Hill's investor ups stake; NYC investment firm plans to acquire more than 50% of shares - Hills Stores

Discount Store News, August 15, 1994 by Laura Liebeck

CANTON, MASS. -- Hills Stores executives are trying to assess the intentions of Dickstein & Co., a New York investment firm that recently increased its stake in the discounter and disclosed intentions to acquire more than 50% of the chain's common shares.

In a July 29 petition to the Securities and Exchange Commission, Dickstein & Co. purchased a large block of Hills' common stock, raising its position to 12% from 11.4%.

Previously, Dickstein & Co. increased its stake in the 152-unit regional discount chain from 5.8%.

Calls to Dickstein & Co. seeking comment on their plans for Hills were not returned.

Dickstein & Co. is one of several major stockholders in Hills. Others include Appaloosa Management, Apollo Advisors, Lehman Brothers, Thomas H. Lee Advisors and Fidelity, which buys stock in Hills under the name FMR Corp. and is the discounter's largest investor with roughly 17.5%.

"We have several large investors in Dickstein's range, and we're still assessing the situation," said William Friend, Hills' vice president and corporate counsel. "We expect to have the meeting [with Dickstein & Co.] in the very near future."

Friend said he has been "in constant communication with them," noting that a Dickstein representative spoke at Hills' June 8 annual meeting and complimented management on the chain's 1993 results and its performance in the first quarter of this year.

Friend declined to evaluate Dickstein's intentions.

Michael Bozic, president of Hills, said offhandedly: "They owned a lot [of stock] and now they own more." He said Hills will continue "to do what we're doing."

At the time of Dickstein's stock purchase, Hills' shares were trading at around $23 per share. At press time, Hills' stock price was hovering at the $20 per share mark, the price set for the stock when the company emerged from Chapter 11 last fall.

Dickstein and other investors can only be pleased with Hill's performance since it emerged from Chapter 11 and entered the public domain. Hills just reported that comparable store sales for the four-week period ended July 30 rose 9.2% to $127.1 million over July 1993 and that total sales jumped 10.1%. Sales for the second quarter, also ended July 30, increased 5.5% to $355.1 million. Total sales for the quarter moved up 5.1%.

For 26 weeks, Hills reported that comp store sales increased 7.1% to $691.3 million and total sales rose 6.2%.

Bozic said the upbeat second quarter report reflects a successful Back-to-School circular in July and "strong sales in June and July in our sportswear, ready-to-wear and fashion merchandise departments, as well as in our toy, housewares and domestics departments."

Bozic said that Hills will open three more stores by the end of the year and begin 1995 with the goal of opening 10 stores per year for the foreseeable future.

Last month, Hills opened a new store in Reading, Pa.

In addition, Bozic said that Hills is now working on a new store prototype that will feature wider aisles (unveiled last month in Reading), a larger domestics department, the creation of a high transaction/fun area for such product categories as greeting cards, party supplies and health & beauty care products, and a "dramatic" presentation of seasonal products.

The prototype will be approximately 90,000 sq. ft., 10,000 sq. ft. larger than the company's existing prototype.

Schafer Associates, Oakbrook Terrace, Ill., a retail design firm, is designing the new Hills prototype, slated to open later this year or early next year. Schafer also is devising a similar new layout for an 84,000-sq.-ft. store already operating in Boardman, Ohio.

Bozic said he wants to grow Hills through new stores and higher comp store gains that will drive down the company's SG&A ratios.

Growth will be in Hills' existing markets, primarily in Pennsylvania and Ohio, and in growing communities in Maryland, New Jersey, the Carolinas and Virginia.

Hills next store openings are scheduled for the Richmond, Va., market on Oct. 28, where two units are planned. Specific sites for other store openings have not been disclosed.