Luria makes offer for Best Products - L. Luria and Son Inc. bids $69 million for chain, plans own reconfiguration

Discount Store News, Sept 16, 1996 by Pete Hisey

MIAMI LAKES, FLA. -- L. Luria & Son, the venerable catalog showroom/hard lines superstore, will get a major facelift this fall and may quadruple in size if its recently proposed friendly takeover of Best Products comes to fruition.

Chairman and newly named ceo Rachmil Lekach, an investor and founder of the Miami-based Perfumania fragrance superstore chain, told DSN that the new-look Luria will debut at the end of October.

Businesses like sporting goods, furniture and CE will be all but eliminated (apart from a few executive gift products) to free room for six to seven core businesses, which will all be given the category killer treatment.

"We see it as a half-dozen truly fine specialty stores under one roof," Lekach said. "And our service will be next to none."

Lekach visualizes Luria as "a woman's superstore," concentrating on categories like fine fragrances that appeal strongly to female shoppers, along with a smattering of gift items women might buy for men. Key categories will include perfumes/fragrances, cosmetics, small appliances, giftware, tabletop, jewelry and gourmet packaged food items.

Selections in most categories will exceed those of any other retailer. "In small appliances, for instance, we might have 200 toasters," he said. "And we will have someone behind the counter who knows a lot about them. Think of it as six or seven Perfumanias under one roof."

Luria had switched to a mainly self-service category killer approach to retailing shortly after Hurricane Andrew struck its Miami base in 1992. But flattening sales and increased competition in the Florida market created losses, and Luria never fully converted to its new strategy.

Lekach said that Luria will now court upper-income, primarily female shoppers, while still appealing to its core middle- and lower-class clientele. It will adopt an EDLP strategy, bolstered by extremely deep discounts on prime items to drive traffic. A $500 item may be advertised for $250 during a weekend event. Discounted items will be distinct values, but sales will be tightly focused on certain items, with most remaining at the EDLP year-round.

But as the company adds more upscale items, it plans to be very careful not to disrupt established pricing in luxury goods, Lekach said. "For instance, we might sell a $600 frying pan, but instead of discounting it, we might offer a $200 gift certificate with each purchase," he said.

The upscaling will be gradual, he said, so as not to alienate Luria's core shoppers, who tend to be middle-income and heavily Hispanic. "What we're trying to do is to expand our customer base and go after the Macy's or Burdine's shopper," he said.

Along with a better product mix, Lekach is intent on upgrading service at Luria stores. "Right now, we have too many people who go the other way when a customer looks at them," he noted. "We're instituting advanced training at all stores, and we're giving special bonuses to employees who provide better service."

As for the proposed acquisition of troubled Best Products, Lekach noted that his Ocean Reef Management's $69 million, $2 per share offer was above the $1.32 closing price on Aug. 30, and that the two chains, while running separately, would be able to combine buying functions, giving them more clout with vendors. "We have 43 stores, and they have about 161. That adds up to more than 200 stores, which is a sizeable chain."

Although Best would only say that it is studying the offer, it comes at a propitious time. Best lost $34.7 million in its first quarter, closed 10 stores and put expansion plans on hold for financial reasons. Some analysts feel that the chain will not survive without radical changes.

Lekach agrees, "Luria is a lot further along in shifting to a new retail strategy. Best is still moving toward [a superstore concept], and the time is best now for a merger. This is when they need us most."

If the sale is consummated, Lekach plans to run Best and Luria separately, but to convert Best to the Luria prototype. In the months since his investment in Luria gave him control of the company (founder Leonard Luria is now chairman emeritus, while son Peter Luria remains as president), Lekach said he has seen financial improvement.

With the full rollout of the new "woman's superstore" concept, due by the end of October, takes place, he expects to see rapid improvement and a return to profitability. "I think by the first quarter, you'll see serious change and improvement."