Less than two years ago U. S. businessmen were dolefully shaking their heads over "profitless prosperity" and gravely predicting the imminent doom of the profit system. Aside from a general animosity toward the New Deal, the cause of this talk was the tendency for costs to rise faster than sales, so that many a company was reporting smaller profits on greater volume of business. It was merely a matter of time before increasing sales would outstrip increasing expenses, thereby cutting the cost of each unit they produced. Last week the return of profitable prosperity was conspicuously evident in at least three industries:
Oils— Texas Corp., biggest of the so-called "independent" U. S. oil companies, last week reported 1935 sales of $295,000,000, a 10% increase over the previous year. But Texaco's profits more than tripled, increasing from $5,545,000 in 1934 to $17,065,000 in 1935. Higher prices, fewer gasoline wars, tighter control over production and record oil consumption helped Texaco as well as the rest of the industry. Shell Union Oil, U. S. affiliate of Sir Henri Deterding's Royal Dutch-Shell and the only company besides Texaco that distributes in every state in the Union, lately reported a spectacular jump in earnings, turning a $949,000 loss in 1934 into a $6,812,000 profit in 1935.
President Frank Phillips of Phillips Petroleum, announced last week that his company's earnings this year were running 100% ahead of a year ago. In 1935 Phillips took in $92,000,000—19% more than in 1934. But benefiting from its famed "polymerization" process, which converts into high-grade motor fuels waste gases and refinery products hitherto lost or used in inferior products (TIME, Sept. 2), Phillips made $13,400,000 as against $5,757,000 in the previous year.
Continental Oil, only U. S. oil company displaying two of J. P. Morgan's partners in its directorate, showed a 1935 increase in gross income of only 6%, yet profits climbed from $4,865,000 in 1934 to $8,813,000 last year. Included in the 1935 figure was a $1,564,000 profit from sale of two tankers "not needed in the company's service." Continental's Daniel James Moran is one of the few U. S. oilmen who is not a confirmed expansionist. In his report, which he signs "Dan Moran," he noted: "During 1935, the company's marketing program centered on improving marketing methods to the exclusion of expansion. An analysis of sales at the beginning of 1935 caused the company to discard unprofitable business which amounted to more than 30,000,000 gallons annually." To the average oilman, whose god is gallonage, shrewd, popular Dan Moran's statement sounded like rank heresy.
Sears & Ward— Last week Sears' President Robert E. Wood issued his Golden Jubilee annual report, which made an interesting comparison with the 64th annual report published last fortnight by Ward's President Sewell Lee Avery. Sears showed net sales of $392,000,000, up 23% from the year before. Ward's sales of $293,000,000 were the highest in its history, yet the gain from the previous twelve-month period was only 17%. Sears reported profits of $21,500,000, a 43% increase. On this item Ward did better than Sears, showing a 47% gain from the $9,161,000 profit in fiscal 1935 to the $13,527,000 for fiscal 1936.