Two years after taking over 10 Macy's stores, including three in the Baltimore market, the Boscov's department store chain is wrestling with a "perfect storm" of slowed consumer spending and the credit crunch.
Kenneth S. Lakin, chairman of the Reading, Pa.-based company, said in a phone interview yesterday that the department store chain had recently laid off 200 people at its headquarters and 10 to 20 at individual stores and refinanced some loans. He also said his family had put equity into the privately held company, but he would not give specifics.
He said the company had not decided whether to close some stores. It closed its Nanuet, N.Y., store in May, when the mall it was located in began major renovations. "We have no determination of any store closings at this point," Lakin said. "There's nothing definite. I have no specifics at this time."
The once regional chain expanded to 50 stores in six states shortly before consumer spending dipped and the subprime crisis engulfed credit markets. It opened in Baltimore in late 2006 at three former Hecht's stores, at the White Marsh, Owings Mills and Marley Station malls, after Macy's acquired Hecht's parent May Department Stores Inc., and now has six in the state. The economic slowdown caught the company by surprise, Lakin said.
"It's the perfect storm," he said. "We tried to take advantage of an opportunity that we saw at the time. Nobody could have predicted that the liquidity and banking issues would have occurred like they did."
Boscov's, founded by Russian immigrants, had its skeptics when it moved into the highly competitive Baltimore retail market in late 2006. Boscov's business model of selling everything from appliances to apparel under one roof was a throwback strategy. The Boscov's name was also virtually unknown here.
Yesterday Lakin said that most of the stores in the Baltimore area are doing pretty well and that the company "achieved 90 percent of its plan" in the market.
"There are certain things we didn't know about the market when we came in, but you learn as you go," Lakin said.
"We're not making our plan, but it's not a disaster either," Lakin said.
The New York Post, citing unnamed sources, first reported Friday that the 97-year-old family chain was facing financial problems.
Half of Boscov's major suppliers had stopped making deliveries because of lack of payment, the newspaper said. Lakin told the Pittsburgh Tribune Review over the weekend that some suppliers had stopped shipments but that the company "was going to get right with them as quickly as we can." Lakin said he expected the stores to be filled with back-to-school inventory. Yesterday he declined to discuss issues with vendors.
Lakin said the company wanted to avoid bankruptcy.
"It's something you want to avoid and try to avoid but it's a specter that is out there," Lakin said. "Every firm faces the possibility. It's something you want to avoid at all costs."
Retail experts said that it's a tough time for all retailers, particularly department stores, as high gas and food prices have cut into people's budgets.
"Department store performance is horrendous," said Howard Davidowitz, chairman of Davidowitz & Associates, a retail brokerage and consulting firm. "Here is Boscov's selling discretionary and home products during one of the toughest credit environments in 100 years."
Some of the Baltimore locations Boscov's acquired are in underperforming malls, said Mark Millman, president of Millman Search Group, an Owings Mills executive search firm specializing in retail.
"They took a lot of real estate and some of it wasn't prime at all," Millman said.