 67 outlets were profitable in 2000 with an estimated $300 million annual revenue.

Although Shaffer was not as successful with Heilig-Meyers as he had been with Sears Canada and Western Auto Supply, industry analysts admitted that he arrived at the company too late to have much of an impact. Shaffer's efforts and the changes he made in the Heilig-Meyers operations were too late to save the retailer. The inexorable slide into bankruptcy began as early as 1994 when the company began an overly ambitious and ill-advised acquisition campaign. By closing down the rest of the company, Shaffer ensured that the specialty RoomStore division would have the chance to succeed. In mid-2001 Shaffer, turnaround expert that he was, handed over the task of dismantling Heilig-Meyers and moved on.

OUT OF THE FRYING PAN AND INTO THE FIRE

In May 2001 Shaffer was appointed president and COO of Dollar General. The company had plenty of troubles for Shaffer to solve. Only a month before Shaffer joined the executive staff, Dollar General announced an internal investigation of accounting fraud and a restatement of its earnings for the previous three years. Before Shaffer set the company on the road to recovery, class action lawsuits were filed, and the Securities and Exchange Commission became involved. Eventually Cal Turner Jr. voluntarily paid $6.8 million to the company to repay performance bonus overages due to the overstatement of earnings on his watch.

Dollar General was a discount retailer of general merchandise. The company's annual report dated April 2003 listed 6,276 stores operating in 27 states. Merchandise sold included health and beauty aids, packaged food products, home cleaning supplies, housewares, stationery, seasonal goods, basic clothing, and domestics to a market targeting low-, middle-, and mixed-income communities. In January 2001 Dollar General agreed to pay $162 million to settle shareholder lawsuits related to approximately $100 million in overstated earnings for fiscal 1998–2000. The company stated that it had incorrectly accounted for leases and liabilities.

In November 2002 in a shakeout of Dollar General's leadership, Shaffer was appointed to the post of CEO on an interim basis. When the former Reebok executive David A. Perdue Jr. was named in April 2003 to replace Turner as CEO and board chairman, Shaffer initially agreed to remain president and COO for at least 270 days. However, only a month later Shaffer resigned from Dollar General to provide the new CEO with a clear leadership path. Perdue praised Shaffer's integrity and steady leadership in steering Dollar General through two difficult years.

See also entries on Heilig-Meyers Company and Sears, Roebuck and Co. in International Directory of Company Histories.

sources for further information

"Advance Auto Parts 2001 Annual Report," http://www.advanceautoparts.com/investor/financial_info/index.html?page=/investor/financial_info/AR_menu.html.

Cramer, James J., "A Word on Heilig-Meyers: Doh!" TheStreet.com, http://www.thestreet.com/comment/wrongtactics/1045466.html.

Gilligan, Gregory J., "Former Richmond, VA–Based Furniture Executive Goes to Retail Chain," Richmond Times-Dispatch, May 17, 2001.

——, "Richmond, VA, Furniture Giant Files Bankruptcy Papers," Richmond Times-Dispatch, August 17, 2000.

"Heilig-Meyers," Home Accents Today, August 2001, p. 70.

"Heilig-Meyers 1st Qtr. Sales Edge Up 1," Twice, http://www.twice.com/article/CA39739.html?display=Business+News.

"Sears Appoints Six National Managers: Set to Head Vertical Business Groups," Weekly Home Furnishings Newspaper, April 10, 1989.

Simons, David, "In Praise of Inventory," Forbes.com, http://www.forbes.com/columnists/2000/08/24/0824.html.

Taub, Steven, "Awarding Bonuses in Bankruptcy," CFO.com, http://www.cfo.com/article/1,5309,1115,00.html.

—C. K. Zulkosky