Hill bounces back with expansion, remodeling - Hills Stores

Discount Store News, April 4, 1994 by Laura Liebeck

CANTON, Mass. -- With Chapter 11 behind it, Hills Stores is poised for growth in 1994.

The 151-unit chain that emerged from bankruptcy last October will open a new unit in Reading, Pa., in July, and use the site as a launching pad for further expansion. Hills this spring will remodel another 37 stores to its current prototype, extending the remodeling program to 70% of its store.

"Our trust in 1994 is to aggressively pursue expansion opportunities," said Michael Bozic, president and chief executive. "Our plan is to fill in existing markets to expand our presence in lower density states [where Hills has few stores], such as Virginia, Kentucky and Massachusetts, and then expand into some of the contiguous states, like Maryland."

Bozic said his staff is "actively looking for sites" and has contacted "hundreds of developers, small, medium and large" to accomplish his expansion plans.

Hills operates stores in 11 Midwestern and Eastern states. In Virginia, Hills operates six stores. In Kentucky, Massachusetts and Maryland, Hills has just one unit in each state.

The new Reading store is an 85,000-sq.-ft. former Kmart unit located across from a local mall. About 70,000 sq. ft. will be used for selling space. The unit, which beefs up Hills' clout in eastern Pennsylvania, will follow the chain's latest prototype accompanied by minor flourishes, said Bozic.

Hills is also working to improve its store signage, specifically, its POS sign program, focusing attention on message continuity and the actual size of the signs to lessen the cluttered look as well as make the signs more visually exciting. Hills also is continuing with its back-wall sign program that presents colorful and lively end-use scenes of the products in the immediate area.

In the front end, Bozic said Hills is actively pursuing concessionaires for its stores that are more than 100,000 sq. ft. Bozic said he is close to completing negotiations for some beauty salons. Tobacco concessionaires are also being actively pursued.

Hills' aggressive 1994 plans come on the heels of a stunning 1993 performance.

The discounter reported that operating profit rose 11% to $87.9 million on a 1% sales gain. Sales for the year totaled $1.765 billion, compared to $1.75 billion in fiscal 1992. Operating profit for 1992 was $53 million. Comparable store sales for 1993 advanced 1.8%

Bozic noted that the year-end comp store numbers mask the company's comparative performance to the rest of the discount store industry. He said Hills' comp store sales advanced 11% in November and by 10.2% in December. He said Hills was "snowed out in January," then bounced back in February with a 6.6% comp store gain.

For the fourth quarter of 1993, sales rose 6.7% to $627 million from $584.9 million in the same quarter in 1992. Operating earnings for the 13 weeks ended Jan. 29, 1994, were $63.2 million, up 3.4% from the corresponding period a year earlier.

"This has been a truly remarkable year at Hills," said Bozic. "Our emphasis throughout the year on cost containment allowed us to exceed our projected earnings for the third consecutive year."

Hills emerged from Chapter 11 bankruptcy six months ago after nearly three years under court protection. In the course of its reorganization, Hills closed 63 stores and exited many markets. The chain's first new store opened last fall, a replacement unit for an old location in Johnstown, Pa.