PAUL HARRIS FORCED TO LIQUIDATE
Byline: Vicki M. Young
NEW YORK — Paul Harris Stores Inc. has finally decided to called it quits after a long struggle for survival. The last blow was the chain’s inability to get a $9 million cash infusion.
The decision to liquidate the chain is just the latest of several retail consolidations since the end of December. Last month, Hit or Miss received bankruptcy court approval to liquidate; Bradlees has already shut down; Wards is also liquidating, and other retailers are moving in to cherry pick the best locations.
Paul Harris said Monday it was developing a plan for the company’s liquidation because it was unable to obtain either financing or vendor support to implement the plan of reorganization filed on Feb. 13.
According to the plan, filed with an Indianapolis bankruptcy court, Paul Harris needed $9 million to stay alive. About 1,600 employees are affected by the decision to close its doors.
The retailer is in discussions with its lenders, creditors and landlords regarding the structure of its liquidation plan, which calls for store closing sales and the sale of other assets. Paul Harris said it doesn’t know how much would be available to satisfy creditor claims. Existing shareholders will get nothing.
According to a spokesman, going-out-of-business sales could start by Thursday.
Glenn Lyon, president and chief executive officer, will not be part of the winding down of operations, a spokesman said. There was also no word on whether anyone was interested in purchasing the Paul Harris trademark, or which firms might be interested in getting the store sites.
Executives at the chain had hoped to exit bankruptcy proceedings by the end of April. Paul Harris was already in the process of shuttering 100 stores, and if it did continue to operate would have been left with 166 units. Keen Realty is handling the auction of the store sites, which range from 3,000 to 10,000 square feet.
Lyon said in a statement: “This unfortunate action marks the end of an era. Throughout its 52-year history, Paul Harris has faced numerous challenges, but had always emerged successful due to its committed team of associates at every level, and a loyal customer base.”
The ceo said that the management team had worked to improve all areas of operation, and that customers’ reactions to the changes were “extremely positive,” based on sales information since November. “However, we were unable to obtain the bridge financing and vendor cooperation necessary to sustain the company through the confirmation of the reorganization plan,” he said.
For the five-week period ended Feb. 3, the chain said comparable-store sales were down 9.6 percent. Sales for the quarter ended Feb. 3 dropped 3.4 percent, to $80 million, while comps dipped 0.8 percent.
Paul Harris’s Chapter 11 filing in October 2000 marked its second tour of bankruptcy proceedings. The moderate-priced chain previously filed for Chapter 11 in February 1991, and emerged in August 1992.
However, in the last few quarters, the chain has been operating poorly due primarily to weak merchandising. Market observers said the retailer also made a $10 million mistake in 1999, when it acquired the bankrupt J. Peterman retail and catalog operation, a move made under the former management team while Paul Harris was on shaky ground.
J. Peterman was sold for $2 million just before Paul Harris filed for Chapter 11 in October.
For the nine months ended Oct. 28, losses totaled $40.3 million, or $3.69 a share, against a $904,000 loss in the first three quarters of 1999.