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HEADED FOR HILLS?: The word on Wall Street is that ShopKo Stores Inc., a 130-unit discounter based in Green Bay, Wis., is eyeing Hills Stores Co., a struggling, 155-unit discounter headquartered in Canton, Mass., as a takeover target. The rumor was heard this week after ShopKo’s deal to merge with drugstore chain Phar-Mor Inc. in a $986 million deal collapsed April 2. There’s also been a run-up in Hills’s stock price since March 19, when it closed at 4, and Tuesday, when it closed at 5 1/8, up 1/8, on the New York Stock Exchange.
Officials at ShopKo and Hills declined to comment on the rumor, which had also circulated last May, prior to merger talks between ShopKo and Phar-Mor, which is based in Youngstown, Ohio.
However, Jeffrey Jones, ShopKo’s senior vice president and chief financial officer, said Tuesday, “The company is scouting for deals that would bring us growth opportunities.” ShopKo operates in 15 Midwest, Rocky Mountain and Northwest states; Hills has stores in 12 Midwest and Mid-Atlantic states, making the geographic fit a good one, said a retail analyst who requested anonymity. Such a deal would extend ShopKo’s presence east of Illinois into Indiana, Ohio, Pennsylvania and New York, where most Hills units are located.
Asked about a time frame for a potential deal, Dale Kramer, president and chief executive officer of ShopKo, said, “We’re industrious, and we study lots of alternatives. Study takes time.” The alternatives include acquiring a retailer, purchasing real estate sites and determining whether deals should be bound by states contiguous with ShopKo’s markets, Jones said.

DISCOUNT DOLDRUMS: Sales momentum at U.S. discount stores, which picked up due to the March 30 Easter holiday, lost some steam last week, according to two surveys released Tuesday. Discounters were on or below same-store sales plans for the week ended April 12, a study by Schroder Wertheim & Co. and The Bank of Tokyo-Mitsubishi showed.
The absence of Easter business, coupled with a slowdown in apparel sales as the weather cooled, were cited as reasons for the downdraft.
Schroder still expects Wal-Mart Stores, Kmart Corp. and Target to hit their April sales plans, but Smith Barney estimated Wal-Mart is trending below its 4 to 5 percent goal for its discount stores. Smith Barney said colder weather chilled Wal-Mart’s apparel comps, and most stores were below plan. Last April, Wal-Mart’s comps climbed just 0.2 percent. According to the surveys, Target is shooting for 5 to 8 percent gains this month, versus a 12.1 percent surge last year, and Kmart is aiming for growth of 1 to 2 percent, against 0.3 percent. Wal-Mart’s best performance last week was in the Northeast, and its top category was basics. At Target, the strongest areas were home improvement, automotive and consumer electronics.

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