WINTER WARMS AMES OUTLOOK
Byline: Vicki M. Young
NEW YORK — While growth in 2000 has been disappointing and September offered little revenue relief, plunging temperatures last week gave Joseph Ettore, chairman and chief executive of Ames Department Stores, cause for optimism.
“Our business stunk because it was cold in the spring,” the ceo told the Robertson Stephens Consumer Conference at the Pierre here. “It’s amazing how smart we got in the last five days.”
The company’s lackluster performance so far was attributed to unseasonable weather conditions and rises in energy prices and interest rates.
But with the drop in temperatures last week, items including outerwear, thermal underwear and even electric heaters are selling briskly.
Ettore commented, “It’s how our customer thinks.”
About 75 percent of the discounter’s primary customers are females between the ages of 18 and 54, with an annual income of between $25,000 to $35,000. The chain’s secondary customer is similar, but aged 55 and older.
Through the first six months of the year, the discounter had a $51.2 million loss on $1.7 billion in sales. In comparison, Ames posted $3.8 billion in sales in 1999.
Despite the losses, Ettore told investors that the company still has a “great story to tell” and that he is “optimistic” about its future.
The chain’s total store count will hit 479 sites by yearend. “This fall we’re going to keep a close watch on our inventory. At the end of September, we had $100 million less in inventory than one year ago, even with 26 more stores,” he noted.
The ceo said that the company would like to be able to look at opportunities for growth such as the acquisition of other chains similar to its $7.6 million purchase of the seven Chicago-based Goldblatt’s Department Stores earlier this year. He added that he doesn’t see any big-chain candidates as attractive as the company’s 1998 purchase of Hills Stores Co. “There are no other Hills out there,” he said, downplaying the possibility of a merger with another large regional discounter.
Kurt Barnard, president of Barnard’s Retail Consulting Group, commented after the presentation, “Ames has a very strong customer base, but the company is under pressure. It targets the low-budget customer who doesn’t have much money and is badly hurt by rising fuel costs. The company needs a very good fourth quarter. If not, a lot of questions will be asked.”