Woolworth to close stores

July 17, 1997: 7:39 p.m. ET

Chain pulls the plug on 117-year-old "five-and-dime" retailing format

NEW YORK (CNNfn) - Woolworth Corp. said Thursday it is giving up the "five-and-dime" format that helped make the company a household name -- a move that means layoffs for 9,000 workers and closure of 400 stores.
     "Unfortunately, the 'five-and-dime' concept of general merchandising, from canaries to house plants to rollerblades, is not the type of business that interests most people who have major investments in retailing," said Alan Millstein, chairman of the Fashion Network.
     The legendary Manhattan-based retailer said it will convert about 100 of the discontinued five-and-dime stores into more profitable specialty operations, such as Northern Reflections and the highly successful Foot Locker.
     The closings will leave Woolworth with about 7,000 stores and annual sales of $7 billion.
     "We made the very difficult decision to close our domestic F.W. Woolworth general merchandise operations to help assure the continuing profitable growth," Roger N. Farah, chairman and chief executive, said in a statement.
     Farah said it became clear the general merchandise division wouldn't be able to return to profitability "in the foreseeable future."
     F.W. Woolworth incurred operating losses of $24 million on sales of $224 million in the fiscal first quarter, ended April 26. Last year, the division generated sales of about $1 billion but lost $37 million.
     For the second quarter, the company plans to record an after-tax charge of about $223 million, or $1.66 a share, for severance, lease expenses and related costs. For accounting purposes, the division will be treated as discontinued operations.
     The decision affects 3,600 full-time and 5,600 part-time workers. Woolworth said it will provide severance and outplacement counseling.
     Wall Street endorsed the move, sending shares up 2-1/2 to 27-9/16.
     "They had retrenched to the urban real estate to a large extent. They tried to hide from the discount department store competition as best they could. That's where the competition from the drug stores, though, proved to be sufficient to really hurt," said David Poneman, retail analyst for Sanford Bernstein.
     The "five-and-dime" operations peaked 35 years ago with 2,127 stores.
     Woolworth said it expects to close the stores over the next several months. The company also plans to change its corporate name later this year.