Bradlees files for bankruptcy
Troubled discount retailer files Ch. 11, explores possible sale of company
The Braintree-based company announced it has filed for Chapter 11 bankruptcy protection in New York and agreed to sell its remaining inventory to Gordon Brothers Retail Partners LLC.
The company expected all of its 105 stores to close within eight weeks, company spokesman Fred McGrail said. A phaseout of its headquarters and distribution functions will begin this week.
The company expects to keep its sales staff through this process, and a bankruptcy court judge has approved severance payments, which will be at least two weeks pay, McGrail said.
The company said it filed for bankruptcy protection because of a general economic downturn, including rising interest rates and higher gas and heating oil prices, that have left customers with less disposable income.
Bradlees also said new competition, unseasonable weather in the first half of the year, and the tightening of trade credit contributed to its inability to operate profitably.
"They really needed a perfect economy to get this thing moved," said analyst Eric Beder of Ladenburg, Thalmann & Co., referring to the attempt at recovery after the restructuring. But the recent consumer spending slowdown did not facilitate that environment, he said.
Bradlees (BRAD: Research, Estimates) operates 105 stores and three distribution centers in Massachusetts, Connecticut, New Hampshire, Maine, New York, New Jersey and Pennsylvania.
Bradlees was founded in New London, Conn., in 1958. It went public in 1992 and successfully emerged from Chapter 11 bankruptcy protection in February 1999.
The Nasdaq Stock Market suspended trading in Bradlees stock
Tuesday. It closed at just under 22 cents.
Wards files for Ch. 11
Chicago retailer Montgomery Ward announces store closings, layoffs
By CNNfN Staff Writer John Chartier
December 28, 2000: 6:30 p.m. ET
NEW YORK (CNNfn) - Struggling retailer Montgomery Ward said Thursday it has filed for Chapter 11 bankruptcy protection and will shut down all of its stores in the coming months, bringing an end to one of the oldest privately held department store chains in the United States.
Chicago-based Wards said it simply could not produce the positive financial results to turn the company around after emerging from a previous bankruptcy.
"Today's filing comes after an exhaustive exploration of options for continuing the business," said CEO Roger Goddu. "Overall weak holiday sales and a very difficult retail environment simply did not permit us to complete the turnaround that might have been possible in an otherwise thriving economy. Sadly, today's action is unavoidable."
Wards also said it will immediately eliminate about 450 national office jobs and close all of its 250 stores and 10 distribution centers nationwide over the next several months. Reductions in its staff of 30,000 are anticipated during the first and second quarters of 2001.
Wards associates learned the news in a series of meetings at the company's stores and offices.
Dozens of employees were seen leaving the company's headquarters with boxes in hand Thursday.
Earlier in the day Crain's Chicago Business reported on its Web site that the chain was expected to lay out a broad liquidation plan, but that it was not yet clear how widespread the closings will be.
Then the company issued a statement shortly before the markets closed.
In August 1999, Chicago-based Ward's emerged from Chapter 11 bankruptcy protection, after which GE Capital Service, a subsidiary of General Electric (GE: Research, Estimates) acquired a 50 percent stake in the company. At the time, Wards closed 48 stores and cut 3,800 jobs as part of its restructuring effort.
Despite investing large amounts of capital and instituting management changes, the 250-store chain continued to post huge losses, said Martin Sankey, an analyst who covers GE for Goldman Sachs.
"In recent years it has lost considerable amounts of money. The losses have been considerable, but they have not compromised GE's ability to report earnings growth of 17 percent annually at GE Capital," Sankey said. "I think it would be fair to say that GE has been trying to fix Montgomery Ward."
Retailing experts said Wards has had trouble surviving in a marketplace with such powerhouses as Home Depot (HD: Research, Estimates), Target (TGT: Research, Estimates) and Best Buy (BBY: Research, Estimates).
The news comes two days after discount chain Bradlees announced it was
shutting its doors after filing for Chapter 11 bankruptcy protection.
Wards was founded in 1872 as a mail-order company, and opened its first retail store in 1926. The company employs 37,315 people nationwide and reported $3.2 billion in revenue in 1999.
For decades, Wards and Sears (S: Research, Estimates), enjoyed similar status as popular all-American companies. Both began to see declining profits in the 1950s and 1960s as consumers' tastes changed. Both retailers limped along through the 1970s and 1980s until Arthur Martinez took the helm at Sears in the early 1990s, overhauling the brand with a popular new "softer side of Sears" campaign, helping to turn the company around.
But Ward's continued to languish, losing more market share to bigger, more contemporary competitors.
"They failed to establish an identity for themselves, a niche, and that makes it difficult for it to stand out," said Kurt Barnard, president of Barnard's Retail Trend Report in Upper Montclair, N.J. "They never gave shoppers a reason for preferring it to any one of its rivals. It was just there, like soaking corn flakes."
