James S. Cohen, W’80, President and CEO of Hudson Media
James Cohen, W’80, with his father and the company, found a niche in undervalued retail locations in urban train
stations and cavernous airport wings, leveraging their skills in merchandising and management. They did so based on a deep understanding of their longheld magazine distribution business and their customers — with the help of a Wharton education.
What were the origins of Hudson News?
In 1947, my father graduated college and went to work for his father. He took my grandfather’s relatively small
newspaper distributorship and, over the next 30 years, grew the magazine side exponentially, so that, by the
1970s, Hudson County News Company was the largest of 300 magazine distribution companies in the country. He delivered across the New York City metropolitan area to street stands, delis, grocery stores, drug chains, bookstores, supermarkets — and to airports and train stations. So you see where this is going.
When did you begin working at Hudson News, and what did you do there?
As a teenager, I worked summers for my father. My first job was counting returns — which are the unsold magazines that come back for credit. In those days, almost one out of every two copies came back. Every magazine had a five-digit bipad number. I would open up a box of returns at my station, enter the issue code and the quantity. Then I would throw it on a conveyer belt to be saved, returned or shredded. That went to a computer affidavit, and we would get credit. The next summer, I joined our merchandising staff; we still have 1,000 people throughout the
Northeast who put up the new magazines at the supermarkets, fix the racks, take the unsolds down and box them for
return. I continued to work in other departments, and by the late 1970s, I knew I would work for my father.
Why was that?
I got along great with my father; it was a great business; and it was a lot of fun. Sales were growing. We were just starting to venture out to supermarkets from independents — it had great potential.
How did retail begin at the Hudson County News Company?
When I came out of Wharton undergrad in 1980, I began taking management positions. By the mid-1980s, I was the magazine distribution manager. That job coordinates the allocation of magazines from the publishers to the retailers. I noticed that some of our biggest accounts — like Penn Station or Grand Central, even though they had huge sales for each title — they did not have that many titles authorized, maybe only 120 titles. It may sound like
a lot — it’s not. These stores preferred to carry candy or gifts because magazines had relatively low margins and
high handling costs. I said to my father that if we could control these busy outlets, the turns that magazines create could more than offset the low margins. Weeklies turned 52 times per year, and monthlies turned 12 times. Plus, magazines had no inventory risk because they were 100% returnable. Understand, my dream at 25 years old was not to build a retail empire, only to increase our wholesale business. At the same time, my father hired someone from the retail industry, Mario DiDomizio, to increase business at some of Hudson’s biggest independent accounts. Mario also wanted to build a retail company, because that was the world he came from. Together, we prevailed upon my father. Our first store was a street store on 66th Street and Second Avenue in the Solow Building. It was the first Hudson News. Sales were great, and everyone loved it. It was a boon to our wholesale business, but it did not make money because the rent was $150,000 per year. It did show us that, under the right circumstances, it could be
done, but midtown Manhattan was not the right spot. In 1987, LaGuardia Airport’s main terminal came up for bid, and we decided to put our theory to the test. We were successful with our bid, our design and product mix. We almost doubled the sales of our predecessor. They had carried dozens of titles, while we carried a thousand. In
addition to carrying Car and Driver, we’d have the Car and Driver’s Buyer’s Guide and the Truck Buyer’s Guide. Customers, instead of buying one magazine, would buy three. Publishers gave a bigger rebate in airport terminals, and instead of giving you a 10% retail allowance, you got 20%. We also received a share of the publisher’s promotional advertising budgets for checkouts and space advertising. Based on these factors, we were successful.
Didn’t other distributors try retail? Every magazine distributor dreamed of owning retail stores, but most were happy with having a couple of smoke shops, then they would run into the issue we had — high rents! Some got tired of retailing. Retail demands that you know what you’re doing. Even for us, expansion came slowly. You see, my father had actually started a retail business in the 1960s, a small chain called Garden State News Stores. He
quickly realized that this was not the wholesale business and sold them to owner operators. That’s why he was
hesitant to get back in. We had this running joke. My father would say, “I hate retail. I hate retail,” But we
prevailed on him and opened a successful airport store. Then an even more challenging opportunity came — if
you remember what the Port Authority Station was like in the early 1990s — and he’d groan, “I hate retail!”
But Mario would say, “Let’s take a chance here,” and it worked out. After that, he kept saying, “I hate retail,” but would have a smile on his face.
