Byline: Vicki M. Young

NEW YORK — Loehmann’s Inc., which has an estimated enterprise value of between $95 million and $120 million, is projecting comparable-store sales increases and improved gross margins for the next five years.
Those projections were made in the company’s plan of reorganization and disclosure statement filed with the bankruptcy court in Delaware on March 24. The court documents were not immediately available. Loehmann’s is expecting to exit Chapter 11 by the end of June.
Robert Friedman, chairman and chief executive officer, earlier this week told WWD that the recovery for unsecured creditors would be “53 percent in stock” in the reorganized Loehmann’s.
According to the plan documents, new Loehmann’s will issue 10 million shares of stock in the reorganized company. Much of the stock will be given to creditors to satisfy their claims. Assuming a midpoint enterprise value of $109 million, and deducting $35 million in long-term debt, the estimated share price of the new stock would be about $7.50. The company also plans to list the new shares on a national securities exchange. Existing shareholders get nothing. Upon the effective date of the plan, their shares in the old company will be cancelled.
Under the plan, Friedman and Robert Glass, president and chief operating officer, each is to get options to acquire up to 276,250 shares of the new stock.
When the company exits Chapter 11, it will be more like the off-price format started by Frieda Loehmann, who in 1921 founded the original Loehmann’s in Brooklyn. She merchandised the store by acquiring overruns and samples from designers who supplied department stores. The retailer offers merchandise at prices 30 percent to 60 percent lower than at department stores. The company has reemphasized its Back Room, which houses discounted designer, bridge and social occasion wear, and limited its promotional sales.
The merchandise mix at Loehmann’s is currently 65 percent women’s apparel, down from an earlier high of 80 percent, but still higher than the 35 percent typically found among its competitors, Friedman noted.
The company, which has 16 buyers on staff, employed 2,185 as of Feb. 15. About 1,626 are store sales and clerical employees.
Bob Carbonell, director of credit for Bernard Sands, a credit reporting agency, said Wednesday, “We’ll be watching closely its exit financing, to see how much and who gets it. We will be supporting them. The stores they have now are making money for them [and will do so] as long as their expansion plans remain conservative.”
Sales are projected to increase 2.4 percent in 2000, and comps are projected to increase 5.2 percent, 2.8, 2.5 and 2.1 for the years 2001 through 2004. As noted in Wednesday’s WWD, the company will open two stores per year starting in 2001, one in the spring and one in the fall.
Gross margins are projected to increase from 30.9 percent in 1999 to 33.4 percent in 2004. The company said the increase would be accomplished through a hike in initial markup from opportunistic buys at steep discounts, a reduction in shrinkage in the men’s business and a decrease in promotional markdowns.
Selling, general and administrative expenses are projected to decrease as well, from 29.8 percent of sales in 1999 to 28.2 in 2000. These expenses are projected to decrease to 25.9 percent of sales in 2004. Store expenses are projected to increase at a 2 percent annual inflation rate. The company expects to make capital expenditures over the next five years, including $1.75 million in warehouse facilities improvements in 2000, $2 million in both 2000 and 2001 to purchase technologically up-to-date cash registers, and $4 million a year for store maintenance.
For 2001, the company is projecting earnings before interest, taxes, depreciation and amortization of $16.1 million, with a net loss of $56.2 million on sales of $352.8 million.
In subsequent years, the company is projecting EBITDA of $23.2 million in 2002, with income of $6.4 million on sales of $370 million; EBITDA of $26.8 million in 2003, with income of $8.5 million on sales of $395 million; EBITDA of $30.1 million in 2004, with income of $11 million on sales of $419 million, and EBITDA of $32.8 million in 2005, with income of $12.9 million on sales of $442 million.

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