- The Washington Times - Tuesday, August 21, 2001

Ames Department Stores Inc. filed for Chapter 11 bankruptcy protection yesterday, becoming the latest victim of fierce competition from national rivals like Wal-Mart and Target.

The bankruptcy filing comes on the heels of the discount retailer's decision to close 49 stores in the 452-store chain, eliminating more than 2,000 jobs.

"After considering all available options, and in light of today's difficult economic climate, we have concluded that reorganization is the best course for Ames," said Joseph R. Ettore, Ames' chairman and chief executive, in a statement. "With the burden of our debt leverage and certain unprofitable leases removed, Ames will be better positioned to realize the strong potential of our solid base of over 400 stores."

The Rocky Hill, Conn.-based retailer, which has 14 stores in the greater Washington area, plans to keep the remaining 403 stores open as it restructures the business.

Ames is one of several discount retailers like Montgomery Ward Inc., Caldor Corp. and Bradlees Inc. that have fallen on hard times thanks to the success of retail giants Wal-Mart, Target and Kohl's.

Montgomery Ward, for example, filed for Chapter 11 bankruptcy in December, shutting the doors to its 252 stores. The 128-year-old ailing retailer, which first filed for bankruptcy in 1997, called it quits after a struggling holiday season last year.

Regional retailers like Ames have a tough time competing with the bigger chains' advertising, service, product selection and store locations.

"It's survival of the fittest," said Mark Millman, president of the Millman Search Group, a retail consulting firm. "Ames is going head to head with Wal-Mart, Target and Kohl's. They can't compete."

Like Montgomery Ward, Ames first filed for Chapter 11 bankruptcy protection in April 1990 two years after buying the 392-store Zayre chain for $788 million. After a successful reorganizing, Ames emerged from bankruptcy in December 1992 but didn't have a profitable year until 1996.

Ames, which has annual sales of $4 billion, has stores in 19 states and one in the District. The stores are concentrated in the Northeast and parts of the Midwest and Mid-Atlantic.

In May, Ames reported a first-quarter net loss of $27.7 million, compared with a loss of $29.1 million in the first quarter of last year.

July sales were down nearly 9 percent, compared with sales in July 2000.

In court papers filed in U.S. Bankruptcy Court in Manhattan yesterday, Ames listed $1.9 billion in assets and $1.55 billion in debt. The ailing company has arranged for two credit lines worth $755 million one from GE Capital for $700 million and one with Kimco Funding LLC for $55 million to pay for the reorganization.

Mr. Millman is not confident that the most recent bankruptcy filing will help Ames re-emerge as a profitable business.

"In the short term, it will help them keep their creditors at bay," he said. "But in the long run, their viability is very questionable."

Ames shares fell 2 cents to 69 cents before trading was halted on the Nasdaq Stock Market yesterday morning. Nasdaq has requested "additional information" from the company before the shares will resume trading.

Within the past six months, Ames stock has dropped $3.62, with a high of $4.31 on March 6.


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