What could be more iconic New York retail? The hustle and bustle, the grittiness of LaGuardia, the Port Authority …
Yes, but we degritted it! If you remember Grand Central Terminal was like a cave and those stores were like holes! You could not walk into them. First of all, the papers were piled up 10 feet in front of the store, and the display was limited. Even before the 1999 Grand Central renovation, we retrofitted them and opened stores that people could walk into, displaying dozens more titles. We made it a showcase. We have a photo of a ribbon cutting in Grand Central with John F. Kennedy, Jr. who was publishing George at the time. His mother was very instrumental in keeping Grand Central from being destroyed. Today, we call our largest store in Grand Central “America’s Newsstand.” Everyone goes by it. Can you talk about working with your father, Robert Cohen? You have to be lucky. You have to be willing to give. My father and I found that right mix. We agreed most of the time on how the business should be run. He was one tough guy and a major success, but on the other hand, for many years, he didn’t have someone like me to be his guy to seek out new opportunities with him. So I was happy to do that. I loved being the detail guy, going out to research the information he needed. Even in my early 20s, I would give him all the
ammunition for a tough negotiation with a publisher. I loved being able to help him be smarter, and he loved it, too. Eventually, I went out to make my own presentations, and he was happy to let me do that. Some fathers can’t share the spotlight — he was thrilled for me to share the spotlight. You can have a big ego and still be proud of your children.
Do you recall a project you worked on with your father?
In the 1980s, I told him that a lot of publisher reps were not exactly Wharton grads, that they didn’t work the titles well. So, with his guidance, I created a new sales and distribution program for the publishers in return
for an added percentage of sales. We made sure retail chains had them authorized, and paid our merchandisers extra money to do a special checkup halfway through the on-sale period, and give us that information. Then we would redistribute to the stores all the unsolds that came back early, and put them back out in the field. My first customer was a little magazine called Venture put out by Arthur Lipper. He sold only 700 copies in New York because he was in the wrong locations. If you don’t remove them from the places that don’t sell and put them in the places that do sell, then you’re going to have a lousy sell-through. We increased his sales 350%! This new program was tremendously profitable, lasted for decades and established my reputation in the business.
How did having the wholesale business mitigate your retail business risk?
Our successful experience and financial strength in the wholesale magazine business allowed us a strong segue
We had been growing retail organically since the 1980s. Owning a successful wholesale business, we never had to take money out of retail, which is a capital-intensive business. The more successful our stores were, the more money airports wanted us to spend on subsequent bids. Airport build-outs with their restrictions and regulations are extremely expensive. From 1987 to 2003, retail grew virtually debt-free until we saturated the New York area market with travel retail stores. We began bidding in airports outside New York; the first one was at Love Field in Dallas.
Then, in 2003, we had a once-in-a-lifetime opportunity. We purchased our competitor, the U.S. branch of WHSmith. It is still in the U.K., of course. It had bought an American company in 1990 but never assimilated well to the U.S. After 9/11, it didn’t recover, although our sales came back within three months. What it did have was some of America’s best locations. It had O’Hare. It had LAX. It had Terminal 4 at JFK. It had Atlanta. We bought WHSmith with 100% debt — $40 million borrowed and a $25 million seller’s note — putting up the assets of both the wholesale business and the retail company. As good as its properties were, less than two years remained on its leases. If we didn’t perform well enough to wow the local authorities, we could have seen that investment evaporate. It was a huge risk, but it was a calculated risk, because we had the best management team in the business.
What happened post-acquisition?
Its overhead had been $20 million, much of it spent on exorbitant IT systems. We figured we could bring them in for an additional $3 million over our current overhead level, which we did. We couldn’t spend big money on build-outs with one year left on the leases, but we thought we could increase sales by getting the merchandise mix right, and we did by 20%. It was a big risk, because these properties can be a dream or a nightmare. In the end, WHSmith made us a national company.
What are you doing now?
I sold the controlling interest of Hudson News’ retail business in March 2008 to a private equity firm called
Advent International. Advent does a lot of retail, for example, Lululemon. It is the biggest private equity
firm that nobody has heard of, a great company. The managing director, David Mussafer, WG’90, became a good friend of mine. In November 2008, Advent merged Hudson News into another company that Advent already controlled called Dufry, a publicly traded company on the Swiss stock exchange.
Hudson is bringing Dufry’s duty-free concept to American venues, using Hudson’s relationships with the airport authorities — and Dufry is taking Hudson’s ‘duty-paid’ concept globally. I’m the largest independent shareholder of Dufry, and about eight of us run its board. We’re pretty entrepreneurial for a public company, and it keeps me closely attuned to retail. Dufry doubled in size during the past five years to a $5 billion market cap, mostly through acquisitions. We’re in only a half-dozen airports in the U.S., but we are growing rapidly and are today, the largest duty-free retail operator worldwide.
We purchased all the duty-free operations in Greece last year, which has been a great success. Beyond retail, I’m the President and CEO of Hudson Media, a holding company that owns publishing ventures, the stock in Dufry and the original wholesale distribution company.
What kind of publishing venture?
I’m a partner in a joint venture to publish a luxury lifestyle magazine called DuJour. We’re using the Gilt Groupe
audience, and the reception has been very satisfying.
What would you say to Wharton students or young alumni?
Find something you love doing! After interning at an investment banking firm, my son, a Wharton alum, changed to a small private equity firm, a more entrepreneurial environment. He was able to articulate well what he wanted, not just what he didn’t want. It may not happen at your first job, or even your second, but don’t give up.