After 127 years, Hess Shoes goes out of business

National competition blamed for demise of local retailer Last 11 stores to close

Company got its start as shoemaker, bought by German firm in '78

November 02, 1999|By Lorraine Mirabella | Lorraine Mirabella,Sun Staff

After more than a century outfitting generations of Baltimore's men, women and children with new shoes, retailing institution Hess Shoes will close its remaining 11 stores, the chain said yesterday.

N. Hess' Sons Inc. will begin going-out-of-business sales immediately, said Larry Drombetta, president and chief executive officer.

Once the sales are completed, Hess will become the latest in a series of Baltimore retailers such as Hutzler Bros., Hochschild Kohn, Stewart's, O'Neil's and Brager-Gutman whose names have disappeared.

Just over a month ago, another Baltimore fixture, London Fog Industries, announced that it would close most of its retail outlets in a bankruptcy reorganization.

The 127-year-old privately owned Hess had been slowly shrinking as it tried to find a niche in an industry dominated by national chains.

Drombetta said he could not discuss the company's financial performance.

The German company that bought the chain in the late 1970s had been pulling out of selected locations as leases expired. It closed 10 stores over the past three years, hoping a leaner chain would have a better chance of survival, Drombetta said.

The decision to close was recent, he said, and employees and suppliers were notified yesterday.

Drombetta would not say how many people work for the chain or how many stand to lose jobs.

"The operations at Hess failed to provide a financial return that resulted in our owners deciding to close the operations," Drombetta said.

"There certainly is a lot of competition for the footwear business in the Baltimore-Washington area, and as that has expanded, that has not helped Hess."

Hess will close stores in Towson Town Center, White Marsh Mall, The Mall in Columbia, Owings Mills Mall and Cranberrry Mall in Westminster, as well as in malls in Rockville and Gaithersburg, Washington and Virginia.

The company's 10 Rockport stores, in Maryland, Virginia and Delaware, will stay open.

Drombetta said the company is hoping to avoid filing for bankruptcy protection, and is negotiating with mall landlords on its leases.

The chain's survival had seemed questionable earlier this decade, as it struggled through a few disappointing years during the early 1990s recession. With business hurting, the company filed for Chapter 11 bankruptcy reorganization in 1992.

Hess emerged a year later, then came up with a new strategy to move forward. It hoped to reinvent itself as a destination retailer, with fewer sites but with larger stores that could offer a much broader selection than most independent footwear chains.

Hess converted its first store to the new format in 1994, remodeling its Towson Town Center location and enlarging it to 14,000 square feet, more than four times the size of the average Hess store.

In the remodeled stores, Hess was able to beef up its assortment of brands, varieties and sizes and carry three times as much merchandise as in the older stores.

But the advantages held by department stores and bigger specialty chains might have weighed against such a plan, retail experts said yesterday.

Lack purchasing power

"The problem is, with small companies, you don't have the purchasing power the larger companies have," said Tom Rothschild, marketing director for Millman Search Group, a Lutherville-based retail consultant. "That's probably what happened here."

It's more difficult, for instance, for the smaller retailers to afford high shopping mall rents and to compete with national chains, especially because profit margins on shoes are so small.

Unlike department stores, shoe stores don't have higher-profit items such as apparel and cosmetics to fall back on.

Hess, founded by the Hess family in 1872, got its start as a manufacturer, then opened stores to sell its brand.

Even though it was sold to Germany's Gortz Beteiligungsgesellschaft MBH in 1978, a Hess headed the company until 1986, when George B. Hess Jr. stepped down as president. He continued to serve on the Hess board.

By 1992, the by-then struggling company had 32 stores in Maryland and Virginia.

It was one of the last home-grown retailers to maintain a downtown presence, closing its Baltimore Street men's shoe store in the summer of 1997.

A local institution

"Hess is such an institution in this town," said Rothschild, of Millman Search Group, who recalled how appealing it had been as a child to go to the Hess at Belvedere and York Road, with its sliding board and Snippery barber shop for children.

But, he added, "Hess does not have the status in this city they once did. They don't have a niche anymore. They're not [offering] anything dramatically different than anyone else.

"If you don't constantly re-invent the wheel, you're not going to be around," he said. "Even with your tradition and whatnot, you can't base yourself on history. People don't care."

The liquidation sales will be handled by Cranford, N.J.-based Fox Promotions and should take 60 days or less, said Rick Marech, president of Fox.

"It's a shame," said Bob Evans, a manufacturers representative for New Balance who had supplied athletic footwear to Hess. "The buyers I deal with have been there for 30 years.

"When you're so used to seeing a store like that around for so long, you figure they've lasted this long, you're sure they're fine," he said.

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