MAJOR LOSSES SEEN FOR FISCAL '94, '95 AT BROADWAY STORES

Byline: Sidney Rutberg

NEW YORK--The Broadway Stores, which continues to struggle with heavy interest and mediocre operating results, is expected to show big bottom-line losses for 1994 and 1995.
According to factoring sources, Broadway anticipates reporting a $41 million loss for the year ended last January, up sharply from the $14 million loss previously expected. Sales for the year will total $2.1 billion.
Furthermore, Broadway has reportedly notified some factors that it projects a loss of $44 million in l995, on sales of $2.2 billion. The projected loss is primarily the result of higher interest rates, according to sources.
John C. Haeckel, executive vice president and chief financial officer, said in a telephone interview that Broadway will report results for 1994 next week "and it is premature to speculate now." He declined to comment on the 1995 projections.
Despite the projections for continuing losses, factors continue to extend credit to Broadway Stores based on its availability of cash.
Said one factor, "Although Broadway is losing money and I have no idea if it will turn around, the company has been paying its bills promptly and in the near term it has enough available cash to continue to pay its bills.
However, another factoring executive said he was concerned about continuing losses at Broadway and on credit approvals was splitting the risk with the client.
On Tuesday, the Los Angeles-based retailer said it planned to slash capital expenditures in 1995 to $40 million after spending $110 million last year on remodeling more than 3.5 million square feet of space. The remodeling efforts included extensive redesign of three stores, in Northridge and Walnut Creek, Calif., and Las Vegas.
The company said the reduction will "allow the company time to assess the efficiency of its capital expenditure program."
Haeckel characterized the reduction in capital expenditures as "a delay, not a cutback."
One bond analyst, who requested anonymity, said the reduction in capital expenditures is "the right thing to do from the bondholders' point of view, but the problem is, the stores still need lots of improvement and that takes money."
About 90 percent of the chain's business is in California, with just a few units in Arizona, Colorado and New Mexico. While other retailers in the state, including Penney's, Sears, Mervyn's and Macy's West/Bullock's, seem to be strengthening their positions, Broadway continues to struggle to find an identity. David Dworkin, president and chief executive, launched turnaround efforts about two years ago and recently said it's a three-to-five-year job in total to overhaul the business enough to generate positive results.
Among his strategies: putting the chain on a more moderate and private label level and attempting to cater more to minorities and lower income groups.
Broadway Stores' 6 1/4 percent convertible notes on Tuesday were being quoted at 62-64 cents on the dollar. About a month ago, the notes were quoted at 69-70 cents. The notes, with a face value of $144 million, were issued in 1993 and are convertible into Broadway Stores stock at $12.19 a share. The stock closed Tuesday at 5 1/2, down 1/8, on The New York Stock Exchange.
In connection with the cutback in capital expenditures, the company said it had "amended certain provisions of its working capital facility with its working capital lender."
Haeckel said the amendments were "very simple, merely reducing the earnings requirement so that there will be no possibility of a violation of the loan agreement."
Broadway stores has a $225 million working capital facility with General Electric Capital Corp. As of the end of October, the company had some $132 million available under the General Electric arrangement.--Fairchild News Service

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