BRADLESS CHOPS ONGOING LOSS
Byline: Thomas J. Ryan
NEW YORK — Bradlees Inc., in bankruptcy proceedings since June 1995, cut its fourth-quarter operating loss before nonrecurring charges to $1.8 million from a year-ago loss of $13.6 million.
In addition, 109-unit Northeast regional discounter said it got a one-year extension, to June 23, 1998, of its $200 million debtor-in-possession financing. The DIP deal is subject to approval by the bankruptcy court.
The extension gives Bradlees “ample liquidity” as it develops a business plan, the Braintree, Mass.-based chain stated. The line was amended, in part, “so that factors and vendors are assured Bradlees will have sufficient funds for summer merchandise,” the company noted.
“I think they are on the right track,” said Walter Loeb of Loeb Associates, retail consultants. Loeb cited initiatives introduced by chief executive officer Peter Thorner in an attempt to drive traffic while continuing to cut costs.
Thorner, who had been president and chief operating officer, succeeded Mark A. Cohen, who resigned as chairman and ceo on December 24 at the request of Bradlees’ board. Under Cohen’s leadership, Bradlees upgraded stores to position itself between a discounter and a department store, but the chain continued to suffer same-store sales drops and significant operating losses.
Sales in the latest quarter, for instance, slumped 21.8 percent to $463 million from $592.4 million. The decline also reflected the closing of 27 stores last year. Same-store sales slid 5.3 percent.
“Thorner’s sort of gone back to making Bradlees more of a promotional discount store,” said Loeb. “They’re much more aggressive in seeking customer acceptance, and you have to have people in the stores to get sales. It’s been successful so far, from what I’ve seen.”
While keeping some of Cohen’s upgrades, Thorner is trying to make the stores appear more like a traditional discounter, in a bid to boost traffic and avoid costly promotions. The effort includes lowering opening price points on certain items like consumer electronics, toys, and ready-to-wear; reintroducing some commodity items, and reinstituting a layaway plan.
Bradlees slashed its net loss in quarter ended Feb. 1 by 46 percent to $59.2 million from $108.9 million. The loss came after a $40.8 million write-down of long-lived assets, $13.2 million in reorganization items, and $3.3 million in interest costs. During the quarter the discounter eliminated 105 non-store positions.
The discounter cut its fourth-quarter operating costs to 24.4 percent of sales from 26.3 percent a year ago, but gross margin eased to 25.3 percent from 25.6 percent.
For the year, Bradlee’s operating loss before special charges fell 20 percent to $98 million from $122.3 million. The net loss grew to $218.7 million from $207.4 million, but the prior year included a $104.5 million tax benefit. Write-downs of long-lived assets came to $40.8 million against $99.4 million; reorganization fees, $69.8 million versus $65 million.