Hills gets a second wind, plans $45M overhaul

Discount Store News, August 18, 1997 by Laura Liebeck

CANTON, MASS. -- At Hills, the time for excuses is over, and the time for results has begun.

The retailer has nearly a full complement of executives in place; the weather has improved to seasonal norms; a number of new initiatives have begun, with others on the way; and the factor community is safely at bay, satisfied with Hills' results and plans, as well as its return to open communications. What's more, two factors told DSN that they support Hills and that the company's finances are in good order.

"They're pretty safe for the rest of the year," said one factor. "They've done well enough, and banks and everyone [in the factor community are] comfortable. They're communicating with us now with the monthly meeting, so there are no untold surprises."

Another factor said simply: "We are supporting them; they have lots of bank liquidity."

It's been a tough two years for Greg Raven, the company's president and ceo. Less than six months ago, several factors in the community were at odds with the chain's lack of communication and their sales and earnings performance, and they were threatening tight credit terms if the situation didn't improve by the year's half point.

Overall, sales and profits have been down, and there's been a lack of top executives from which to draw new ideas. The chain was without a chief merchant from January through July, when Raven picked Larry Angst, Hills' women's apparel chief, for the top spot. Sales are still down: through June, sales were down 5.4% to $584 million and comparable store sales were off 1.5%. The chain operates nine fewer stores this year than last year. And July results showed a double-digit decline, said Raven, the result of a new initiative (the elimination of its free layaway program for Back-to-School) that should help prop sales in August and curtail deep markdowns at the end of the Back-to-School season.

But Hills appears to have turned the corner somewhat. The retailer now has good relationships with its factors and banks; it just hired Angst to get its merchandising program back on track; inventory levels are being managed tightly; and it is committed to spending $45 million on new systems that Raven feels is critical to the company in the long term.

"Hills has been at a competitive disadvantage for years, and we're going to correct that,l Raven said. "The problem in trying to compete in today's retail environment is based on the best information -- information that is easily actionable." He said Hills will begin to see the benefit of the new systems in late 1998 and early 1999.

He feels time is on his side. "There are many things we're improving," Raven said, noting that some of the programs he's implementing have been successful at other retail companies, including Revco, where he was cfo prior to his arrival at Hills.

More is on the way. Raven and his invigorated team will review the entire operation: the way Hills presents itself to customers, the company's pricing structure and the amount of private label in its mix. He said the team will look at space allocation and its merchandising programs. The focus of Hills -- family apparel and toys retailer -- will remain intact.

Programs on the way are: * Completely new systems. "We're taking every system we have and throwing them away," Raven said. The new focus will be on merchandising systems, new financial systems, human resources, payroll, payables and eventually a new warehouse management system. Nearly all of the new systems (90%) should be in place by next summer. * Improvement in men's apparel, which "slipped away over the past few years," Raven said. * Merchant store visits, at least once per month. Raven is committed to this program, which he calls vital.

The recent reset of the hard lines section is nearly complete. The program's major points include lopping off 4 ft. from the end of the gondola runs in hard lines to create a power aisle with pallet presentations of "good values." That reset is now in about 135 of the chain's 155 stores.

Adjacencies also were improved. For example, picture frames, previously merchandised near hardware, have been moved closer to housewares.

Raven feels that Hills has an opportunity to improve domestics, men's apparel and children's apparel (traditionally a strong performer for Hills).

He is looking to increase efforts in product development and imports and is also expecting improved door-to-floor performance, merchandise delivered to the store and then put on the sales floor. His new program is called "door to floor in four," meaning four hours -- a program that started in May.