New prototype may spur Rose's rebound - Rose's Stores

Discount Store News, Feb 21, 1994

HENDERSON, N.C. -- Despite what has been a virtually continuous stream of sales declines at Rose's Stores for months, company president George Jones is again promising that a turnaround is near at hand.

He said the turnaround would be due, in part, to increased merchandising of closeouts.

Jones next month will discuss with the 172-unit chain's board of directors a possible new store prototype that will include more space for closeouts as well as a possible change in store name.

"We are pleased with what we've learned in the closeout business. Together with plans to grow our apparel business we feel very good with the direction in which we're heading," Jones said.

Nonetheless, same store sales for the month of January tumbled 13.3%, greater than the expected 9% decrease. However the results compare a four-week month ended Jan. 29, 1994 with a five-week period ended Jan. 30, 1993. Year-to-date same store sales--comparing a 52-week year in 1994 with a 53-week year in 1993--dropped 7.7%.

Spring merchandise shipments, which are due to reach stores soon, will include increased closeouts. As the level of closeouts. As the level of closeouts in stores rise, Jones anticipates closeout will generate 25% to 30% of total apparel sales and 10% to 15% of total hard lines sales.

Rose's had first experimented with closeouts in its "Greatest Deals" departments more than a year ago, then transformed three underperforming Rose's stores into "Greatest Deals" closeout stores, which also offered damaged and refurbished goods in one department. Having closed the Greatest Deals stores shortly after filing for protection under Chapter 11 Sept. 5, 1991, the chain continues to find closeouts to be an opportunity for growth.

As a result of positive results from closeouts, the prototype being proposed for the fall would increase the chain's closeout offerings and focus on several key businesses such as toys, seasonal, party goods, home business, video tapes and games, as well as enlarged apparel assortments.

Jones had stated last year that the company is pursuing a retailing niche "which emphasizes merchandise assortments between Wal-Mart/Kmart and Family Dollar/Dollar General, with some necessary overlap with each of these companies."

Rose's task of reversing the trend toward sales and profit declines is formidable. Having done everything from instituting a "Never Out-Of-Stock" program to insure that 400 key destination items are always in stores, to launching television and radio campaigns during the December holiday season, to efforts for improving inventory productivity and creating a centralized return system for damaged goods--results are still poor.

Even after its December advertising program was executed, same store sales for the month dropped 2.8%--which was considered a victory since the company plan called for a decrease of 9% in same store sales.

Prior to the Chapter 11 filing, the chain reported that an insufficient loan agreement coupled with bad weather resulted in out-of-stocks, reduced store traffic, and created a downward sales spiral. Having secured a debtor-in-possession $125 million credit facility from G.E. Capital Corp. shortly after filing bankruptcy, the company anticipated that stocked shelves would result in a sales turnaround.