BRADLESS SAYS ’97 IS TURNAROUND YEAR
NEW YORK — Bradlees Inc., mired in bankruptcy since June 1995, says it will turn itself around this year and projects vastly reduced losses and a profit in the fourth quarter.
In a filing with the Securities and Exchange Commission, the trouble regional discounter said it expects to lose $33.5 million in 1997, compared with a projected loss of about $165 million in 1996.
Bradlees’ final audited 1996 results will be released by March. It went public with the projections to help vendors with credit analyses.
The discounter, based in Braintree, Mass., projects a net loss of $33.6 million in the first quarter, a $12 million loss in the second quarter, and $3.3 million in the third, before earning $15.4 million in the fourth quarter. That would mark Bradlees’ first quarterly profit since the fourth quarter of 1994.
At the operating level, EBITDA (earnings before interest, taxes, depreciation and amortization) before restructuring costs is predicted to reach $27.2 million in 1997, rebounding from a projected loss of $45.7 million in 1996 before interest, taxes, depreciation and amortization.
Bradlees now projects EBITDA of $12.6 million in the fourth quarter, down from revised projections of $50.3 million issued in September.
Projections for all of 1997 assume same-store sales gains of only 1 percent.
The discounter said the bottom line improvement should stem from expense reductions, a 1.4 percent hike in gross margin rate, and the closings of 27 unprofitable stores last year.
The chain is also expecting to benefit from new initiatives by Peter Thorner, who became chairman and chief executive officer on Dec. 24. Thorner, who had been president and chief operating officer, succeeded Mark Cohen, who resigned.
Bradlees managed a net profit of $8.9 million in the five weeks ended Jan. 4 on sales of $244.9 million. The December results included a $5 million writeoff related to the resignation of Cohen. The $5 million represents amounts withdrawn under a letter of credit by Cohen in January. Bradlees said total termination benefits due Cohen under his contract are still being determined.
Bradlees’ gross profit reached $67.1 million, or 27.5 percent of sales. After $47.7 million in selling, general and administrative expenses, the discounter’s operating profit was $19.4 million.
Reorganization costs also include professional fees in the bankruptcy case totaling $1.5 million, partly offset by a $697,000 gain from the sale of an interest in a lease on a store that closed.
Results were not as strong as the 1995 December period, when net earnings reached $14.8 million and the operating profit was $28.9 million on sales of $308.9 million.
However, this year December’s results marked improvement from November, which showed an operating profit was $751,000 and a net loss of $5 million.
The court papers noted that the discounter’s year-to-date net loss in 1996 was $155.7 million.
Thorner’s initiatives include lowering opening price points on certain items to increase traffic and avoid costly promotions, reintroducing some commodity products, reinstituting a layaway program in the second half, reducing markdowns through better inventory controls and making weekly circulars more item and price intensive.
Bradlees has 110 stores.