Rose's shutting 59; seeks to be smaller, stronger after ch. 11

Discount Store News, April 18, 1994

HENDERSON, N.C. -- Another round of store closings will pare Rose's, fighting to emerge from Chapter 11, to 113 stores.

"We really had a choice to make," said president George Jones. "We could either attempt to emerge as a 172-store chain with a lot of debt and questionable ability to become and remain profitable, or we could emerge as a much more solid, more profitable chain of 113 stores, assured of turning a profit."

The proceeds from the 59 store closings this May will be used to pay down debt, Jones said. The company has also laid off approximately 275 headquarters and distribution center employees of a total of 1,250. Employees were notified immediately after the announcement of the store closings. Rose's has now shuttered 100 stores in the past 12 months.

These steps, which Jones called "incredibly painful," will allow the beleaguered chain to emerge from Chapter 11 either this fall or early in 1995, Jones said, as a profitable, albeit much smaller, retailer.

While the company turned an operating profit of $800,000 and a net profit of $2.1 million in the fourth quarter after filing for Chapter 11 protection in the third quarter, the year was "extremely difficult," Jones said.

Including reorganization costs, the net loss was $66.2 million, compared to a loss of $63.6 million a year ago. Same store sales plummeted 7.7%, with total sales declining to $1.246 billion from $1.404 billion last year.

Apart from the strong fourth quarter, the best news is that operating losses fell sharply, from $55.5 million in 1992 to $27.1 million this year. Jones noted that "1993 was significantly, negatively impacted by out-of-stocks experienced throughout the year. In response to resulting losses and an eventual erosion of vendor support, we filed for Chapter 11 protection in September in order to obtain the necessary time and capital to effectively reorganize. While this process has been very difficult, we believe the steps we have taken, including the recent store closings, are appropriate given our objective of returning ... to consistent profitability."

Jones noted that vendors have been highly supportive since he and his management team arrived three years ago, and the company has consistently published vendor newsletters to keep its suppliers up-to-date on developments. "It hasn't been easy for them, I know," he said. "Some of them were stung badly by the Chapter 11 filing. But we've managed to keep our relationships solid by keeping them informed; for instance, we never hoarded cash prior to the Chapter 11 filing; they know that it wasn't pre-planned, that we just ran out of money."