Rose's shores up credit, vendor confidence - Rose's Stores Inc

Discount Store News, July 8, 1991 by Mary Ellen Kelly

HENDERSON, N.C. -- A crisis at Rose's has been resolved now that the 236-unit discounter has reached an agreement with its short-term lenders for an $82 million working capital facility for the upcoming year.

But the resolution could be tenuous unless Rose's is able to build sales and profits this year. While rose's comes out fighting each year, armed with new strategies and information systems, it continues to be pummeled by wave after wave of new competitors in its Southeastern market area. The mounting list of Chapter 11 filings by retailers is apt to make lending institutions concerned about chains whose profits appear caught in a downward spiral.

At the end of May, confidence in the chain was shaken when several apparel factoring firms advised their vendors to stop shipments to the chain. The pressure from the factors strained the talks Rose's was having with its banks to renew financing. Rose's had been down to the wire on its bank agreement.

As Lucius Harvin III, Rose's chairman, was quick to point out in a press release, Rose's "throughout the ordeal maintained payments to all vendors on a current basis," and that the agreement with its banks should, "remove any doubt whatsoever about the financial viability of our company."

Last year, Rose's reported flat sales of $1.5 billion. Operating profits, however, took a serious hit, falling to a loss of $7 million from a profit of $14 million. The operating loss for 1990 climbs to $42 million when a $35.4 million provision for future store closings is considered. By the end of the 1991 calendar year, Rose's plans to close 23 stores and open four.

The first quarter 1991 figures indicate a worsening of the chain's competitive standing, magnified by a generally poor economic climate during the first few months of the year. Sales were down 8.6% to $323 million, due in part to the closing of 23 unprofitable stores. On a same store basis, sales declined 2.5% for the quarter. Rose's was still showing profits this time last year with first quarter earnings of $2.1 million. In the first quarter of 1991, however, the chain reported a net loss of $538,000.

Despite Rose's operating results, it continues to move ahead with the implementation of a new point-of-sale communications network. Datatec Industries, Fairfield, N.J., developed the system which is expected to be online by November. The system includes a dual store loop price look-up which is essentially a back-up, in case one loop were to fail. Rose's will be the first chain employing Datatec's token ring multistation access unit to help in troubleshooting and further prevent downtime.

Separately, Rose's is actively seeking a new president. Former president Jack Bush, resigned in January 1990 to join Ames. At the time of his resignation, Harvin was not looking for a successor.