Byline: Jean E. Palmieri

NEW YORK — Elder-Beerman, the 118-unit Dayton, Ohio-based chain, hopes to emerge from bankruptcy in early December with 40 percent fewer vendors and an aggressive store expansion.
That’s the plan, according to chief executive officer Fred Mershad, a retail veteran who joined Elder-Beerman in January from Proffitt’s, where he was president and ceo. At Elder-Beerman, a venerable, 114-year-old regional chain, he inherited a company that had been operating under Chapter 11 protection since October 1995.
The company, which operates 50 Elder-Beerman department stores and a total of 68 El-Bee and Shoebilee shoe stores in the Midwest, “lost focus,” he observed. “We strived to be the lowest-priced commodity retailer.”
Also, the company closed its Margo’s LaMode 70-unit women’s specialty chain, “a real consistent drain,” Mershad said, and a general business slowdown in 1995 sent the company over the edge.
This March, the three controlling shareholders of privately owned Elder-Beerman — Barbara Beerman Weprin, daughter of the store’s founder; her husband, William Weprin, and her first cousin, Leonard Peal — were kicked off the board for trying to sell the chain to either Proffitt’s Inc., Carson Pirie Scott or some other retailer behind the backs of the creditors’ committee and independent shareholders. A lawsuit is pending with Carson’s after Elder-Beerman charged the competing retailer with violating a confidentiality agreement regarding the sale of the company.
Mershad insists that Elder-Beerman is now not for sale. He stated: “We want to be independent; we don’t intend to be takeover bait. Our strategy is to be the branded department store in second-tier markets.”
Mershad said he has found 20 potential sites in the chain’s seven-state region — Ohio, Indiana, Illinois, Michigan, Wisconsin, Kentucky and West Virginia — for Elder-Beerman stores.
“We expanded three stores this year, and we’ve identified two new locations for next year,” he added. Another three stores will be expanded in 1998. The company will close two weak stores by Oct. 15 in Toledo, Ohio, and Carbondale, Ill.
In most of its markets, the company goes against Federated’s Lazarus chain, Mercantile’s Root’s and McAlpin’s divisions, or May Co.’s Kaufmann’s units. Dillard’s is also a competitor in some cities. “Sears and Penney’s are everywhere,” Mershad said.
In the year ended Feb. 1, Elder-Beerman generated earnings before interest, taxes, depreciation, amortization and reorganization expenses (EBITDAR) of $34.6 million against an $8 million operating loss a year earlier. Sales reached $750 million. In the second quarter, EBITDAR rose to $6.9 million from $3.9 million last year.
Now Elder-Beerman is slashing its supplier list. “When the year is completed, we’ll have 40 percent fewer vendors,” Mershad said. “We want the big brands to get bigger, but we still encourage buyers to seek new lines.”
In main-floor knits, for example, there will be four vendors instead of 11. In hosiery, six of the n0ine vendors will be cut. “We were far too broadly assorted, but starting this October, we’ll have stronger vendor statements and we’ll be less promotionally driven,” Mershad said.
“We’re a brand-driven company,” he explained. “We’re not obsessed with private label. It’s at 8 percent now. We have no plans to increase the penetration.”
“We are now a value-driven moderate-to-better department store,” Mershad said. “We’ve cut back on our promotional calendar. We’re increasing our regular-price business, and our margins are going up.”
As a result, Mershad is confident that the company’s plan of reorganization will be confirmed. As reported, Elder-Beerman filed the plan Aug. 6, providing unsecured creditors with 99 percent of the stock in the reorganized company plus 32 cents on the dollar in cash. Former equity holders and the Beerman and Peal families will receive 1 percent of the common stock in the reorganized company, plus warrants.
“We have the support of the creditors, the family and the ESOP,” Mershad said. “But we have no deal yet with the institutional creditors. We continue to work with them and hope to come up with a consensual plan very soon.”