LOEHMANN’S GROWTH CAUTIOUS POST CHAP. 11
Byline: David Moin / With contributions from Vicki M. Young
NEW YORK — A downsized Loehmann’s Inc. emerged from Chapter 11 protection Tuesday, with a plan for growth that’s far more conservative than the one that got the off-pricer in trouble to begin with.
The good news was expected since an amended plan of reorganization was approved by bankruptcy court on Sept. 6. Loehmann’s was in bankruptcy proceedings for 16 months. Generally, major bankrupt retailers require two to three years to reorganize and get plans approved.
The Bronx-based chain also said Tuesday it closed on a $75 million senior secured exit financing facility provided by Bankers Trust Company and arranged by Deutsche Banc Alex. Brown.
In connection with its plan of reorganization, the company has formed a new holding company, Loehmann’s Holdings Inc. The new Loehmann’s will issue new common stock to the company’s creditors who have allowed claims in the retailer’s Chapter 11 case. The distribution, along with senior notes in the reorganized company, is expected in the “near term,” the company said. Shares of the company’s old common stock are being canceled, and shareholders will get nothing. Loehmann’s has been streamlined down to 44 stores and $340 million in volume, from 69 stores and $430 million on the day it went bankrupt. The remaining stores are mostly on the East Coast, from Connecticut to Florida, and in California. Also, 35 percent of the management team in the corporate office was let go during the bankruptcy.
“Besides having confidence that the 44 stores can make significant contributions and continue to grow, we also have plans to open two stores a year over the next five years, beginning in fall 2001,” said Robert N. Friedman, Loehmann’s chairman and chief executive officer. “The concentration will continue to be where we have strength in core markets, such as the New York region.”
Other core markets, such as Baltimore, Washington, the southeast and southwest coasts of Florida, parts of California and the Atlanta area, could also be filled in with additional stores.
“By going into new markets with single stores, we were not successful,” Friedman said. “It wouldn’t be appropriate to repeat a strategy that was flawed.”
Loehmann’s heavy debt structure, some expensive real estate, assortments that were watered down with moderate labels over the past decade, as well as department store price promoting, also contributed to the chain’s difficulties.
But Friedman said one reason the company was able to pull out of bankruptcy was that business this past year was good, with recent comp-store sales gains in the mid-single digits. Margins have been “very strong,” Friedman added, while declining to be specific.
He also said Loehmann’s during the bankruptcy returned to its original merchandising philosophy by offering a more focused assortment catering to “somewhat affluent women over 35 looking for better, bridge and designer labels, with much better value than she can get in the department stores.” Loehmann’s advertises prices that are typically 30 to 65 percent off department store prices.
Added Friedman: “One of the things that we did after we filed for bankruptcy was to hire PricewaterhouseCoopers to put together a strategy, and one of the major recommendations was getting back to our roots.”
Other off-pricers, such as Filene’s Basement, which went bust and sold its assets to Value City, have also been struggling.
Loehmann’s formed a new board with five members, selected by the creditors’ committee and bondholders, from “various walks of life,” but Friedman declined to identify them.
Percent holdings in the company are still being tabulated, according to Robert Glass, president and chief operating officer. “It appears no one shareholder has more than 5 percent of the stock,” he said.