Discount veteran Ames to liquidate after 44 yrs. closings end era of Northeast regionals - American retailers struggle to survive, industry consolidation - Statistical Data Included

DSN Retailing Today, August 26, 2002

By the early '90s, four discounters dominated the region--Ames, Bradlees, Hills and Caldor. Bradlees and Caldor were expansion-oriented at the decade's beginning and battled each other to win sites of the by-now-defunct Alexander's chain to break into the New York City market. However, these vibrant retailers had been joined by the first of the national discounters to enter the region, Kmart. As the decade continued, the nationals kept upping the competitive ante. In 1995, when a new round of Chapter 11 filings began for Northeastern retailers, the culprit blamed for their distress was a recent arrival, Wal-Mart.

Caldor entered Chapter 11 in Sept. 1995. In another irony, observers blamed Bradlees' bankruptcy filing in June '95 for forcing Caldor into Chapter 11. Bradlees' filing undermined vendor and factor confidence in Caldor, which was approaching the Christmas season with suppliers reluctant to ship, whereas Bradlees, with debtor-in-possession financing at hand, was fully stocked. Given their relative financial positions, most observers felt Caldor would be the one of the two to emerge from Chapter 11. As it turned out, the reverse was true. Bradlees emerged from bankruptcy protection in February 1999, and even added stores during a brief period outside court supervision. Caldor began its liquidation process in January 1999. Bradlees initiated liquidation two years later, giving up the ghost as 2001 closed and setting going-out-of-business sales in early 2002.

In the meantime, Ames was eyeing Hills, a long-time Northeastern discounter that had long-term problems remaining competitive. Although a deal was expected for some time, it wasn't until November 1998 that Ames announced it was purchasing the 155-store chain. In hindsight, observers noted, Ames might have been better served by letting Hills go out of business and cherry picking attractive locations. But that's hindsight. At the time, the move was considered a triumph. The gap in size and scope between Ames and the Big Three discounters had grown such that it was an afterthought both to vendors and investors. The purchase nearly doubled Ames' revenue and brought it recoguition as a major retailer and a multiregional, with strength both in the Northeast and the Midwest, and with a foothold in the South.

The move invited speculation about Ames into growing a national player with smaller stores, and a lower-income core customer providing a unique niche in which it could build. Ultimately, though, Ames was to leave the lower-income consumer for the dollar stores. Ames continued expanding for some time after the Hills purchase, snapping up shuttered Caldor locations and, in February 2000, acquiring seven Gold-blatt's units as an entry to the Chicago market. Yet, the debt Ames had incurred in the Hills transaction became a millstone around the retailer's neck, particularly as the economy softened in the second half of 2000.

By November 2000, Ames announced it was closing 32 stores, including 31 former Hills units. New markets, such as Indiana, Illinois, Tennessee and Kentucky, didn't take to the fresh, but unfamiliar, retail presence, and Ames was withdrawing from those markets by December 2001. Ames had only closed shop at 20 locations when it bought Hills, but by the end of 2001, it had weathered several store-closing efforts and was about as big as it had been when it acquired Hills, In the end, Ames would be the final casualty among the native Northeastern regional discounters.