CHARMING SHOPPES GETS $157 MILLION CREDIT FACILITY
Byline: Rich Wilner
NEW YORK — Charming Shoppes Inc. has signed a new $157 million working capital facility with Congress Financial Corp., putting the chain on sounder financial footing and enabling it to correct merchandise problems.
“The key for us will be to give the customer choices, choices, choices,” said Dorrit Bern, Charming’s president and chief executive officer, in an interview Friday. The company said it reached an agreement with its existing commercial lenders to restructure about $90 million in short-term debt, converting letters of credit and working capital facilities into a 2 1/2-year facility.
The Congress deal — for a 2 1/2-year, asset-backed working capital facility — and the restructuring provide $247 million in additional capital. That amount is sufficient to “meet the company’s needs for the foreseeable future,” Charming asserted in a statement.
The Bensalem, Pa.-based operator of 1,423 Fashion Bug and Fashion Bug Plus specialty stores has been struggling with losses, double-digit sales declines and lack of fashion appeal for more than a year. Charming reported a $24.7 million loss in the third quarter ended Oct. 28 as sales eased 12.6 percent. In November, Charming’s store-for-store sales were off 13 percent.
However, Bern said the new financing signals the start of a merchandising and marketing turnaround for the chain.
Bern recently completed a business plan for Charming that calls for closing unprofitable stores, repositioning the merchandise and overhauling inventory management. She has previously cited such problems at Charming as a limited focus of merchandise, an attempt to dictate fashion to shoppers and a tendency to go too narrow and deep on production orders. According to Bern, the merchandise didn’t change frequently enough to keep customers interested.
At Charming, she plans to expand career wear and dresses and move away from narrow and deep assortments.
“We have never had a problem of too little store traffic, but rather buying too deep an assortment of private label fashion items that our customers would see visit after visit,” Bern said.
“Our customer is in our stores every week, so our displays will be changed more frequently to give the customer a new assortment,” Bern noted.
Bern’s new merchandising strategy will include an expanded petite department and, in fashion-sensitive dress and careerwear items, more branded domestic resources.
Under Bern, Charming’s extensive sourcing facilities overseas will become less ambitious and concentrate on less fashion-sensitive items. Bern said that Charming’s poor performance in the third quarter was to be expected as the merchandise in the stores represented the old sourcing ideology and would require time to work itself out of the pipeline.
Expect the fruits of the repositioning to begin to be felt in August 1996, Bern noted.
The new chief executive has already begun to cut costs, laying off 100 people from the chain’s corporate offices and promising more layoffs in the first quarter next year. Bern has already shut 100 stores and said she will announce more closings in the next 10 days.
Bern took over the top spot at Charming Shoppes Oct. 1. Before that, she was Sears, Roebuck & Co.’s group vice president for women’s apparel and home furnishings and was considered an important player in revamping Sears’ women’s areas.
Charming Shoppes’s stock closed at 2 11/16, up 3/8, in heavy over-the-counter trading Friday. — Fairchild News Service