Pergament faces store closings, possible bankruptcy - Brief Article

Home Channel News, Feb 5, 2001 by John Caulfield

Convenience format featuring low-cost products has 'disappointed' company's owners

MELVILLE, N.Y -- Pergament Home Centers, which a year ago looked as if it were on the road to recovery, is retrenching with store closings and possibly bankruptcy.

Robert Arcoro, the chairman, CEO and co-owner of the 31-unit retailer, told Newsday, Long Island, N.Y.'s leading daily newspaper, that his company was considering closing "some or all" of its stores. He also told the newspaper that Pergament was considering several strategic options that could include filing for bankruptcy protection from its creditors.

"We are unsure of what our plans are," he told the newspaper.

Arcoro declined to elaborate on his comments during a brief telephone interview with NHCN. Joseph Kaidenow, Pergament's executive vp, said that he was "not in a position right now" to discuss what options the chain was pondering, and he said he "could not predict" when company officials would be able to talk about plans. Calls to Mike Ring, Pergament's chief operating officer, were not returned. Kaidenow confirmed on Jan. 25 that Ring still worked for the company. Kenneth Sands, an official with Pergament's primary lender, Congress Financial Corp., confirmed that Congress's line of credit with the retailer was still in place. Beyond that, Sands refused to comment. Calls requesting information about the retailer's financial state to Alan Cohen, owner of Alco Capital, which was holding $22.5 million of Pergament' s long-term debt when Arcoro and Kaidenow acquired the chain on Dec. 24, 1999, were not returned.

An assistant manager at Pergament's 20,000-square-foot store in Smithtown, N.Y., stated that the outlet continued to operate as usual, but declined to provide any further information about what they had learned of Pergament's fate from its headquarters executives. The Smithtown store was one of the first in the chain that Pergament converted to a format which showcases a 25,000-sku assortment of lower-priced merchandise for home fix-up projects aimed at "the reluctant DIYer," according to Ring.

The 20,000- to 25,000-square-foot, 11-department "convenience" format, which features lighting, paint, storage and furniture, had been seen by company officials as the competitive answer to Home Depot, which since first coming to the New York metropolitan area with a Whippany, N.J., store in 1989 has dominated the region. In 1999, Pergament lost more than $8 million and saw sales plummet 26 percent to $280 million, Ring confirmed.

Pergament had converted nearly two-fifths of its stores. But that remodeling and remerchandising effort did not turn the tide for the company. Arcoro told Newsday that he was "disappointed in the results" of its converted stores. He halted plans to convert all stores by the end of 2002 and plans to open a new store in the Bronx, N.Y., which was scheduled for 2002. Arcoro noted that its game plan had been disrupted by the recent downturn in the region's economy.

Pergament closed its Portchester, N.Y., store right before Christmas and its Yonkers, N.Y., store in January. Both outlets had been particularly hard-hit by competition from Home Depot, according to one store management source. Kaidenow said when interviewed that no other store "at the present time" was liquidating its inventory.

One manager, who oversees three stores, told NHCN he was "in the dark" about the company's plans. "We know something is going on, but they haven't told us anything yet," said this manager, who requested anonymity.

This manager said that stores were still getting regular inventory shipments, although merchandise quantities had been smaller lately.

Vendor sources contacted by NHCN said Pergament had been making regular payments for merchandise it bought until the beginning of this year, when it halted payments and, these vendors said, stopped returning phone calls.

"We're not happy, that's all I want to say," lamented one lighting supplier whose company, according to one knowledgeable source, is owed several hundred thousand dollars by the chain.

Another supplier filled an order with the company for more than $60,000 in December, after conducting what its owner said was an extensive credit check of the retailer. "At this stage, we're just trying to get our merchandise back," said the supplier's owner.