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Venture sells 20 units to Kmart for fast cash - Company Profile

O'FALLON, MO. -- Venture Stores once again is pushing its resources and abilities to the limit. Just as the chain reported its first year-to-year monthly sales gain in two years (June 1997 sales rose 3.5% to $124.1 million), Venture scrambled to pursue options with an investment banking firm and a real estate investment trust known for helping battered retail chains jettison properties.

In the most telling move, the pending sale of 20 stores to Kmart, Venture chairman, president and ceo Bob Wildrick in effect penned the final commentary on the strategy of former chairman Jules Seeherman.

In 1993, Seeherman chose an audacious expansion into Texas over reinvestment in the chain's core Chicago market. Faced with an onslaught of new Target and Wal-Mart locations in metro Chicago, he shunted Venture's capital into a new Dallas distribution center and 11 new stores in Dallas and Houston. By Wildrick's arrival in mid-1995, fewer than half of the beleaguered Chicagoland stores had been through major remodeling.

It is the Texas stores that Venture is now abandoning in a further trimming of tattered sails.

The store count, which peaked at 117 in 1996, will be cut to 93. The locations to be sold: Houston, 10; Dallas, five; Indianapolis, two; and one each in Tulsa, Okla.; and Des Moines and Waterloo, Iowa. Venture will handle its own GOB sales; Kmart will occupy the 20 stores by Sept. 15.

Venture senior vp marketing Cliff Campeau said the sale of the stores, for terms to be announced upon closing of the deal this month, will help the chain focus on its core markets of Chicago, St. Louis and Kansas City, Mo.

He said all the Texas stores had been cash-flow positive, but the units being sold did not have sufficient long-term profitability projections. The company intends to maintain its eight remaining Texas units (Houston, three; Dallas, three; Amarillo, one; Corpus Christi, one) as a viable part of the chain. Advertising through circulars and print ads will continue. Venture had never spent much on broadcast media in Texas.

The 20 stores had provided about 15% of 1996 sales volume, and Venture will cut its workforce by 1,500 to 2,000 individuals, or roughly 15%.

Campeau confirmed that Venture has had discussions on contracting out the use of its modern 300,000-sq.-ft. DC in Corsicana, Texas.

Wildrick has repeatedly said he would seek new infusions of capital for the company. But while yielding immediate cash, the sale will also precipitate a second quarter non-cash charge estimated at between $60 million and $65 million ($3.50 per share).

Venture has gained an increase in the advance rate under its credit facility through Bankers Trust Commercial Corp. Venture can now borrow against its inventory up to 65%; the old rate was 60%. The company is in talks with Kimco Realty for advice on turning more of its real estate portfolio into capital.

In 1995, Kimco took the defunct Clover chain's stores to market, where they were acquired by Kohl's and other retailers. Earlier, Kimco had brokered the sale of the Gold Circle chain's withered configuration to Target.

Venture has also retained investment banking firm Houlihan, Lokey, Howard & Zukin (based in New York and Los Angeles) to probe other capital sources.

For its part, Kmart called its acquisition of the 20 Venture stores a one-time maneuver. Bob Burton, divisional vp, investor relations, said it was "evidence that we have the ability to be opportunistic." It was an unusual move by Kmart, which has typically bought no more than one or two stores at a time. Burton said the transaction was an appropriate move within the climate of retailer consolidation.

Kmart already operates 14 stores in the Dallas/Ft. Worth metro area and 18 in Houston/Galveston. Burton said the Venture stores "are of a size that's very consistent with the Big K concept; they are between 95,000 and 105,000 sq. ft."

Assuming Venture's GOB sales are completed by mid-August, Kmart will have 30 days to fully outfit the stores, none of which is more than four years past new construction or a major remodel.

Heading into the fall Venture boasts a relatively clean inventory and a fresh flow of private label goods to replenish its apparel pad. Campeau called the June results a vindication. "It shows that when we're able to execute the family value strategy [with the flow of merchandise to the stores] uninterrupted, we have a winning formula," he said.

Venture saw a June comp store drop of 0.8%, the closest the chain has come to positive comps in more than 18 months and a real indication that the remerchandised stores are winning shoppers.

Yet the company is still losing money, with 1996 sales of $1.48 billion. Wildrick's turnaround bid, his effort to avoid bankruptcy, is running against the clock. Venture must prove over the next six months that its new format and merchandise mix gives shoppers enough reasons to keep the chain going.