Bradlees begins the Thorner era

Discount Store News, Jan 20, 1997 by James Mammarella

BRAINTREE, Mass. - "First of all, there will be a major expense reduction before the start of fiscal 1997," said Peter Thorner, who was elevated to chairman and ceo of Bradlees on Dec. 24.

The board of directors obtained former chairman and ceo Mark Cohen's resignation Dec. 24, after deciding his strategy for repositioning Bradlees wasn't yielding results quickly enough. Thorner sounded in accord with this view when he said, "We have to reassess the value equation that we're bringing to the customer." He added, "I give Mark Cohen high marks for merchandising."

Thorner told DSN he will have his cost-cutting plan in shape by Feb. 1. He expected that Bradlees' Chapter 11 creditor committee would accept his petition for an extension of exclusivity; a hearing is set for the third week of January. Once the business is stabilized, probably by late summer, he anticipates filing a plan for reemergence, which could occur in early 1998.

Thorner avoided delineating the measures he has in mind for restoring profitability to the 110-store Northeastern discounter. But he was clear on the goals. "We will focus on margin dollars, he said. "I will get the infrastructure and expense structure to where a company can operate effectively. We had hefty expense ratio - among the highest. We cannot stay in the 30s (for SG&A as a percent of sales). We should be in the 26% to 27% range. I will get us to 28% immediately."

Bradlees, which filed for bankruptcy protection in June '95, reported a net loss of $159.6 million for the first three quarters of 1996. The chain saw sales decline 7.5% and comp sales drop 5.5% to $1.16 billion for the period.

Thorner does not foresee any major shrinkage in store count ahead. He said the chain's 26 store closings in 1996 would largely be sufficient. There will likely be some consolidation of personnel.

Thorner is also considering these steps:

* Reinstituting layaway;

* Eliminating first-time discount for the private label credit card;

* Re-examining productivity of broadcast and direct mail advertising;

* Shifting to rate-of-sale markdowns rather than time-based ones.

"Our inventories are clean," he said, justifying the last step. On the layaway issue, he said its discontinuation cost was at least $15 million on $100 million in lost sales. Cutting out the 10% first-use discount on the Bradlees credit card could also cost margin dollars, perhaps $10 million.

Known as a straight-talking master of retail finance, Thorner quickly earned a round of praise from the trade on his new appointment. On the buying side, Bradlees has solid merchandising talent that has absorbed a lasting imprint from Cohen.

Once the president, coo and acting ceo of Ames Department Stores, Thorner brought that chain out of Chapter 11 in 1993, then left in mid-1994 when Ames recruited Joe Ettore as ceo. He was hired by Bradlees in April 1995 as president and coo. At the time, he told DSN he had received other offers but believed that Bradlees had the best relative position for survivability in the toughening marketplace.

He still holds to this belief.

"We have an excellent opportunity to take this great real estate, with our customer demographics, density and loyalty, and shape it," he said. "Over the past 18 months we have gained a focus on quality, fashion merchandise that is well-spaced. The offering is superb.

"We have narrowed our vendor structure. We're important to some manufacturers," he added, indicating that trade support was swinging Bradlees' way.

After two years of remerchandising, Bradlees will undergo new changes to the mix. When Cohen, who had been chairman and ceo of the Cincinnati-based Lazarus division of Federated Department Stores, took the reins of a troubled Bradlees in December 1994, he said the chain would play to its soft lines strengths. He asserted Bradlees could best compete against oncoming national chains by trading up in quality and price point to differentiate and appeal more strongly to the upscale elements of its clientele.

But discounters trading up in the 1990s run into the revitalized national chains Sears and JC Penney.

We were trying to get initial markups that were too high for the [discount] industry," Thorner said. "Our opening prices were taken to a point where our customers were given sticker shock. And we have had a fairly consistent stream of one-day sales. Then the customer is deciding the mix. You lose control of a predictable margin."

Thorner emphasized, "We are not going to everyday low prices." Bradlees will offer a variety of promotions on a restructured good/better/best mix, he said, adding, "I will look at the restoration of some convenience product."

Switching from his trademark cigar to a crystal ball, Thorner shared a thought about the future of regional discounters:

"All regionals have to seriously consider some form of confederation or consolidation, either through merger or a rationalization of infrastructure by organizational memberships or affiliation. It must happen in the next three years.