WOOLWORTH BACK IN BLACK, PLANS TO CUT 2,000 JOBS
Byline: Jennifer L. Brady
NEW YORK — Woolworth Corp. reported Wednesday that it returned to profitability in the fourth quarter and expects to save $100 million before taxes annually by cutting 2,000 jobs. Most of the cuts have already been made, and the estimated savings is after severance costs.
Roger N. Farah, chairman and chief executive officer, said the company expects the cost reduction program and sales of “several smaller underperforming business units and surplus real estate” will improve cash flow in 1995. He declined to disclose which businesses will be sold.
“It is a dramatic turnaround from last year’s depressed quarter,” said Janet Mangano, at Burnham Securities. In the latest quarter, Woolworth earned $90 million, or 69 cents a share, against a loss of $111 million a year ago.
Operating income came to $201 million against an operating loss of $126 million after a $168 million charge from disposing of the Woolco stores in Canada a year ago. Sales slid 9.1 percent to $2.6 billion from $2.8 billion. In the year, Woolworth reported an operating income of $274 million after a $30 million charge for the Woolco stores, which were sold to Wal-Mart, against an operating loss of $653 million. The year-ago loss included a $558 million charge related to the store-repositioning program and the Woolco charge.
Net income came to $47 million, or 36 cents, against a loss of $495 million a year ago. Sales fell 13.8 percent to $8.3 billion from $9.6 billion.
Farah said the company has commitments from banks for a new $1.5 billion revolving credit agreement providing “adequate financial resources and flexibility to implement our long-term plans.” Despite the favorable report, Standard & Poor’s lowered its rating on Woolworth Corp.’s senior debt to triple-B minus from triple-B plus and commercial paper to A-3 from A-2 affecting $935 million of debt and removed the ratings from CreditWatch. The rating company noted that Woolworth may be unable to restore prior levels of profitability, but said, “Farah brings a strong merchandising focus critical to determining which of the company’s businesses hold the most promise.” The agency noted it will be tough to expand The Foot Locker, which has been hurt by a leveling off of demand in athletic footwear. Woolworth stock was unchanged at 15 5/8 on the New York Stock Exchange Wednesday.