McCrory axes 300 more stores

Discount Store News, Feb 3, 1997

YORK, PA. -- McCrory has been fighting for its survival ever since it filed Chapter 11 five years ago, and the battle rages on.

The latest casualties of war: 300 stores that will be liquidated to generate some immediate cash. Meanwhile. the clock is ticking. Financing for the company's remaining stores also needs to be secured; its current line of credit expires April 30.

The variety store operator recently defaulted on its debtor-in-possession credit agreement with the CIT Group/business Credit Inc. by not satisfying a cleanup requirement and reducing total outstanding indebtedness to $30 million. At yearend 1996, McCrory. had a total indebtedness under the DIP facility of approximately $52 million. Lower-than-expected December sales hampered the chains ability to meet its goals. The company had expected a December sales gain of about 15%, but sales ultimately remained flat.

During McCrory's heyday in the '80s store counts reached 1,200, but the latter half of that decade brought lagging financials. Since filing Chapter 11 in February 1992, McCrory has slowly pared away underperforming stores and currently operates 447 variety stores, 11 Coast to Coast hardware stores and three Talley Houses, a free-standing restaurant operation. Affected b the current round of closings will be 294 variety stores, four Coast to Coast stores and two restaurants, senior vice president Paul Weiner told DSN.

The closings will leave McCrory with about 161 stores operating under several names, including McCrory, McLellan, H.L. Green, T.G. & Y., J.J. Newberry,and G.C. Murphy. Most of the remaining stores will be in the eastern United States, though some key stores will remain in New Mexico, Arizona, northern California, Oregon and Washington.

These locations were chosen either because the leases were attractive and could generate additional cash or they were deemed unprofitable. Proceeds from the closings, inventory liquidation and the sale of furniture, fixtures and equipment are expected to generate about So million to $50 million. Nassi Group and Schottenstein-Bernstein Capital Group have been retained to help liquidate the assets at the stores due to be shuttered. The chain was awaiting approval of the liquidating agreement by the bankruptcy court at press time.

After completion of the store closing program, the chain's remaining stores will be evaluated to determine if they can generate enough profit to support a viable business plan.

Other steps to trim overhead and operating expenses include laying off 3,500 store-level and headquarters personnel, as well as those at its distribution center. Also, all operations in the western United States will be eliminated.