Lucas Bros. plans to sell retail stores

November 05, 1990|By Michelle Singletary | Michelle Singletary,Evening Sun Staff

Lucas Brothers Inc. is privately seeking buyers for its retail operation.

But shedding that division is simply a change of focus, not a signal of hard times at the nation's oldest independently-owned office supply and furniture distributor, according to its new chief executive officer and president.

"We've made a decision to move forward," said David J. Kessler, who took the reins of the 186-year-old company from Conrad A. Bruns, who retired last month.

"We believe as a company selling the retail division makes sense," Kessler said. "Our main contention is to spend energy where we produce the greatest sales and highest level of profits."

He said the company will focus on its office contract furniture division and its office supply division, which delivers directly to corporations. "The point is [these] two divisions do 88 percent of the volume and make up 90 percent of the profits."

Kessler said the retail operation accounts for only 5 or 6 percent of the volume. The company also has a small printing division.

Kessler said the retail stores will most likely be kept open while Lucas tries to sell them. The stores are located in Baltimore, Annapolis, Towson, Pikesville and Cockeysville.

In Salisbury, the company owns White and Leonard Office Products. Lucas is headquartered in Dorsey and has a distribution center in York, Pa.

Two weeks ago, Lucas closed its Harrisburg, Pa., store, which was called Wagner's Office Products. Lucas acquired Wagner's and the York distribution center in 1987.

Kessler said Lucas hopes to sell the retail stores as a group. So far, he said, Lucas has received about three offers to buy the group. The company is acting as its own broker.

Neil Dvores, Lucas' executive vice president in charge of financial operations, said as the leases on the stores come up they might consolidate stores or move to smaller locations.

"The retail division has been turning profits but not compared with the other divisions," said Dvores. "It's just not worth it."

Since 1988, the ownership of the company has changed hands three times. Alan E. Behrend, who retired as chairman of the board of directors last month, acquired Lucas from its original owners after World War II. In 1988, Behrend sold controlling interest in the company to Bruns and a number of top managers at Lucas.

Bruns, formerly executive vice president, joined the firm in 1959 as a commercial sales representative. In 1987, Bruns was named president replacing Behrend, who remained as chairman.

Now, Kessler, 61, and Dvores, 40, have controlling interest in the company.

A former stockholder in the privately-held company said the buyouts have resulted in Lucas taking on a considerable amount of debt that may jeopardize the company's financial footing.

"They are heavily leveraged," said the former stockholder, who asked not to be identified. "It's just unbelievable...It's sad. We thought we were leaving the company in good condition."

An investment division of John Hancock holds an interest in the company "but they have nothing to do with the running of the organization," Kessler said. "They have nothing to do with the day-to-day operations."

Sources familiar with the Lucas operation say at least 30 people have been fired in the last few months and the list is growing. "They need the money," the former stockholder said."

However, both Kessler and Dvores said Lucas is financially sound.

"The company continues to grow in both gross revenues and in profitability," Dvores said. "This company has had a steady history of earnings. In the 12 years I've been here it has always shown a profit."

Kessler said last year the company had revenues of about $50 million, up from $47 million the year before. He said Lucas expects revenues of about $60 million this year. Lucas employs about 340 people.

Dvores said employees have been fired but only as a streamlining measure.

"Like any other company we have been evaluating the productivity of some employees. There has been no panic firing," Dvores said. "The company is extremely strong and very profitable."

In fact, Dvores said that's one of the reasons BT Office Supplies Group U.S.A., based in Schaumburg, Ill. had wanted to buy Lucas.

BT is a wholly-owned subsidiary of Buehrmann-Tetterode N.V., headquartered in Amsterdam, The Netherlands. BT is an international group of independently operated trading, distribution, and manufacturing companies. One of its five international divisions is office supplies.

Last February, BT signed an agreement in principle to purchase Lucas. However two weeks ago, negotiations were terminated. A BT official refused comment.

Dvores would not say exactly why the deal was called off. However, he did say said that negotiations, which had gone on for more than a year, had reached a standstill at one point over the price of the company.

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