|
Caldor to shut 12 stores
|
 |
February 24, 1998: 2:01 p.m. ET
Move likely to affect 1,300 jobs; Future of regional discounters called dim
|
NEW YORK (CNNfn) - Caldor Corp., the nation's fourth-largest discount store chain, said Tuesday it will close 12 underperforming stores employing 1,300 people in order to better focus on a swath of northeastern markets at the heart of a major reorganization effort.
Caldor, with annual sales of $2.5 billion, has operated under Chapter 11 protection since 1995. Since then, the chain has labored to revitalize itself in a regional Eastern market that has seen profits steadily eroded by the back-yard incursions of three retail juggernauts -- Wal-Mart, K-Mart and Talbots Inc.
As if to accentuate that threat, Caldor's announcement Tuesday coincided with Wal-Mart Stores' earnings report showing an 18 percent spike in fiscal fourth-quarter earnings to $1.29 billion, or 57 cents a diluted share. That was up from $1.10 billion, or 48 cents a diluted share, in the comparable period a year ago.
For the year, Wal-Mart's profits vaulted 15 percent to $3.53 billion as sales increased 12 percent to $119.30 billion.
Wal-Mart said it had benefited from an overseas expansion drive that saw the opening of 289 stores, as well as tighter inventory management and cost controls. "With the momentum we have, I am confident that fiscal 1999 will be another record year," said Wal-Mart President and Chief Executive Officer David Glass.
Wal-Mart is the world's largest retailer, with more than 3,300 Wal-Marts, Sam's Clubs membership-only warehouse stores, and Wal-Mart supercenters around the world. It operates an extensive network of stores in Latin America and Asia. In the U.S., it has recently upgraded its operations by converting many existing Wal-Mart stores into supercenters.
By sharp contrast, the regionally-oriented Caldor operates 157 stores in 10 eastern states. But even on home turf, analysts say, the chain has been hard-pressed to protect its niche between traditional discount stores and upscale department stores.
Warren Feldberg, Caldor's chief executive officer, said the decision to close the 12 stores -- including seven in Washington D.C. -- came as the company plots a comeback.
"We have determined it is in Caldor's best interest to close these stores, which fall short of our financial performance targets," Feldberg said. He added that the closings would allow Caldor to beef up performance in "core" markets in New England and the Mid-Atlantic states.
Under the terms of a six-month extension granted by U.S. Bankruptcy Court, Caldor has until Sept. 1, 1998, to file a reorganization plan with the court. Feldberg said the chain hopes to emerge from Chapter 11 protection sometime this spring.
He added that the company will help the estimated 1,300 workers whose jobs are in jeopardy to either find new jobs or get a transfer.
Skeptics say that reorganizations of regional discount chains like Caldor, however well-intentioned, may be bound to fail in the current retail environment where bigger tends to mean better.
"The question is, 'Will it be airborne?'," asks Kurt Barnard, publisher of Barnard's Retail Trend Report. "Let us assume that [Caldor is] able to do this. The big question is: Wal-Mart is invading Caldor's territory, K-Mart is in everyone's back yard. The three giants are extremely dominant and it is very difficult for smaller chains. All the regional chains are basically in difficulties….The outlook at best is dim."
David Poneman, a retail analyst with Sanford Bernstein, said Caldor and regional chains like it "have a major challenge ahead of them."
But even savvy target marketing may prove fruitless, some say, in a retail market where the top three chains account for 85 percent of market share. That raises the prospect in the short-term of consolidation among regional chains struggling to remain viable.
|
|
|
|
|
|
Wal - Mart Stores Inc.
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
