Byline: Vicki M. Young

NEW YORK — “Check out the change” is one of Caldor’s new advertising themes and its latest effort to reclaim its former niche as an upscale discounter by offering more fashionable apparel and fewer price promotions.
In doing so, the Northeast chain, which is struggling to emerge from bankruptcy, has been able to slash promotional sales to 40 percent of revenue from 55 percent in June 1996, Warren D. Feldberg, chairman and chief executive officer, said in an interview. More than half of the business at the $2.6 billion discounter is coming at full price.
Despite such progress, one credit analyst described the improvements in Caldor’s business this year as “baby steps, not huge strides.” Earnings before income taxes, depreciation and amortization have grown significantly, but are still far short of a healthy cash flow, according to sources.
While maintaining that Caldor can emerge from bankruptcy as an independent company, Feldberg admitted that in the long term, “some combination of regional players is ultimately going to make sense.
“I’ve thought for some time there’s enormous overlap in the Northeast,” the ceo added. “There isn’t really a need for two [or more] regional discounters.”
While scaling back on basics, Caldor has been shining the spotlight on such items as fashion denimwear. Hot styles for fall include wide-legged and boot-cut jeans, and denim overalls, said Mark Minsky, senior vice president and general merchandise manager.
For the holiday selling season, Feldberg projected that “texture will be the story in apparel. “We see chenille playing out in sweaters, scarfs and gloves,” he said.
Efforts to raise Caldor’s fashion quotient have been helped by obtaining better trend information through closer ties with a smaller group of vendors and by conducting focus groups with customers, Minsky noted.
According to Feldberg, Caldor has made additional progress in executing its business plan by:
“Dramatically reducing” the number of items it carries, in part by cutting obsolete goods to 11.5 percent of inventories in July from 14.5 percent a year ago and 19 percent in January 1996.
Narrowing its vendor base by 15 percent between July 1996 and July 1997.
Heightening brand awareness by merchandising apparel labels in lifestyle presentations instead of by product classification.
Caldor’s business plan calls for cutting costs by $55 million between December 1996 and December 1998. Feldberg would say only that savings “are where we thought they’d be.”
A source close to the discounter estimated that Caldor’s planned expense reductions are likely to exceed the $55 million target by a double-digit percentage.
Caldor is planning to exit bankruptcy proceedings next spring. It received its fourth extension of exclusivity last week. The 157-unit chain, based in Norwalk, Conn., presented its five-year business plan to creditors in December. The discounter filed Chapter 11 in September 1995.
“The size of Caldor,” said retailing consultant Walter Loeb, “is an impediment for profitable growth.” Loeb and others believe regional chains such as Caldor and Bradlees will survive only by combining to leverage buying clout and cost controls.
Nonetheless, Feldberg continued to deny recurring rumors that a merger with Bradlees and possibly Hills is in the works. “Caldor…is capable of emerging as an independent company,” he said.
Getting there won’t been easy.
“The last year, from June 1996 through June 1997, was very painful for us,” Feldberg acknowledged. “We eliminated all one-day promotional events.
“We got the customers weaned right away,” the ceo continued. “What’s been difficult is getting them to come back and recognize the other values.”
Those values include price reductions on more than 7,000 items, reflecting Caldor’s shift to an everyday-low-price strategy. Although its promotions-driven approach drew shopper traffic, Caldor’s profits were eroded by the low prices and costly advertising.
Last December, for instance, Caldor gave up $80 million in promotional sales, said Feldberg, “when we realized that the business wasn’t profitable for us.
“We did that willfully as a part of our plan, but it’s still real tough to look at that.”
The previous dependency on promotional pricing and one-day sales also made it tough to keep featured items in stock. According to credit analysts, Caldor’s business was hurt by shortages of promotional merchandise and being understaffed to handle long checkout lines during one-day sales.
Richard L. Church, retail analyst at Smith Barney Inc., noted that Caldor stores often are not fully stocked and could be made easier to shop.
The problems persist despite a narrower advertising focus that has seen Caldor eliminate 50 pages annually from its Sunday ad circulars.
Brands driving Caldor’s business are those typically found in discounters: Hanes, Playtex, Fruit of the Loom, Wrangler, Rider and Chic.
New on the discounter’s selling floor is the private label Modern Edge, an activewear collection introduced last spring that has been expanded for fall. Caldor has trimmed its private label stable to focus more sharply on a handful of lines such as Fresno, Flying Colors, Laura Tyler, Active Energy and Trail’s End.
Categories that are becoming a bigger part the business include plus-size apparel, and Feldberg forecast “enormous growth” in the bath and body department.
Caldor updated its prototype with the grand reopening of its store in Peekskill on Aug. 7. The store houses Caldor’s first children’s entertainment section, where kids can listen to audio tapes and view videotapes before they buy them.
A remodeling of the Timonium, Md., unit is slated to be completed in November.
Calling attention to its new store, Caldor sent a direct-mail piece themed “Checking out the change” to residents within a three-mile radius of the Peekskill site.
Analysts said it is unclear whether Caldor’s strategy can keep it competitive with Wal-Mart, Kmart and Target, which is moving into the Northeast. Caldor faces Wal-Mart or Kmart in most of its 157 markets in the Northeast, which is Kmart’s strongest region.
Further, analysts noted that some market share formerly held by regional chains like Caldor had been taken away by category killers such as Petco, Staples and Bed, Bath & Beyond.
Feldberg claimed that Caldor’s apparel assortment gives it a fashion edge over Wal-Mart and Kmart. “We also devote a lot of space to outerwear,” he added. “It’s not a business they’re really in. In the Northeast, that’s important.”
Acknowledging the need to evolve, Feldberg said, “If you sit still and say the job is done, you lose because what works today may not work tomorrow.”
Still, the ceo expects the appeal of discounters to be enduring as they attract a broad range of customers, from consumers having income constraints to those without any constraints. He added, “They also are able to offer value in all categories, while meeting the basic necessities of people’s lives.”

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