Within the last 30 months, Ames, Hills, Roses and Jamesway emerged from bankruptcy, but new challenges confront these and other regional discounters. Last week, Dickstein Partners offered $25 per share for the stock of Hills, and Jamesway said it received "unsolicited expressions of interest from several parties." In addition, regional discounters are challenged by price pressures from department stores, competition from Wal-Mart, Target and category killers, and poor spring apparel sales.
These developments have triggered speculation that mergers among regional chains, creating new discount giants, could be in the making. Other chains may be in for store closings.
When asked if regional discounters can fit into the retail landscape, Herb Douglas, president and chief executive officer of Jamesway, insisted, "There's still a place."
"We have to be clean and neat," he added. "We have to have a good assortment of merchandise at the right price, and we have to be a convenient place to shop. People have to be able to come in and get out through the checkout line quickly."
Here's what others think about the future of regional discounters.
Jack Smailes, executive vice president, Hills Department Stores: "The future for regional discounters is very exciting. Certainly our numbers last year were excellent. [Earnings rose 35 percent.] It's been a little tough this spring for all of us. But we still feel our merchandise and niche--with our very strong emphasis on apparel and fashion home--is what the customer is looking for.
"As strong as Wal-Mart is, the customer is always looking for shopping options.
"I think Wal-Mart has done a good job with its Kathie Lee Gifford collection. I'm in those stores every week looking at it. "Our private label business is less than 10 percent of our apparel sales. We certainly compete with Wal-Mart on price, but throughout our apparel we offer a wider assortment and we're a little more trend oriented and fashion-driven.
Mark A. Cohen, chairman and ceo, Bradlees: "In a nutshell, we're going to be successful because we do a superior job with selection, presentation and execution. We're not going to be successful if we try to do a superior job by being cheaper, carrying more assortment and jamming more goods on the floor than it can hold.
"We also must begin to focus on the quality component in our price-value equation. Some of our best-selling programs are some of our highest price points. If the price-value aspect is really there, customers seem to have no hesitation."
A Kmart executive: "It's going to be very interesting over the next five years. Some regionals look like they could be here for the long term. Caldor is strong. And Jamesway has its own niche. They're in rural communities, while Wal-Mart in the Northeast seems to be moving into more populated areas compared to other regions. Jamesway stores are smaller, around 60,000 square feet. Who would buy them? Target wouldn't. Bradlees is very strong in the New England area, but the chain does have some opportunities" for merchandise improvement.
Jerry Fox, president, Miss Juli, a juniors supplier: "There is a future if they remain unique and timely. They are going to have to turn their floors faster and keep them very fresh. They've got to create a reason for the consumer to shop them, as opposed to the gorillas out there. It's got to be beyond price point. There are some regionals who are doing this sporadically, but everybody is searching.
"If I had to single any companies out, it would be Caldor and Shopko, for their housekeeping, store setups, mix, keeping floors fresh, reaching out for new items in the market, and looking for advantageous buys."
Robert F. Buchanan, analyst, NatWest Securities: "The key for regional discounters is execution....There are some regional discounters that have done extremely well, but there is a lot of suffering at some in the Midwest and Northeast.
"It's next to impossible to out-do Wal-Mart in consumables, such as health and beauty aids, underwear, fleece and toys. But to the extent that a regional brings some acumen in soft goods--in particular, updated basics--it can nicely complement what Wal-Mart is doing. That's what some better regionals are doing, trying to be strong where Wal-Mart historically hasn't been."
Walter Loeb, president of Loeb Associates: "The regional discounters that can distinguish themselves can maintain and gain market share. But fighting Wal-Mart on price is very difficult. Consistent everyday low prices at Wal-Mart have created almost a unique bond between the chain and its customers.
"Regional discounters should understand their customer and regionalize the apparel offerings to customer tastes. Wal-Mart has Kathie Lee Gifford, but there are many other names stores can develop. They should also become more adroit in understanding what leisure activities shoppers enjoy. Wal-Mart is very strong on fishing and very weak on sailing. Another discounter could use that as a point of distinction."

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