Red ink sinks Alexander's; files Chapter 11; will return as real estate company

Discount Store News, June 1, 1992

Files Chapter 11; Will Return as Real Estate Company

NEW YORK -- After months of speculation, Alexander's finally closed its doors.

The Northeastern retailer shut down all of its 11 units on May 15 and subsequently filed for Chapter 11 bankruptcy protection. In March, a number of vendors stopped shipments and inventory was running low. Talks with vendors to delay payments proved futile and the 64-year-old retail chain closed abruptly.

When the corporation emerges from its Chapter 11 filing, it will be as a real estate company, not a retailer.

Ironically, it was the emphasis on its real estate properties that was often cited as the reason the retail side of the business was left in decline.

"Alexander's retailing operations have sustained losses for three years in a row," said Robin Farkas, chairman, commenting on the decision. "In the last 24 months alone, losses reached approximately $40 million, and were projected to continue. Alexander's retail business is not viable and there is little prospect of turning it around. It is simply no longer capable of producing the cash flow necessary to meet its ongoing business obligations."

At presstime, the company had reopened the stores to conduct a going-out-of-business sale at the start of the Memorial Day weekend. According to Roanne Kulakoff, a company spokesperson, the sale would likely last 60 days.

Alexander's had 5,600 employees, most of which will be called back to work during the going-out-of-business sale, she said. After that, each will receive severance pay in accordance with company policy.

In its filing with the bankruptcy court, Alexander's listed assets of $183.7 million and liabilities of $95.7 million.

Its largest unsecured creditors are Gitano, which is owed $891,000; CIT/Group Holdings, a factor ($858,000); and Empire Blue Cross & Blue Shield ($775,000).

Published reports locally of the chain's demise waxed nostalgic. Alexander's was one of an obviously dwindling group of urban discount stores. It will leave a void, especially in some depressed Bronx neighborhoods where it has been a staple for 64 years. Alexander's had three stores in that New York borough, one opened as recently as 1990.

The chain also has two stores in the borough of Queens; one in Valley Stream, a Long Island suburb; two in Manhattan; one in Yonkers, N.Y.; and one in Paramus, N.J.

"As our stores are situated on prime retailing sites, we fully expect that the positions lost will be only temporary, with other major retailers entering the properties. Our decision to close Alexander's stores will maximize the value of our excellent store locations," noted Farkas.

Alexander's real estate locations have been in the limelight consistently over the years. High profile developers such as Donald Trump made news in the mid-'80s with attempts to buy interest in the chain. Trump's own real estate troubles resulted in Citibank becoming one of the company's largest shareholders.

However, a depressed New York real estate market, and a difficult overall retail climate could make the store sites harder to sell--a tough lesson learned by such retailers as TJX Cos., which continues to have its share of problems with leases dating back to a 1988 sale of Zayre stores to Ames.

Retail difficulties are also well-known to Stephen Goldberger, president of Alexander's since May of 1991.

His merchandising thumb print was visible in Alexander's, which shortly after his appointment began to concentrate more on basic assortments and rolled out POS scanning and other electronic improvements. Though comp store sales did begin to show signs of modest increase, they were not meaningful enough to keep the operation going.

Goldberger had been president of Hills, but left that chain in December 1990. Soon after, Hills, which was founded by his father, Hank Goldberger, filed for Chapter 11.

One of Alexander's largest shareholders, Interstate Properties, was also involved with the defunct Two Guys chain, which ultimately made money for the company through its real estate rather than its retailing business.

Alexander's was founded in 1928 by George Farkas. The chain grew to 15 stores in the metropolitan New York area, but began selling its properties as business declined in the early '80s.