- The Washington Times - Wednesday, July 17, 2002

The odds are against bankrupt retailers Ames Department Stores Inc. and Kmart Corp. In the past, few retailers have emerged from bankruptcy to live long, healthy lives.

Bankrupt retailers have to reassess, reinvent and reorganize to climb out of the red. And Ames and Kmart are attempting to do just that. They are changing their merchandise, closing underperforming stores and sprucing up their existing ones to get back on their feet.

"We're trying to enhance or embellish on the things that have worked for us in the past," said Joseph R. Ettore, chairman and chief executive of Rocky Hill, Conn.-based Ames.

Despite the odds, Mr. Ettore is confident his company is at least moving in the right direction.

He said Ames isn't trying to reinvent itself, but rather continuing to differentiate itself from dominant competitors, such as Target and Wal-Mart. And that's what retail officials say is a must if ailing retailers want to come out of bankruptcy.

"They need to develop a niche spruce up their stores, be customer-friendly and offer competitive prices," said Mark Millman, president of the Millman Search Group, a retail consulting firm in Baltimore.

It's not going to be easy, especially when customers begin to turn their backs.

"It's hard to come back because it's hard to change your identity," Mr. Millman said. "Reinventing doesn't mean they are going to be successful."

In the past, some now-defunct retailers, such as Hechinger, Crown Books and Montgomery Ward, tried but couldn't emerge successfully. Federated Department Stores Inc. is one of the few success stories left. The company, which owns Macy's and Bloomingdale's, filed for bankruptcy in January 1990 and emerged successfully two years later.

Mr. Ettore said his company, which filed for Chapter 11 bankruptcy protection for the second time in August 2001, was running a "good business," but bought another chain of stores that resulted in too much debt.

Since filing for bankruptcy, Ames has closed 123 stores and one distribution center to reduce some of its costs. In addition, Ames, which has more than 300 stores from Maine to Virginia, started to reassess its merchandise adding more items that customers had been asking for, Mr. Ettore said.

"We looked at our merchandising and our marketing to see where we could improve ourselves," he said. "We're focusing on the customer. This is how we did so well before."

The company has eliminated some of its underperforming merchandise, such as its books, dried flowers and part of its party supplies, to make room for its "Great Value Aisle," which started in February, and its newest "Dollar Bargains" section, which debuts Friday.

The Great Value Aisle is an area in the front of the store that features $1, $2 and two-for-$3 items, including granola bars, cookies, pastas, cleaning supplies, cups, food-storage items, beauty products and pet supplies.

When the concept was put on trial, customers bought two to three more items during each visit, which adds up, Mr. Ettore said.

The Dollar Bargains section at the back of the store is an extension of that concept, offering seasonal items, craft products and other trinkets for $1 each.

"Their focus on the customer may be what causes them to survive" said Holly Etlin, a principal at Crossroads LLC, a consulting firm in New York.

Drawing in new shoppers and retaining the old ones is key to turning a struggling retailer around.

Last month, Kmart, which filed for Chapter 11 in January, kicked off a weeklong promotion to thank its customers. At the end of the month, the retailer held another promotion in which shoppers received 10 percent off general merchandise and 20 percent off jewelry and apparel.

"We're going to continue to do promotional sales to get a pulse on our business," said Jack Ferry, a spokesman for Kmart.

In addition, Kmart, which filed the biggest retail bankruptcy in the nation's history, has closed 283 stores and has tried to improve the remaining 1,800.

"We're basically trying to clean up our stores," Mr. Ferry said. "We're making them lighter, brighter and a better shopping experience."

Kmart's strategy of offering products exclusive to the company, such as the Martha Stewart brand and Disney children's line, is not a bad plan, because it has the right amount of appeal for shoppers at prices they want, Ms. Etlin said. However, in the past, the stores, which weren't always kept clean, had difficulty keeping things in stock, thereby disappointing shoppers, she said.

Retail officials say competition is fierce among discount retailers, with giants such as Target, Wal-Mart and Kohl's expanding across the country, especially in markets where Ames and Kmart stores exist.

Target and Wal-Mart's larger size and distribution network allow them to offer lower prices something shoppers are always looking for.

Ames and Kmart "have a long struggle ahead of them," Mr. Millman said. "They have to set themselves apart."

Mr. Ettore, who is aware of that, says the retailer is trying to give shoppers more reasons to visit its stores from the stores' smaller size to its discounts for senior citizens.

"We try to play on the things we knew the big guys couldn't do," Mr. Ettore said.

But is that enough?

It's too early to tell if Kmart will successfully emerge from bankruptcy by its original aggressive goal of mid-2003. Mr. Ferry said the company is looking at an early-2004 comeback.

Mr. Ettore isn't making any predictions, either.

After the fourth quarter and all-important holiday season, officials will reassess the business and have a better idea of when they will come out of bankruptcy.

"We're hanging in here," he said.

Sign up for Daily Newsletters

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide