?Probably time to say goodbye to Filene?s Basement?
By Donna Goodison | Monday, April 20, 2009 |
http://www.bostonherald.com | Business & Markets
Retail Ventures? decision to put Filene?s Basement up for sale could spell the end of the once-storied retailer, according to industry observers, who say the chain has lost its luster and the only real value left may be its store leases.
?It?s probably time to say goodbye to Filene?s Basement,? said Stuart Zall of Retail Intelligence Advisors in San Francisco.
The off-price chain?s leases are its most valuable assets, because the brand lacks the ?panache? it once had, particularly when department stores essentially have become discounters due to the economy, he said. The Basement has key real estate, including stores in Manhattan and on Chicago?s Magnificant Mile and Loop.
?They may be bad deals for Filene?s Basement because they?re doing so poorly, but they could be a good deal for someone else,? Zall said. ?Even in these economic times, it?s still hard to find good big-box locations in the cities.?
New York retail consultant Howard Davidowitz sees a less-than 50 percent chance that the 25-store Basement will be around in six months. He doubts another off-price retailer, such as No. 1 TJX Cos. or No. 2 Ross Stores, would be interested in buying the Basement, because it lacks critical mass. Framingham?s TJX declined comment.
?The company does not seem viable the way it?s currently constituted - that?s where we are now,? Davidowitz said. ?We?re in a world of liqudation, not reorganization.?
Retail Ventures disclosed in a regulatory filing Thursday that it was putting the cash-strapped chain on the block and classifying it as discontinued operations.
The news came several weeks after Retail Ventures acknowledged it needed funds to satisfy vendors who were threatening to force the company into bankruptcy because they hadn?t been paid in months.
In January, Retail Ventures closed 11 of the 36 Filene?s Basement locations, including one in Framingham, and disclosed plans to aggressively renegotiate some of its remaining store leases, as well as the leases for its Burlington office and Auburn warehouse.
In Thursday?s regulatory filing, Retail Ventures said the Basement?s performance has continued to ?deteriorate significantly,? and renegotiation of the leases wasn?t likely to sustain its operations. The chain posted $422 million in sales last year.
?Filene?s Basement, like so many retailers, has been hurt by the current economic climate,? Mariellen Burns, a spokeswoman for the chain, said in a statement. ?All strategic alternatives are being pursued to deal with the current economic realities.?
Several family-owned companies and consortiums of liquidators are said to be looking at the Basement. And Davidowitz acknowleged that Retail Ventures? recent $7.5 million investment in the company could be a sign that it?s buying time for a sale.
Some believe the 100-year-old retailer still holds regional appeal, and buyers willing to invest in its operations could make a go of it in an environment where discounting is king.
?It?s the one category that should be doing well in this environment,? said Andy Moser of Kairos Capital Partners in Westwood.
Despite the doom-and-gloom environment, there are lots of investors that think now is the time to make investments in opportunistic situations, he said.
The chain has been dragged down in part by the loss of its historic ?automatic markdown? store in Boston?s Downtown Crossing. The signature store closed in 2007 as part of a redevelopment project that?s since come to a halt because of developers? financing problems. The store accounted for about 13 percent of the entire chain?s sales in 2006, according to a regulatory filing.
The Downtown Crossing store was originally supposed to open this spring.
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