ALEXANDRIA, Va. -- Woodward & Lothrop Inc., a department-store chain that has been hemorrhaging money for years, may consider filing for Chapter 11 bankruptcy protection to restructure its debt, a company spokeswoman said yesterday.
"It is one of the options," said Sandra Sternberg. "Chapter 11 is open to us as it is to companies facing similar financial issues. That's an alternative available to us."
Even though Woodward & Lothrop has been unprofitable for almost a decade, the company hasn't had many financial worries because its owner, real estate magnate A. Alfred Taubman, has been propping it up.
But factoring firms, which finance manufacturers' shipments to retailers, said Mr. Taubman, who sits on R. H. Macy & Co.'s board of directors, may have finally grown tired of pouring hundreds of millions of dollars into a company that can't &L compete against more modern and better-run department stores specialty shops.
"I think what Taubman's doing is cutting his losses," said Kurt Barnard, a retail consultant and publisher of Retail Marketing Report. "It's an old-line department store that has lost market share to specialty stores and the Bloomingdales of the world. Woodies is nothing more than a grand old lady that didn't stay in tune with the times."
Mr. Taubman bought Woodward & Lothrop in 1984 and four years later purchased John Wanamaker in Philadelphia from Carter Hawley Hale Stores Inc. The company now operates 16 Woodward & Lothrop units in the Washington area, 15 John Wanamaker stores in the Philadelphia area, four home-furnishings centers and three clearance outlets.
During the last five years, Mr. Taubman spent $200 million to re model and upgrade older stores and build new ones as well as install new technology to improve merchandising and streamline operations, Ms. Sternberg said.
Asked whether Mr. Taubman would continue to support the money-losing Woodward & Lothrop, Ms. Sternberg said, "Nothing in the relationship has changed." A spokesman for Mr. Taubman said, "Mr. Taubman is not commenting at this time."
The company downplayed concerns about its viability. "The speculation and rumors regarding the possibility that Woodward Lothrop may file for bankruptcy are nothing new," it said in a statement. "We've heard them every January for the last several years."
Mr. Taubman's businesses have lent and invested about $400 million, including a $160 million equity investment in the retailer, Ms. Sternberg said.
Woodward & Lothrop has a $170 million credit line with Taubman Investment Co. and a $135 million working capital loan with Chemical Bank, according to people familiar with the company's finances.
Factors said they expect the company to file for Chapter 11 because it hasn't paid many of its overdue December and January bills. Woodward & Lothrop is considering "all alternatives" to restructure its debt, which may include renegotiating its credit agreements or selling some stores, Ms. Sternberg said.
Woodward & Lothrop, a closely held company, doesn't release financial results. However, according to documents obtained by Bloomberg Business News, the company's loss for the first six months of fiscal 1994, ending in July, widened to $42.2 million from a loss of $30.1 million in the year-earlier period.