Melville readies Bob's for spin-off - Bob's Stores Inc

Discount Store News, April 15, 1996

RYE, N.Y. - Melville Corp.'s off-price active apparel chain, Bob's Stores, is retreating in upstate New York and Philadelphia, but entering Washington, D.C., market for the first time. The chain, which Melville plans to spin off to shareholders, added 14 locations to a base of 20 in 1995 and stood at 34 units as of March 1.

This year will see a net gain of just four stores, with nine new locations planned and five existing stores to close.

Total sales grew by 39% in 1994 over the year prior, then by 21% in 1995, even though the store count increased far more rapidly in '95 (see table). Melville does not report separately on Bob's operating expenses or profit, but '95 sales were $349 million.

A company representative said the stores slated for closing were underperformers. To be shuttered: Greece, Henrietta and Buffalo, N.Y.; Morristown, N.J.; and Northeast Philadelphia.

Bob's opened three metro D.C. locations last month. Half-page teaser ads in The Washington Post announced the March 22 opening of stores in the suburbs of Fairfax and Seven Corners, Va., and Gaithersburg, Md. Among the featured brands in the image ad: Nike, Russell Athletic, Fila, Umbro, Levi's and Dockers.

One more D.C. store is slated for '96; sites for the remaining five new units have not been disclosed.

Only a year ago, Melville called Bob's one of its better growth vehicles, noting that "significant investments" had been made "to lay a solid base for rapid expansion in the years ahead." But the chain's regional popularity apparently has not traveled well once transplanted far beyond its Connecticut base.

When privately held, Bob's was known in western New England as a traditional sporting goods retailer that also carried apparel. Founded in 1954, the business transformed over the years into an off-price apparel chain with a focus on family casual activewear. The format was not unique except in a strictly regional sense, but the personality of the chain was well known locally.

Purchased by Melville and taken on the road, there was insufficient differentiation in its merchandise mix or store ambiance to make the store a compelling choice by consumers in other markets. Melville acknowledges that the Connecticut Bob's units "are among its most productive," and contends that chainwide refinements, to merchandising design will improve profitability.

Along with home furnishings superstore chain Linens 'n Things, Bob's is on the list for shareholder spin-off, according to Melville. The corporation until recently a major diversified retailer, is burning off every retail concept unrelated to its best performing core unit, the CVS Drug chain.

Melville sold Marshalls to archrival TJX last fall, and is selling Kay-Bee Toys to close-out chain conglomerate Consolidated Stores. It will spin off the footwear division this summer, and it hopes to sell Wilson's Leather and furniture chain This End Up during the second quarter.

On total '95 sales of $11.5 billion from 6,657 stores and leased departments, Melville reported an operating profit of $293.2 million before special charges. However, accounting for various write-downs and excluding, the "discontinued operations" of the footwear division, Melville reported an operating loss of $742.8 million on sales of $9.69 billion.

Melville filed a Form 10 Information Statement for an indeterminate number of shares of common stock of Footwear Group Inc. with the Securities and Exchange Commission in late March, in connection with the proposed spin-off. Meldisco, Footaction and Thom McAn make up the the division. Meldisco is the co-venture shoe department within Kmart. Melville chairman and ceo Stanley Goldstein said the spin-off would be accomplished by July. Kmart should still retain effective control of Meldisco by virtue of its owning about half the shares.

Bob's Stores
Fast store count growth,
but diminishing returns