Crown hopes for new reign

It expects to leave bankruptcy, change format of stores


July 02, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Crown Books, the discount bookseller that declared bankruptcy a year ago, expects to emerge from Chapter 11 protection in time for the holiday selling season, with hopes of rolling out its first new-format stores by next fall.

Crown said yesterday that it has spent the past year closing nearly half of its 174 stores, revamping its format, rebuilding inventory, improving distribution and cutting operating expenses by $25 million.

The Landover-based company filed a reorganization plan Wednesday with U.S. Bankruptcy Court in Delaware and expects approval by October.

Under the plan, Crown, formerly a subsidiary of Dart Group Corp., will emerge as a separate, public company, with newly created stock given to unsecured creditors based on their claims.

Crown also has a commitment for a $35 million revolving credit facility from Paragon Capital LLC and Foothill Capital Corp. and commitments from major suppliers for normalized credit terms.

Major creditors support the plan, Crown said yesterday.

Anna Currence, who took over as president and chief executive officer six months before the company filed for bankruptcy in July 1998, said yesterday that an improved distribution system has enabled Crown to expand its inventory to 500,000 active titles and speed up special-order deliveries.

Currence, a former Barnes & Noble Inc. executive, also said she has been working on a new store design, with the help of the consultant who came up with Barnes' hugely successful superstore design. New Crown stores will have the same designer as its rival, but "a discount store would have a different feel to it, with the character and feel" of a bookstore, Currence said.

New stores could open by next fall in existing markets -- Baltimore-Washington, Chicago and the West Coast -- though the timing and number of stores, ranging from one to a dozen, will depend upon the chain's holiday season performance, she said.

Advertising campaign

Crown is also launching an advertising campaign to better leverage the Crown brand, built by founder Robert Haft, the former Dart president. "He was a master at branding Crown," and came up with the slogan, `If you paid full price, you didn't buy it at Crown Books,' " Currence said. The new campaign lists competitors' prices and Crown prices and includes Internet pricing with shipping and handling.

During the 1980s, Crown grew into the first national discount bookstore chain, opening stores in neighborhood strip shopping centers and offering a wider selection and a more convenient alternative to mall bookstores. At its peak, the chain had 250 stores.

But the retailer failed to heed changing trends in the book business.

It also found itself caught up in management turmoil stemming from a Haft family feud that began when founder Herbert H. Haft fired his son, Robert, in 1993 as president of the chain. Meanwhile, Borders Group Inc. and Barnes & Noble had begun amassing greater shares of the market.

Dart Group was acquired last year by Richfood Holdings Inc., a Richmond, Va.-based grocery wholesaler. Richfood had planned to sell all of Dart's nonsupermarket subsidiaries, including Crown, but a deal to sell the chain to a New York financial investment company fell through.

The independent Crown will run 92 stores in five markets and employ 1,700.

"Certainly their coming out of bankruptcy is a necessary move, but it may be very difficult for them to gain a leadership position in the market," said Walter F. Loeb, president of New York-based retail consultant Loeb Associates.

Heavy competition

Crown faces not only heavy competition from large book chains but a newer threat: the Internet, Loeb said.

"The book business is going to get tougher," said Loeb, who predicts that half of all book purchases eventually will be made electronically.

But Currence said she has a different view.

Electronic commerce won't spell the end of brick-and-mortar bookstores, much as the growth of VCRs in the home hasn't hurt movie theaters, she said.

"Books belong on the Internet more than any other product, because there are always more books than any showroom is big enough to show," Currence said.

"But I think what's going to happen is people will have more access to more eclectic titles, and nobody will give up going to the bookstore because it's such a pleasant experience."

Pub Date: 7/02/99

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