LOEHMANN’S, BACK TO ITS ROOTS, FILES FOR EXIT FROM CHAPTER 11
Byline: Vicki M. Young
NEW YORK — A return to its former mission as the off-price purveyor of designer, bridge and occasion dressing has put Loehmann’s Inc. back on track toward emerging from bankruptcy proceedings as a stand-alone company by the summer.
The Bronx, N.Y.-based retailer Friday filed a plan of reorganization with the bankruptcy court in Delaware, only nine months after filing for Chapter 11 protection. Court papers were not immediately available, and the plan is still subject to approval by the court and Loehmann’s creditors.
Robert N. Friedman, chairman and chief executive officer, said Tuesday that the recovery for unsecured creditors is “53 percent in stock” of the reorganized company. Loehmann’s will exit Chapter 11 by the end of June, he said.
To rebuild the strong consumer franchise the store long enjoyed, the company’s focus going forward will be on the continued rebuilding of its famous Back Room, the spot to which shoppers look for the best deals in the house upon entering the store. It features the designer, bridge and social occasion eveningwear that is key to Friedman’s strategy and now accounts for 34 percent of the apparel in the store, up from 23 percent in May when it filed its bankruptcy petition. The chairman didn’t say how much higher the Back Room percentage may be, but said “it wouldn’t be lower than its current 34 percent. It will achieve its own level.”
According to the ceo, a reaffirmation of Loehmann’s roots selling better-quality apparel for the higher-income customer was necessary if the retailer wanted to stay in business.
“We needed to go back to the history of Loehmann’s if we wanted to go forward. Our core customer comes to us for designer brands and social occasion eveningwear. How can we compete with TJX and Marshall’s when we have 55 stores? We can by becoming a niche player,” Friedman explained.
The off-pricer started 1999 with 69 stores, but shuttered 14 sites last year and another 11 are in the process of going dark. When Loehmann’s emerges from Chapter 11 in June, it will have a store count of 44 units.
“The business plan includes the opening of two stores a year, with the first two store openings in 2001,” Friedman said, adding that, while specific sites have yet to be identified, “our three concentrated areas are the New York Metro-Mid-Atlantic market, Southern Florida and California.” The company presently operates 18 sites in the New York-Mid-Atlantic area, four stores in southern Florida and 13 in California. The remaining nine stores are scattered in different regions.
Friedman, who is responsible for merchandising and drumming up support among vendors, credited Robert Glass, president and chief operating officer, for his efforts in negotiating with members of the factoring and investment community.
“I spent a lot of time in the marketplace with our key vendors, and Bob [Glass] has worked hard to develop strong relationships with the factors. We wouldn’t be emerging if it wasn’t for his efforts as well,” Friedman said.
The chief executive emphasized that during the fall, “we either hit our numbers or beat them month after month. We’ve also been able to hold together all our key people, and will be emerging with a strong group of merchants.”
The company is negotiating with four possible lenders for exit financing, but probably won’t make a decision until May, closer to its targeted exit date from Chapter 11, Friedman said.
To help its margins, Loehmann’s also has become less promotional. “We used to offer more point-of-sale promotions and more coupons. Now our coupons are only good on reduced merchandise,” Friedman noted.
The merchandise mix at Loehmann’s is 65 percent women’s and 12 percent men’s, with the balance spread among accessories, shoes, intimate apparel and gift categories.
If successful, might Loehmann’s position itself as a potential acquisition target? “Right now, we’re looking to emerge as a stand-alone company. We’re not looking for a buyer, nor even to sell the company. Our plan is to keep things simple and uncomplicated,” the ceo said.
The off-price retailer, which operated in the red for years, filed last May because of an inability to pay a $5 million interest payment on its senior unsecured notes. The company reported a $5.1 million loss on sales of $432 million in 1998.