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Home Electronics, Appliance Chain Fretter Inc. Considers Bankruptcy

September 27, 1995

DETROIT (AP) _ Fretter Inc., a 22-state chain of home appliance and electronics stores that has been losing millions of dollars, is the latest to stumble in one of the most competitive and crowded areas of retailing.

The chain, which also operates stores under the names Fred Schmid, Silo, YES! and Dash Concepts, has closed 58 outlets in 10 states since early August in a drastic attempt to stop hemorrhaging red ink.

At least 12 more stores are scheduled to be closed soon.

Fretter, citing ``deteriorating″ finances, recently announced in documents filed with the Securities and Exchange Commission that it might seek protection from creditors under the U.S. Bankruptcy Code.

``We’re looking at all options,″ Vice President Doug Hickman said Wednesday when asked about a possible bankruptcy filing for the Brighton, Mich.-based company. He declined to elaborate.

Retail analysts say it is just a matter of when.

``Everybody’s kind of expecting it, but they seem to have nine lives,″ retail consultant Frederick Marx said. ``I don’t know which number they’re on now.″

Fretter is just the latest regional retailer to run into such trouble. Oregon-based Smith Home Furnishings Inc. and Connecticut-based Caldor Corp., a discount department store chain, filed for bankruptcy protection in recent weeks.

As it has rushed to shutter stores, Fretter’s inventory has dwindled and the company has virtually ceased advertising _ further signs that it is preparing for bankruptcy, Marx said.

All the signs in recent months have been bad:

_The company failed to meet two loan payments in the second quarter, after defaulting on a $140 million line of credit last spring when sales dropped sharply.

_Fretter reported an $11 million loss in the second quarter ended July 31, causing its stock to plummet. It was selling at 43.8 cents a share Wednesday on the Nasdaq exchange, down from $1.125 on Oct. 18, one day before the second-quarter results were released.

_Sales at stores open more than a year, a key measurement of a retailer’s health, were down 28.5 percent in the second quarter from a year ago.

Fretter’s troubles are the result of increased competition, lower profit margins industrywide and a failure to carve out a niche or unique identity with consumers, Marx said.

As it expanded in recent years, Fretter acquired a patchwork quilt of stores with varying sizes and marketing approaches. It was unable to come up with a consistent format.

At the same time, ``superstore″ chains such as Circuit City and Best Buy have lured consumers on Fretter’s home turf with newer, larger and more attractive stores, said Ron Petrie, an analyst with Roney & Co. in Detroit.

``Fretter is just an older generation of store,″ Petrie said.

Additional competition has come from Sears and Montgomery Ward, discounters such as Wal-Mart and Kmart, and warehouse chains such as Costco and Sam’s Club. All have expanded their electronics and appliance offerings.

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