Rose's hangs tough as competitors invade its Southeastern markets - Rose's discount stores - Discount Industry Annual Report - company profile

Discount Store News, July 4, 1988

Rose's Hangs Tough as Competitors Invade Its Southeastern Markets

HENDERSON, N.C. -- Rose's Stores faced 56 new challenges during 1987, and there is no reason to think this year will be any easier.

A trio of new general merchandise managers and a new vice president of merchandising were among the changes made during 1987 to meet the new competitive challenges.

"During 1987, 56 of our stores had a new competitor in its market for less than a year, including Wal-Mart, Ames, Zayre, Bradlees, Gee Bee, Jamesway, K mart . . ." said Jack Bush, Rose's president.

The nearly 12 percent rise in sales and 3.2 percent same store sales increases were achieved despite this mounting competition. Wal-Mart is quickly becoming Rose's most formidable competitor. The nation's No. 2 discounter opened 47 stores in Rose's markets in 1986; by the end of 1987 that figure had risen to 73 of the chain's 237 locations.

Despite rising sales, earnings before income taxes dropped about 28 percent to $31.6 million from $43.6 million. Competition no doubt played a roll in the earnings drop, but other factors also had a one-time negative effect on the income.

Bush said that 1987 earnings at Rose's were considerably impacted by a $5 million LIFO charge. The Southeastern chain is also in the middle of an extensive expansion and remodeling program; 205 of the 237 units have either been opened or remodeled within the last five years, Bush said.

Other expenses incurred during the year included 23 new store openings and six older stores closing or being replaced with an equal number of larger replacement sites. Also, Bush said the chain's 850,000-square-foot distribution center is in the final stages of a systems renovation which will result in a fully automated distribution center within the year.

All of these investments were part of the chain's efforts to fortify itself against the steady influx of competition, Bush said, as is the company's investment in its merchandising and store level people.

Among the headquarters additions during 1988 were: Bob Floum, vp, merchandising; Doug Harris, apparel, gmm; Gary Hanson, hard lines, gmm; and Bob Sasser, home lines, gmm. "We intend to build the best merchandising team possible," said Bush.

The three gmms also signal a change in Rose's merchandising approach. Until recently, there had been two gmms, one for hard lines and one for soft lines.

Many have determined that sales growth in home fashions and apparel could be further exploited by recognizing the interrelated nature of soft lines merchandise, such as domestics, with hard lines departments, like housewares.

In addition to headquarters personnel shifts, there have been staff changes at the store level.

Bush said that Rose's has been keeping a close watch on the store level "team" that is up against new competition.

"We start looking at the management staff ahead of time, before the competing store has opened," he said. Store managers are sometimes changed or specially trained in markets where new competitors have arrived.