Demolition derby with rivals looms for regionals in N.E - competition among discount stores in the Northeastern States

Discount Store News, Sept 2, 1996 by James Mammarella

NATIONWIDE DSN REPORT -- It's as simple as A-B-C. The leading Northeastern discount department store chains--Ames, Bradlees and Caldor--face the steepest odds for survival in their collective history. All the challenges dogging the industry, from overstoring to toughened competition from category-dominant retailers, specialty chains and department stores, are intensified in the Northeast.

As the Big Three national powerhouses increase their influence across this densely populated region, observers believe it is unlikely all three of the regionals will be around for the dawn of the 21st Century. It is a radically different outlook from just a few years ago.

On the DSN Top 200 list in 1992, ranked by sales volume, Ames had reached the rank of No. 17, Caldor No. 19 and Bradlees No. 20. With a combined store count of 572, the three chains' total sales that year were $6.28 billion. Profits totaled $187.7 million.

Three years later, with a total store count of 603, the combined 1995 sales volume was $6.73 billion--but the chains lost a total of $252.7 million. Caldor declared a before-tax loss of $181.7 million on sales of $2.77 billion in 1995; Bradlees reported a loss of $69.4 million on sales of $1.84 billion; and Ames had a relatively respectable $1.6 million loss on sales of $2.12 billion.

The chains' latest rankings on the DSN Top 200: Caldor No. 20, Ames No. 24 and Bradlees No. 29. The current combined store count has been trimmed to 573; the three chains have closed a net total of 30 locations since January 1996. Meanwhile, other regional chains have vanished. The Fair folded its tent, little Stuarts sank, Jamesway faded away and Clover rolled over.

The national competition will only get stronger. The Northeast is already riddled with Kmart stores; Caldor's former president and coo Marc Balmuth said one year ago that he considered Kmart his most direct competitor. In the midst of a turnaround, Kmart has shuttered many underperforming stores across the region and is on a conservative relocation/rehab schedule. Kmart opened New England's first Super Kmart Center last year in North Haven, Conn.

Northeastern retailers have seen well over 100 new Wal-Marts open in the past three years. In the six-state New England region, Wal-Mart began with 16 new stores in 1992. By the end of 1995, the store count had reached 64. Wal-Mart's status as the nation's largest retailer places it squarely in the crosshairs of local anti-sprawl activists, who are intent on slowing its expansion, and point to the scarcity of easily developable real estate across the region.

For example, Wal-Mart's full court press yielded its first Vermont store only last year, a 50,000-sq.-ft. unit in Bennington. Yet it recently decided against proceeding with a 70,000-sq.-ft. store in St. Johnsbury, Vt., a site for which it had fought for several years.

New England boasts no Wal-Mart super-centers to date, and Wal-Mart's newly opened $30 million distribution center in Raymond, N.H., is non-refrigerated, designed to handle general merchandise only.

Target has rolled in along the Southern front, with new stores in the Washington, D.C., Norfolk, Va., and Baltimore markets. Target has begun work on a new DC in Virginia to support these markets and with typical marketing flair is leading a highly visible corporate campaign to refurbish the Washington Monument. The third wave of Target's 1996 store openings, set for next month, will include several northern New Jersey locations.

Just as observers question how successfully Kmart can carve out the middle ground between Wal-Mart and Target, they wonder how three full-line regional discounters can survive as overall competition grows more fierce. The answer for Mark Cohen, chairman and ceo of Bradlees, is to cease operating as a full-line discounter. He has pushed hard to trade up the quality and prices of his apparel and domestics offerings, putting plenty of distance between Bradlees and Wal-Mart.

In contrast to Bradlees, Ames and Caldor have yet to veer from their recent merchandising directions. Ames plays old-fashioned discounting by the high-low book, trumpeting brands in frequent promotions and driving up traffic with "best buys" based on opportunistic purchases. President and ceo Joe Ettore and executive vp, gmm Denis Lemire have kept this course since Ettore took the helm in June 1994.

Ames stands out from its two regional rivals for three reasons: It is not in Chapter 11 (it emerged from its bankruptcy in late 1992); it does not promote itself as "upscale;" and its stores, much smaller on average than its rivals, will likely generate a profit in 1996.

Caldor, prior to its bankruptcy last year, had achieved several strong years of growth through a consistent record of on-trend merchandising in hard lines and soft lines. With Warren Feldberg arriving as Caldor's top merchant in May 1996 (joining chairman and ceo Don Clarke), the market will see indications of any key product changes in spring 1997.

All three chains have invested capital in remodelling and refurbishing stores during the past few years--and have hacked away unprofitable sites. Ames closed 17 lackluster sites early this year, then bought and reopened nearly a dozen of the best former Jamesway locations. Bradlees, which shut a net of nine stores in early 1996, will close 14 more, trimming its count to 110, a move some vendors have applauded as a sign of fiscal prudence. Bradlees will also invest in a re-set of its flagship Union Square store in Manhattan as it looks to chase more of the upscale soft lines business from an urban clientele. Caldor halted plans for new stores in several states and has pruned its store count from 171 to 160, but has gone ahead with a few planned openings in the Washington and New York markets.