Ames returns to basics; scraps specialty strategy - Ames Department Stores

Discount Store News, April 19, 1993 by Pete Hisey

ROCKY HILL, Conn. -- Faced with continuing losses. Ames Department Stores will return to its roots, chief executive Peter Thorner said in early April.

"We will focus on profitability and customer service," he said. "The message we want to get to our people is: run a clean store, stay in-stock on the items people want and essentially stay true to the basic retail equation."

The company, which emerged from Chapter 11 in late December, will invest in low-cost face-lifts." The ambitious repositioning of the chain as a series of store-within-a-store power retail formats is "on hold, indefinitely. We're seeing just as strong sales improvements [as at the new prototype stores] in standards stores that are concentrating on the fundamentals," Thorner said.

"I feel that a companyy with $2.3 billion in annual sales already has a good franchise with its customers," he added. "But you have to make a buck while you're at it, and that's where our energy will be directed."

Not that everything in former chairman Stephen Pistner's specialty store strategy will be discarded. The company will continue to expand its offerings in pet supplies, party goods, RTA, jewelry and crafts--all areas earmarked for specialty focus by Pistner, and all showing good sales results, according to Thorner. In addition, "apparel sales have risen sharply, which is key because of the high margins," Thorner said. Jewelry, pet supplies and party and paper goods (which are mostly private label) have also contributed margins.

The company released its financial results for the 11 months ended Dec. 26, as well as results for the first month of post-bankruptcy operations. For the48 weeks ended Dec. 26, Ames reported an EBIT loss of $26.5 million, a little more than half the $45.4 million it lost in the comparable 48 weeks in 1991, and for the nine weeks ended Dec. 26, Ames posted a $26.1 million EBIT profit, a figure impacted negatively by restructuring charges and bankruptcy expenses, partially offset by a reduction in interest expense and a LIFO credit. However, under fresh-start reporting for the following five weeks, the company posted a net loss of $23.9 million, about the same as a year ago, on sales of $142.3 million.

On the bright side, comparable store sales rose 4.9%, and Thorner said same store sales continued to grow through February and March.

Ames will attempt to stanch the red ink by returning to the basics, Thorner said. "We want customers to see stores that are clean, well-stocked and user-friendly," he said.

Thorner doesn't have much time to reposition the company and return it to profitability. Wal-Mart is rapidly invading Ames' core markets of northern New York and small town New England. Caldor and Bradless, also head-to-head competitors in several markets, have upgraded their stores and are both moving to an upscale look to differentiate themselves from Wal-Mart. Kmart has refreshed many of its Northeastern stores, and is replacing some of its oldest units with brand new ones. Even Stuarts, which also recently emerged from Chapter 11, is on an upward track.

Ames hopes that by concentrating on categories "our competitors don't do very well," (meaning jewelry, pet supplies, crafts, and party goods) it can clearly differentiate itself, while still maintaining its position in product categories that the competition does very well indeed, like domestics, housewares and apparel. The company also expects to have full scanning installed by year-end at all 309 Ames stores, a step that is vital to keeping the chain competitive.