Boston Business Journal - Jeff Atkin
6/19/2000
Basement's new chief seasoned in Chapter 11
Boston Business Journal by Donna L. Goodison, Journal Staff
Date: Monday, June 19, 2000
WELLESLEY--It appears Alan R. Schlesinger should feel right at home with Filene's Basement Corp.
The 57-year-old Schlesinger--named to take over the troubled Wellesley-based company that was purchased by Value City Department Stores Inc. in March after a Chapter 11 bankruptcy protection filing last August--has plenty of experience with ailing retail companies.
Although he's an unknown among local retail industry observers, Schlesinger has made a name as a turnaround specialist on the West Coast, even though he was unable to save the company he ran for the last five-and-a-half years.
"He knows his ins and outs of Chapter 11 and turnaround situations," said Dick Outcalt, a principal with Outcalt & Johnson Retail Strategists LLC in Seattle.
"It would seem to us that he's a terrific candidate for Filene's Basement. He's been through lots of storms. He's been a survivor. He's regarded as a hard-nosed, turnaround retailer. He was brought into Lamonts originally because it was a tough situation."
Schlesinger was chairman, president and chief executive officer of Lamonts Apparel Inc., a retail company based in Kirkland, Wash., during a period in which the family clothing chain twice filed for Chapter 11 bankruptcy protection. A U.S. Bankruptcy Court last month approved the sale of Lamonts' real estate assets, and the company now is liquidating the inventory of its 38 stores in Alaska, Idaho, Oregon, Utah and Washington.
Neither Schlesinger nor Value City officials returned phone calls for this story.
The publicly traded Value City of Columbus, Ohio, last week named Schlesinger as the new president and chief executive officer of Base Acquisition Corp., the Value City subsidiary that now operates the Basement's 17 stores. Schlesinger starts Monday, succeeding Samuel J. Gerson, who, by mutual agreement with Value City, resigned from the position he held since 1984.
Before joining Lamonts, Schlesinger held senior merchandising positions at Macy's, May Department Stores Co. and Ross Stores Inc. The Newark, Calif., Ross chain began in 1982 and now has 378 off-price Ross `Dress for Less' Stores that sell name brand and designer clothing and footwear.
"He basically invented the Ross format," said J'Amy Owens, president of the Seattle-based Retail Group Inc., a retail branding, design and consulting firm. "His particular skill set and expertise in discounting, particularly women's apparel discounting, is legendary. It seems to me he certainly has a letter sweater in that category."
Schlesinger was brought in to turn around the publicly traded Lamonts in November 1994, and the company filed its first Chapter 11 petition two months later.
"I would say that business has been a challenge for well over 10 years due to a lack of capital," said Jeff Atkin, an investment analyst with Kunath Karren Rinne & Atkin Inc. in Seattle. "They've always been skinny."
In an October 1996 interview with Washington CEO magazine, Schlesinger referred to the bankruptcy proceedings as a "humbling experience."
During the three years of the company's Chapter 11 restructuring, Schlesinger eliminated $90 million in debt and secured new financing. He closed 19 stores and realigned Lamonts' unfocused merchandise mix of branded, moderately priced clothing to concentrate on casual wear aimed at Northwest consumers. Home accessories also were added to store shelves.
The company emerged from Chapter 11 on Jan. 31, 1998, only to find itself again filing for Chapter 11 this past January due to capital and liquidity restraints. The company cited weak spring and summer sales as a result of unseasonably cool weather, and higher than anticipated costs associated with Y2K and the installation of new cash registers.
"I think they chose the second (Chapter 11) to get out of some leases that were choking them--a not so uncommon phenomenon for retailers," Outcalt said.
Despite sales of $209.6 million, its highest in four years, Lamonts posted a $4.5 million net loss for the fiscal year that ended Jan. 30. It listed $110.7 million in assets and $104.4 million in liabilities, in addition to $40 million in trade payables and accrued expenses.
Although Schlesinger was unable to keep Lamonts out of the hole, Outcalt and other Seattle-area retail specialists said they'd be hard-pressed to blame him for the company's demise.
"Lamonts has been so capital-strained that they've never had a chance to do a good job," Atkin said. "It's been a tough niche in that they were getting caught between discount stores moving up in price and department stores moving down in price."
According to Owens, Lamonts was a "poor man's J.C. Penney" that got squeezed by Target Corp. and the Gap Inc.'s Old Navy stores.
"Target got hip and suddenly living low was living large," she said. "It (Lamonts) literally fell out of favor. Alan kept that thing on life support for seven years. He truly kept a dead concept alive longer than it should have been."
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