Boscov's begins liquidation process

Sale specialist to take over 3 stores

August 06, 2008|By Lorraine Mirabella | Lorraine Mirabella,Sun reporter

Boscov's Inc. will turn over operations of its three Baltimore-area department stores by midmonth to a liquidator that will begin selling off inventory in a two-month store closing sale.

Hurt by slumping sales, the department store chain filed Monday for Chapter 11 bankruptcy protection and said it would close 10 stores, including anchors in three of Baltimore's largest shopping centers: White Marsh Mall, Owings Mills Mall and Marley Station.

Three other stores in Maryland - in Westminster, Frederick and Salisbury - will remain open.

Yesterday, a Boscov's executive said the family-owned company is continuing to explore reorganization options such as selling the Reading, Pa.-based chain or bringing in investors.

"We're looking at every opportunity," said Maralyn Lakin, senior vice president of marketing and public relations. "The family would like to stay involved in the business."

Firms that handle store liquidations have made bids to the bankruptcy court to purchase the merchandise and fixtures at the 10 Boscov's stores slated for closing, Lakin said. The bankruptcy court must select and approve a liquidator, which Lakin said could happen by the middle of this month.

Typically, liquidators quickly bring in experienced management teams to handle store closings, setting prices that become more steeply discounted each week over a set period, usually eight to 10 weeks, said Mark Millman, president of Millman Search Group, an Owings Mills executive search firm specializing in retail.

"They can be up and running in less than a week; they have people on hold all across the country," Millman said. "The first couple of weeks is when they will try to make the major money, when people are flocking in, and that's when there's a lot of inventory and a lot of selection."

Everything will be for sale, including store fixtures, so the mall owners end up with a broom-clean space.

Retail experts warn that store closeouts don't necessarily offer the best bargains for consumers.

Shoppers seeking bargains in the Baltimore stores' final weeks should expect a different atmosphere than at the Boscov's they have come to know. There likely will be fewer salespeople to offer help and, toward the end of the sale, the liquidator might bring in merchandise from elsewhere to sell.

With most liquidations, "there will be big, gigantic signs to lure you in, but the sales are usually not as good as they appear, particularly at the beginning," said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm based in New York.

"And shoddy merchandise can be brought in later to support the sale, so it's consumer beware."

All sales are finaI in most liquidations, said Steve Hannan, executive director of the Maryland Consumer Rights Coalition. He suggests that consumers pay with credit cards because those offer more protection than cash if an item is defective. Shoppers buying big-ticket items should make sure any repairs covered under a warranty can be done somewhere in the area, he said, "because you won't have Boscov's to take it back to."

"You need to know whether it's a good deal; it's not necessarily that it is," Hannan said. "The liquidator is going to put a price on it, but it might not be cheaper than anybody else's."

With the housing and credit crunch affecting consumer spending at stores, Boscov's is only the latest of numerous department store and specialty retailers that have been forced to shut stores in recent months or go out of business. Bombay Co., Sharper Image, Linens & Things, Lillian Vernon and California-based department store chain Mervyns LLC all have declared bankruptcy.

Boscov's, an 87-year-old privately held company, brought little name recognition when it expanded into Baltimore two years ago by buying former Macy's locations. The regional chain relies on a throwback strategy of selling everything from appliances to apparel under one roof, an anomaly when the handful of remaining department store chains typically focus on apparel.

The company said its stores in White Marsh, Owings Mills and Glen Burnie were not profitable.

Prior to filing bankruptcy, Boscov's Chairman Kenneth S. Lakin had said his family had poured equity into the company to try to stave off bankruptcy, but he would not give specifics.

Davidowitz, who estimated the family's now-lost investment at $28 million, called it a "Herculean effort to save this company, and it was an effort I've never seen an owner do. This is a remarkable level of commitment that could only happen at Boscov's."

Now, as the company prepares to close stores, the bankruptcy process of restructuring to pay creditors requires the family to look at alternatives involving outside ownership.

Finding a buyer could be difficult but not out of the question, Davidowitz said:

"You may have somebody who sees value in the real estate, and there is a lot of private equity."

As far as other retailers, Davidowitz said he sees York, Pa.,-based Bon-Ton Stores Inc. as one potential suitor, because the chain is also based in Pennsylvania and has made acquisitions. But, he noted, that retailer is struggling too; it reported a first-quarter loss and sales decline.

Bon-Ton officials could not be reached for comment yesterday.

As for Boscov's future, "Maybe the family could hang in there, but the likelihood in five years is there won't be a Boscov's," Davidowitz said.

Liquidation sale shopping tips

Comparison-shop first; liquidation prices may not be lowest.

Be aware that in most cases, sales are final.

Check warranty details and find out where repairs can be made.

If a product requires installation, contact the installer/contractor directly.

Pay with a credit card in case of product defects.

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