Woolworth shareholder Greenway seeks spinoff Apparel, athletic shoe division would be sold

beaten-down stock rises

January 23, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- Woolworth Corp. said yesterday tha shareholder Greenway Partners LP has proposed a spinoff of the company's athletic and apparel division to stockholders.

The retailer also said it expects fiscal fourth-quarter profit from operations to be lower than last year, because of lower-than-expected December same-store sales and continued slow sales in January. Woolworth was expected to earn 72 cents a share, the average estimate of five analysts surveyed by Zacks Investment Research.

The New York-based company said it is evaluating the spinoff proposal by Greenway, an investment group run by Alfred Kingsley and Gary Duberstein, former associates of financier Carl Icahn. Two years ago, Greenway proposed splitting U.S. Shoe Corp. into three companies. U.S. Shoe was later sold to Luxottica Group SpA.

Mr. Kingsley declined to comment on the proposal, but confirmed that it was made and said New York-based Greenway is a "significant" shareholder.

The retailer generates 60 percent of its sales and 94 percent of its profit from its Foot Locker athletic shoes, Northern Reflections apparel and other businesses in its specialty division.

Woolworth shares rose $1.25 to finish at $11.125 in trading of 2.6 million shares, more than triple its its average daily trading of about 734,200 shares over the last three months.

Investors and analysts have been calling on 117-year-old Woolworth to focus its strategy by selling or spinning off some of its assets to boost the company's sagging stock price.

The company has been the worst-performing member of the Dow Jones industrial average during the past year. Its shares dropped 33 percent as the index gained 34 percent.

Along with its 812-store Woolworth dime-store chain, the $8.3 billion-in-annual sales company also has more than 40 specialty- store chains.

Foot Locker, which includes Lady Foot Locker and Kids Foot Locker outlets, is its largest business -- even surpassing its dime-store operations -- with about $3.5 billion in annual sales.

These specialty chains accounted for most of Woolworth's growth in the past decade. But competition is increasing in athletic footwear, which has crimped the unit's operating profit in the past few years.

Woolworth's biggest apparel chain is its 662-store Northern Lights women's apparel chain. It also has more than 1,000 other apparel stores under names including AfterThoughts, Carimar, Rubin and Reflexions.

The company said the spin-off proposal was made in connection with its 1996 annual meeting. A date for the meeting has not been set, Woolworth said, but expects it will be held sometime in June.

Greenway Partners, which was founded three years ago, also had a hand in drugstore retailer Rite Aid's purchase of Perry Drug several years ago.

Woolworth also said its profit from operations for the full year is

expected to be lower than analysts' estimates.

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