Retailer to Close Hundreds of Stores; Thom McAn Shoe Chain Scaled Down
NEW YORK (AP) _ Melville Corp., whose varied retail holdings include many well-known chains, announced a corporate realignment Monday that involves closing or altering 700 to 800 stores.
The chains headed for reconfiguration are the Thom McAn shoe stores, the Chess King young men’s clothing stores and the Kay-Bee toy and hobby stores. The Linen ’n Things chain is being transformed to bigger individual branches.
The company will take a one-time charge of about $212 million, or $2.03 a share, in the current fourth quarter to cover the cost of the realignment.
Robert D. Huth, Melville’s executive vice president and chief financial officer, said the company still will post a profit for the quarter and full year, but he declined to elaborate.
Stanley P. Goldstein, Melville’s chairman and chief executive officer, said the realignment speeds up an existing process under which the company has closed about 250 stores across all divisions in each of the past several years. ″It reflects our belief that to thrive in today’s highly competitive retail environment, we must continually reassess our investments and capitalize on our better-performing units,″ he said.
Huth said more than 100 stores of the 700 to 800 total affected by the realignment might ultimately be converted to different formats. The company gave no estimate on the effect of the moves on employment.
Melville, based in Rye, N.Y., is one of the country’s major speciality retailers. It emphasizes value-oriented, lower priced chains within several distinct business segments: prescription drugs; health and beauty aids; apparel; footwear; toys; and household furnishings. The company’s divisions run a combined total of about 8,200 stores nationwide.
Wall Street analysts welcomed Melville’s moves.
Michael Exstein of Kidder, Peabody & Co. said Melville has taken positive steps to strengthen itself, but may need to consider selling off underperforming chains, such as the Chess King stores with 500-plus branches.
″I think their prospects as a viable competitor are better,″ said Exstein ″The questions surrounding some of their mature businesses and ones that are not solidly profitable have been answered by these moves.″
Despite the positive reaction from analysts, the stock lost 12 1/2 cents to $51.50 on the New York Stock Exchange Monday.
A central element of the plan includes significantly reducing the size of the Thom McAn chain, widely considered a retailing has-been by the analyst community. The Chess King chain also would be scaled back.
More than 350 of the existing 730 Thom McAn stores will be shut, sold or changed to other types of Melville-owned stores while the number of Chess King stores that will be closed, sold or changed hasn’t been determined yet. The company did not specify where the stores are that will be closed.
About 250 stores in the 1,250-store Kay-Bee chain will be closed, sold or changed to other stores. Those slated for closing, which also weren’t specified by location, are either poor performers or have overlapping markets with other Kay-Bee stores.
Melville said it still intends to open more than 100 new Kay-Bee branches over the next three years. It didn’t say where the new stores will be located.
For Melville’s highly profitable Linens ’n Things chain, the company said it will continue its previously announced plan to convert most of the 144 branches to larger stores. About 75 of the smaller branches will close when their leases expire over the next few years, but a similar number of larger- format stores will be opened over the same time period.
Among other chains owned and operated by Melville - which were not affected by Monday’s announcement - are the Marshalls off-price apparel stores, CVS drug stores and This End Up furniture stores.
Separately, Melville said it was taking a charge of $32 million, or 31 cents a share, for the estimated cost of health care and life insurance benefits. This brings Melville in compliance with the new federal accounting standard required of all public companies by the first quarter of 1993.
The standard requires the estimated cost of post-retirement benefits other than pension be accrued under the period earned rather than expended as incurred.