WARD’S PLANS TO SHIFT ITS FOCUS TO HIGHER MARGIN MERCHANDISE

Byline: Jennifer Owens

WASHINGTON — Montgomery Ward plans to narrow its assortments and focus on higher-margin merchandise after suffering a $237 million loss in 1996, according to a filing with the Securities and Exchange Commission.
The company has officially released its 1996 results, confirming figures reported on page 2 of WWD, March 19th. The loss of $249 million previously reported included a $12 million preferred stock dividend.
The factoring community has been concerned about the heavy losses, but has continued extending credit to Ward’s; many seek to share the credit risks with their clients.
The 408-unit department store and direct-marketing company generated $6.6 billion in revenue in 1996, down 6 percent from $7 billion in 1995 and 1994. Retail sales last year were $5.9 billion, as reported; the additional revenue came from insurance and other sources.
The Chicago-based company last registered a profit in 1994, when it earned $137 million. In 1995, it lost $9 million.
The 125-year-old retailer blamed its 1996 loss on tough competition as well as slow fourth-quarter sales in 1995 and oversized shipments of foreign-sourced goods, particularly apparel. This combination saddled the company with $300 million in excess inventory, prompting a push to move the merchandise at heavy markdowns between September and December 1996.
As of late December, the excess inventory had been pared to $130 million. Montgomery Ward has since taken a $54 million loss on liquidating the goods and has identified another $55 million worth of merchandise that will be sold at an estimated $19 million loss.
Ward’s same-store sales dipped 11 percent.
Overall sales in specific categories reflected the general slide: Apparel slid 10 percent, jewelry fell 11 percent, home and furniture sales dropped 9 percent, electronics slumped 10 percent, appliances decreased 8 percent and automotive declined 6 percent.
In response, Montgomery Ward said its strategy would be “to concentrate on offerings at price points and quality levels intended to appeal to consumers desiring higher-quality goods than those generally available from discounters, at prices generally lower than those charged by department stores.”
To do that, Ward’s will reduce certain lines of apparel, including suit separates. It also will cut back computer merchandise. The firm plans to curtail foreign sourcing to “shorten commitments and increase the speed at which the company can respond to volatile sales trends.”
Denim, activewear, team sports apparel and licensed-character items from Disney and Warner Bros. will get greater emphasis.
Targeting a niche between discounters and department stores, Montgomery Ward has so far staked its business on mass appeal brands such as Bugle Boy, Lee and Converse. It has developed licensed and private label brands such as Ship ‘N Shore and Connie Selleca in women’s, and BIKE in activewear.

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