Ames: profits to grow in '96

Discount Store News, June 3, 1996 by Dawn Wilensky

CROMWELL, CONN. -- After experiencing a "generally satisfactory year in 1995 despite the toughest retail climate ever," Ames president and ceo Joe Ettore told those gathered at the company's annual meeting that he is ready to tackle 1996 with a business plan that is both realistic and achievable.

The chain ended ,95 with a decline of 1% in net and comp store sales. However, income before other charges and gains increased $2.3 million to $10.1 million. The chain plans on increasing its sales by a modest 1% in ,96 and predicts that it will have a net profit of approximately $16.5 million on net sales of $2 billion by yearend. While some shareholders at the meeting challenged these goals, Ettore pointed out that the chain has already implemented a series of cost-reduction initiatives, namely the closing of 17 underperforming stores in March and the elimination of 71 headquarters positions.

Results have been very encouraging from nine out of 10 former Jamesway sites opened April 18, Ettore said, and sales are "off the chart" in a former Stuarts store in Lowell, Mass. Ames plans to reopen one more former Jamesway location in August and at least one of two stores destroyed by flooding in January.

"We are positioning Ames to actively pursue growth opportunities. We plan to open 11 stores, and I'd like to open more if possible," Ettore said.

These efforts seem to be paying off. The chain experienced a $4.1 million improvement during the first quarter compared to last year. Its first quarter loss was $2.2 million better than plan. The Rocky Hill, Conn.-based regional plans to focus on its business and increase sales and traffic by emphasizing commodity products, improving in-stock positioning, expanding its Special Buys program (especially in apparel and home furnishings), using event marketing and growing its 55 Gold Saving Card program.

The Special Buys program--featuring merchandise acquired through odd lots, closeouts and orders cancelled by other retailers-is clearly what Ames is banking on to differentiate itself. These items can be found in the power aisles and on endcaps in and around the entire store at very sharp prices.

Also significant for the chain are event marketing programs like its Underwear Fair and Truckload Sale, as well as its 55 Gold program, which has more than 1.2 million cardholders and adds 50,000 monthly.

While other regional competitors have embraced the concept of trading up, Ames will stand firm behind its new marketing theme "Bargains By The Bagful," and continue to offer its lower-income customers good merchandise at good prices.

"We don't believe in the concept of trading up the customer. We know that dollars don't multiply in our customers, wallets, so why should we give them merchandise that costs more?" Ettore said.

"It's Retailing 101," according to executive vp of merchandising Denis Lemire.

Micromarketing has been key for the chain, and its 70 resort stores in particular use this strategy. Ames is also stocking school uniforms for 65 schools, up from 50, and has broadened its selection for its ethnic customers.