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Consolidation and competition made '95 a record year for realignments - The DSN Top 200

Retailing has been savage over the past 18 months, with 22 chains going belly up and 23 others seeking the protection of Chapter 11 bankruptcy--compared to eight in the previous census period.

The chains that emerged from Chapter 11 found it a cruel world: two--Jamesway and Pic 'N Save--liquidated, while Rose's Stores was acquired by Fred's. That left just three surviving as independent chains.

The number of start-ups also indicated the ferocity of the times: just four in the past year.

Despite the general boom in IPOs, only six chains went public during the period, and one of those was Kmart's spin-off of Borders in May '95, a $567 million deal.

The others were small: Loehmann's and 99 Cents Only each raised $61 million, while Dollar Tree, another single-price chain, garnered $38 million through an IPO. Party City raised $20 million and Ace Auto Parts $8 million.

One major deal remains pending: TJX Cos. filed to spin off its Chadwick's of Boston catalog through a $139 million IPO.

The liquidations hit especially hard at full-line regional discounters: Nine regionals have gone out of business over the past 18 months.

Jamesway was the largest, closing the doors of its 90 stores in January.

The rest were smaller and illustrate the problems of regionals trying to survive against the competition and buying power of Wal-Mart, Target and Kmart. The bell tolled for: Pic 'N Save, 27 stores, which dissolved just a week after emerging from Chapter 11; Prange Way, 22 stores; Hart's, 15; Stuart's, nine; Swallen's, eight; Van Leunen's, seven; and The Fair, six.

Clover is about to hold going out of business sales after its parent company, Strawbridge Clothier, agreed in May to sell the 26 Clover stores for their real estate value and its department stores to May Department Store Co.

In addition, the two major regionals in the Northeast, Bradlees and Caldor, both declared Chapter 11, each closing a dozen or so stores.

The failure of both F&M Distributors and Rx Place, owned by Woolworth, again illustrated the fragility of the deep discount drug concept. Phar-Mor emerged from Chapter 11 with 102 stores, only one-third of its store count when fraud in the corner office drove it into Chapter 11.

The toll also includes two major sporting goods retailers: Herman's Sporting Goods, which ended an 80-year history shortly after it declared Chapter 11 for the second time in three years, and SportsTown, a superstore chain that fell victim to overexpansion.

The failure of Auto Expo, founded by Robert McNulty, is another indication that warehouse-size stores have yet to find favor with auto parts customers. Still another was the bankruptcies of Auto Parts Club and Warehouse Auto Centers.

W. John Devine, former chairman of Warehouse Auto Centers, quit his position there and purchased the remaining nine stores of the Auto Parts Club units out of bankruptcy.

Fretter announced last month that it will close its remaining 10 stores (down from 237 at this time last year. It folded its Silo subsidiary after it declared Chapter 11, and its Fred Schmid chain is also gone.

Value Merchants, operating in Chapter 11, folded after failing to find a buyer for its Everything's Really A $1 chain. Last year, the company had bought time by selling its Toy Liquidators chain to Consolidated Stores.

Conversely, 99 Cents Only breathed new life into the single-price concept when it went public in a $61 million initial public offering.

Dollar Tree, which has emerged as the dominant player in the single-price retailer category, also went public in March '95 with a $38 million IPO. Additionally, it grew through acquisition, purchasing the Dollar Bill$ chain, but keeping that chain's name alive as a separate entity.

All For A Dollar emerged from Chapter 11 after closing about one-quarter of its stores.

The Chapter 11 filings included chains from a wide range of retailing.

In addition to major regionals Bradlees and Caldor, two off-price retailers, Clothestime and Today's Man, also sought Chapter 11 protection.

Four retailers filed for the secod time in three years: Kitchen Bazaar, Herma's, Brendle's and Value Merchants. Two--Herman's and Value Merchants--are gone.

In addition, five more dissolved while in Chapter 11: Silo, Auto Expo, Pic 'N Save, Cheap John's and Sportstown.

Besides liquidation, acquisitions also caused a number of chain names to disappear after new owners converted them to their own formats.

PetsMart, for example, dissolved the Petstuff name after it bought the chain, closing competing units and converting them to the PetsMart format. Also, the 10-unit Pet Food Giant nameplate disappeared after PetsMart bought it.

Petco converted the eight-store P.T. Moran chain into its format after acquisition.

Western Auto folded both the Nationwise and Wheel's names after it acquired the chains. It converted the stores to its new Parts America parts-only chain. And Big-5 Sporting Goods absorbed the seven-store Gardenswartz Sportz chain following acquisition.

Much of the acquisition activity stemmed from the restructuring of Melville back to its core drugstore operation: Consolidated Stores bought its Kay-Bee Toys chain; TJX Cos bought Marshalls; and either management or private investor groups bought Wilsons, This End Up and Hit or Miss. Still pending is Melville's IPO spin-off of Chadwick's of Boston, a catalog operation.

Kmart--restructuring king of the hill last year--stalled in its efforts to shed its sole remaining subsidiary. One of the reasons it can't find a buyer for its money-losing Builders Square home centers: Kmart guaranteed hundreds of millions in Builders Square leases and any purchaser would have to assume that liability.

Kmart did sell its 13-store Czech/Slovak chain for $117 million, and raised more than $100 million from selling par of its stock in Payless drug stores, a chain it sold in 94 Kmart had to retain a 45 equity stake as part of the purchase deal and still owns some 7 million shares.

And another Payless chip that Kmart hopes to cash in this year is a $100 million note that the purchaser, Leonard Green Partners, gave in partial payment for the $1 billion asking price.

The biggest news for Kmart, however, is that it not only shook off talk of Chapter 11 last year, but also regained favor on Wall Street. Investors clamored so vigorously for a preferred stock offering last month that Kmart was able to sell $1 billion worth, up from the original $750 million.

Initial Public Offerings

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Mergers and Acquisitions

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