NEW YORK — The bankrupt Spiegel Group plans to close 60 underperforming Eddie Bauer stores, though many more are expected to be on the chopping block.
Spiegel said Monday the store closings are an integral part of the reorganization process, and that it would be exploring additional retail sites for possible closings. Currently, Eddie Bauer operates 529 stores. Spiegel previously said it would close 21 outlets.
On a much brighter note relevant to the restructuring, Spiegel said it chose Alliance Data Systems Corp. to establish the catalog operator’s new private label credit card program. The program, which still requires Manhattan bankruptcy court approval, would include Spiegel’s three merchant operations: Eddie Bauer, Spiegel Catalog and Newport News.
As reported, Spiegel’s previous private label credit card operation was shuttered when First Consumers National Bank, the direct marketer’s wholly-owned subsidiary, entered into a voluntary liquidation due to failure to meet financial covenants.
"Outsourcing to a third party is a good sign," that someone has confidence in Spiegel’s business, said Mary Ann Domuracki, managing director of the Financo Restructuring Group.
Regarding the stores, Domuracki observed, "Eddie Bauer has extraordinary locations, many in ‘A’ malls. The problems have been in the merchandising. It just hasn’t been hitting. So the company has been operating these expensive stores that were not particularly productive, and some are very big locations with Eddie Bauer home stores right next to the Eddie Bauer apparel stores."
Domuracki said about 30 store leases were coming up for renewal and landlords in certain cases had decided not to renew them.
"Years ago, Eddie Bauer was opening stores with 3,000 square feet, but recently, it was not uncommon to see 12,000 to 14,000-square-foot stores on two levels and with their merchandising issues, sales productivity dropped dramatically," said Steve Greenberg, president of The Greenberg Group real estate advisers to retailers.
There has been speculation that Spiegel may decide to sell off Eddie Bauer, but on Monday, sources indicated that the Spiegel restructuring team has yet to make an official decision on asset sales, though it has been weighing interest. Pruning Eddie Bauer’s store count would help sell it, since the price would be lower and the chain would be streamlined with only productive stores remaining. With Spiegel operating under Chapter 11 bankruptcy court protection since March, it can take advantage of the process to reject unwanted leases without severe penalty."The first 60 stores — that’s an easy group to shed. It doesn’t mean there won’t be another 60 or 100 or 200 to come," said one source. "The 60 stores being closed will have very little affect on operating Eddie Bauer as a stand-alone."
The stores slated to close will remain open for business for at least a few months. First, the store-closing plan must be approved by the bankruptcy court, and then there will be liquidation sales where units remain open until they run out of goods, or get depleted enough to warrant closure. A motion for permission on the store closing plan was expected to be filed Monday.
Bill Kosturos, interim chief executive officer and chief restructuring officer of The Spiegel Group, said in a statement, "The decision to close stores is never easy, yet we are confident that this move will result in a healthier, more productive store base for Eddie Bauer as we eliminate the least productive stores and concentrate our efforts on boosting store productivity."
Fabian Mansson, president and chief executive officer of Eddie Bauer stated, "We are taking tough, but necessary steps to position Eddie Bauer for future success." Mansson has been trying to beef up the quality of the merchandise so that it better reflects Eddie Bauer’s heritage of innovative, outdoor-inspired products.
Eddie Bauer operates 382 apparel stores, 45 home stores and 102 outlets. The stores targeted for closure include 51 apparel and eight home stores and one outlet, all in the U.S. Some stores operate in Canada. Previously, the company said it would close 21 outlets.
Stronger apparel chains such as American Eagle, Abercrombie & Fitch, Victoria’s Secret, Pac Sun, Express and Chico’s, will be vying for the sites — and there are some choice locations slated to close. Among the best locations are a home store and an apparel store, both on Post Street in San Francisco, as well as apparel stores in South Coast Plaza in Costa Mesa, Calif., Georgetown in Washington, the Ala Moana mall in Hawaii, the Mall at Short Hills in New Jersey and the Desert Passage at the Aladdin hotel in Las Vegas.
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