PROFITT’S SEES PAYOFF ON MONEY SPENT
Byline: Alexandra Zissu
NEW YORK — The Proffitt’s Inc. acquisition binge comes at a cost, but it will be worth it in the long run.
The retailer said Tuesday that while it plans to enliven its recently acquired G.H. Herberger’s division by introducing such brands as Tommy Hilfiger, Nautica and Lancome next fall, it also expects to take a charge of about $34 million stemming from the acquisition, completed Feb. 1.
Of that charge, $6 million will be posted in the fourth quarter ended Feb. 1. The remainder will be used to restructure Herberger’s, including $18 million to $19 million in 1996 and $7 million to $9 million in 1997. Restructuring charges include severance, consolidation of administrative operations and systems conversions.
Proffitt’s will take an additional $2.5 million charge in the fourth quarter to sell seven stores in Virginia to Dillard Department Stores, as reported.
However, by restructuring Herberger’s and eliminating duplicate expenses, the corporation’s total operating costs will eventually be reduced by over $7 million annually. The company, based in Knoxville, Tenn., estimates that $3 million can be saved during 1997.
Between now and 1999, plans are to open 15 to 20 stores and to expand or remodel an additional 10 to 15 stores.
Proffitt’s also remains on the lookout for acquisitions, executives disclosed during a conference call with analysts Tuesday. In the past couple of years, Proffitt’s also purchased Younkers, McRae’s and Parisian.
In other plans:
Herberger’s will introduce a proprietary credit card in May. The division currently only offers a co-branded VISA card.
Proffitt’s plans to expand its corporate private-label business over the next two years, to 10 to 15 percent of sales from the current 6 percent. Recently, Peggy Eskenasi was recruited as senior vice president of private label and brand development for the Proffitt’s retail group to facilitate merchandising strategy. She was with Frederick Atkins Inc.
Excluding non-recurring items and prior to the inclusion of Herberger’s, the company is “comfortable” with earnings per share estimates of $1.20 for the fourth quarter and $2.24 for the full year. Estimates include the operations of Parisian beginning Oct. 11, 1996.
Including Herberger’s, earnings per share should be $1.12 for the fourth quarter and $2.15 for the year.
Analysts had estimated $1.22 a share for the fourth quarter and $2.25 a share for the year. Results for the fourth quarter and year will be released March 20.
In 1995, Proffitt’s earned $1.12 in the fourth quarter and $1.81 in the year, before extraordinary items.