Discount Chain Seeks Bankruptcy; Cites Skittish Suppliers, Competition
Sep. 18, 1995
HARTFORD, Conn. (AP) _ Caldor Corp., facing increased competition and suppliers nervous about its fate in the age of Wal-Mart, sought protection Monday from creditors under federal bankruptcy law.
The large regional discount department store chain said it had been hurt by a cutthroat retail environment and weakened finances aggravated by the troubles other major competitors faced.
Nevertheless, all 166 Caldor stores, which operate in 10 Northeast states, will remain open for business.
``We don't see any changes as to our stores,'' said Ron R. Clarke, chairman and chief executive. ``It's business as usual and we're trying to get out of this as soon as possible.''
Huge national retailers like Wal-Mart and Kmart have been squeezing store owners large and small with their ability to buy large amounts of merchandise at bulk prices. Their savings can be used for store expansions, marketing and the like _ as well as lower prices.
Clarke sought to deny perceptions that Norwalk-based Caldor is the latest retailer to feel the heat from the rise of Wal-Mart in the Northeast. He said Wal-Mart only competes with 20 percent of Caldor's market, and that competition is with less-profitable rural stores.
Industry watchers appeared to disagree.
``Anybody in the discount business who's telling you Wal-Mart is not a competitor is hoping against hope,'' said Geoffrey Lurie, president of GDL Group, a retail consulting firm in New York.
``Consumers today have so much choice that it's inevitable the weaker sisters are going to stumble,'' Lurie said.
Alan Millstein, editor and publisher of Fashion Network Report, a retailers' newsletter, agreed.
Recently, he said, Caldor has started opening stores in cities where discount stores are in demand and where Wal-Mart hasn't established a presence yet.
The Chapter 11 bankruptcy filing in federal bankruptcy court in New York will allow Caldor to delay paying bills while the company get its finances in order. News of the bankruptcy filing didn't seem to irk customers.
``They have everything other stores don't have, some products and styles I like,'' said shopper Laura Saunders of Rocky Hill, a suburb of Hartford. Saunders said she would continue shopping at Caldor.
Investors reacted to the news with greater disapproval. Caldor stock plunged $1.56 1/4 cents a share to $3.43 3/4 in late afternoon trading on the New York Stock Exchange. The stock has been eroding in value for months.
The retailer's first goal in bankruptcy will be to shore up confidence among lenders, shippers and investors so Caldor will be in good shape for the important Christmas season, which accounts for 20 percent of business, Clarke said.
Perceptions of Caldor's financial strength have soured among banks, investors and shippers, particularly because of the financial troubles of rivals like Bradlees and Jamesway.
Bradlees sought bankruptcy protection earlier this year and has been cutting prices to stay in business. Jamesway emerged from bankruptcy protection in January but the owners have been trying to sell the company for months.
Some shippers have demanded prompter payment for merchandise and have changed the terms of longstanding agreements with Caldor, Clarke said.
At the same time, some factors, which are lenders that buy goods from suppliers and accepts the risk of collecting from retailers, have reduced credit limits.
Caldor's finances have been in a difficult state since since the fourth quarter of last year. Same-store sales fell 4.9 percent in July and 10.4 percent in August.
As of July 29, Caldor had consolidated assets of about $1.2 billion, and consolidated liabilities of about $883 million. Caldor plans to use proceeds from its current inventory to amass $500,000 million to pay shippers and suppliers, Clarke said.
The bankruptcy court this week will consider a $250 million agreement from Chemical Bank to finance Caldor's debt.