Wards turns spiffy, ends monkey business

Retailer rolling out new-look stores on path out of bankruptcy

Montgomery? Forget it

August 19, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

The stores are brighter, the aisles wider, the fixtures updated and the departments more logically arranged. A circular "racetrack" propels shoppers from furniture to appliances to window treatments. Just like at rival department stores, the "Juniors" department is pushing flared-leg jeans with floral trim. In "Misses," the displays feature outfits in this fall's "in" colors of gray and black.

Just to make sure no one confuses this updated incarnation with the old, more cluttered, less fashion-conscious Montgomery Ward, the Chicago-based retailer has dropped the "Montgomery" from its name.

Starting tomorrow, the new Wards -- freshly emerged Aug. 2 from a two-year bankruptcy ordeal that included closing more than 100 unprofitable stores -- will begin rolling out 40 newly remodeled prototype stores. The chain plans another 40 by April, and another 40 the next year -- half the chain's 252 stores -- all at a cost of $180 million. Reopenings include stores in Annapolis and Laurel tomorrow and one in Glen Burnie in October.

For the 127-year-old mail-order catalog pioneer, it's all about regaining footing in the highly competitive world of retailing. It's an attainable goal, say company officials, who expect the chain will turn a profit by 2001.

The retailer has become convinced of this largely because of the sustained success of Wards in Towson Market Place as well as stores in Las Vegas and in Bloomingdale, Ill. -- all remodeled in a test phase in September.

Average monthly sales at those stores since then have jumped 40 percent compared with the combined performance of the rest of the chain, the company said. At another nine stores just completed under the same format, sales rose 15 percent.

Sale are expected to rise an average 20 percent at remodeled stores, said Howard Parge, vice president of the eastern region. "It wasn't a flash in the pan," Parge said yesterday while touring the Annapolis store.

Some analysts remain unconvinced. The chain has been battered by years of losses -- including a $106 million loss for the first quarter that ended April 3 -- and an eroding customer base as shoppers found alternatives either in mass discounters such as Target or hipper shops such as Old Navy. The chain's financial troubles stemmed from its inability to keep up with consumer shifts, retail experts said.

"Wards had a fuzzy image," said Kurt Barnard, president of Barnard's Retail Trend Report, of Upper Montclair, N.J. "It didn't seem to know where it stood. Was it an apparel store that carried appliances or an appliance store that carried apparel?"

"Store remodelings are always very good, and re-merchandising is good if you know what you're doing, but changing an image in itself is not an easy thing," he said.

One of Wards' biggest challenges will be avoiding bankruptcy again, said Peter A. Chapman, president of Bankruptcy Creditors Service, a publisher of a newsletter that tracks bankrupt companies.

Wards pulled itself out of Chapter 11 bankruptcy largely by paying creditors just 28 cents to 29 cents on the dollar and thanks to a $650 million cash infusion from General Electric Co.'s GE Capital Services division, Chapman said. GE Capital had owned half of Montgomery Ward and acquired the remainder of the chain and its Signature direct-marketing unit, Wards' only profitable subsidiary, as part of the bankruptcy restructuring.

GE Capital played a large role in convincing creditors they could recover no more than a third of the debt, Chapman said. If Wards had liquidated instead, GE would have lost hundreds of millions of dollars on the retailer's credit-card portfolio.

"At the end of the day, whether you have people walk in circles, squares or tick-tack-toe patterns, that does not generate revenue," Chapman said. "What you need is a place in the market."

Wards executives say they have found that, in part by identifying target shoppers: middle-income women between the ages of 30 and 55.

"We firmly believe there is a huge opportunity between discounters and department stores," Parge said. "We've always been rock-solid on big-ticket [items] and appliances. We had walked away from the fashion end of the business. It doesn't work. Today, you have to have a mix."

Wards has improved and better coordinated its apparel buying and taken the assortment more upscale, but still offers better value than upper-end department stores, Parge said. The chain also has an edge over mass discounters, offering more of a selection in areas such as electronics, appliances, furniture and jewelry, he said.

"This is much nicer," than the older format, said Janine Fitzpatrick of Grasonville, shopping yesterday in the Annapolis store for athletic shoes for daughter, Shannon, 9. "I don't like when stores are cramped. I'm inclined to come more often."

"It's easier to find things," said Jena Harmon of Annapolis, adding that she was drawn by the lower prices.

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