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Ames Chairman Fired, Company Reports $91 Million Loss

December 8, 1992

ROCKY HILL, Conn. (AP) _ Stephen L. Pistner, tapped two years ago to help turn around Ames Department Stores Inc., was fired in a shakeup prompted by continued losses, the company said Tuesday.

Pistner’s firing came as the discount retailer reported a third-quarter loss of $91.4 million, compared with a loss of $196.3 million a year earlier.

As part of the shakeup, chief operating officer Kenneth J. Cort was demoted to chief merchandising officer. Chief financial officer and executive vice president Peter Thorner will assume the additional role of chief operating officer, Ames said.

Thorner will report to a new three-member committee that will oversee the company’s operation. The committee includes retailing consultant Walter Loeb, accountant Melvin Rosenblatt and management consultant Elliot Stone, a former vice chairman of Federated Department Stores Inc.

Ames, struggling to emerge from bankruptcy protection for more than two years, said Pistner’s resignation was requested at a board meeting late Monday.

Pistner was hired in early 1990 after Ames filed for Chapter 11 protection. The company had high expectations that he would help it emerge quickly from bankruptcy court.

″The main thing was the turnaround didn’t happen as quickly as it should have,″ said Barbara Wedelstaedt, an analyst who follows the retail industry for Duff & Phelps Inc., a Chicago-based investment firm.

″The management changes were precipitated by, among other things, the company’s continuing margin erosion resulting from its aggressive promotional strategy,″ the company said in a statement.

Ames officials did not return telephone messages seeking additional comment. Pistner also could not be reached for comment. He did not show up at the office Tuesday and did not call in, said a woman who answered the phone in his office.

Pistner, who earned the nickname ″Mr. Turnaround″ for leading recoveries at Target Stores and Montgomery Ward & Co. during his 38-year career in retailing, was hailed as the savior for Ames when he was hired.

But two years later, the company continues to suffer huge losses and weak sales.

Ames’ third-quarter loss amounted to $2.52 per share and compared with $5.31 per share in the same period a year earlier. The company also reported a $58.8 million drop in third-quarter sales, from $673.1 million in 1991 to $614.3 million this year.

In the first nine months, Ames reported a loss of $165 million, or $4.67 per share, compared with a loss of $290.5 million, or $8 per share, in the same period last year. Nine-month sales fell to $1.68 billion from $2 billion.

The company attributed the drop in sales to its restructuring and store closings.

Ames lost $793.5 million in 1990, the year it filed for bankruptcy protection. In 1991, it lost $282.4 million.

Analysts said the management changes would have no effect on sales for the Christmas holiday because most of the planning for the season has been done. They said any changes by the new team would not be noticed until about the second quarter of next year.

Ames said it would ask for a postponement until January of a hearing on an amended restructuring plan it filed in September with U.S. Bankruptcy Court in New York, said Andrea Priest, a spokeswoman for the company. The hearing was set for Dec. 14.

Analysts have said they expect the company to emerge from bankruptcy protection in January or February. They said most creditors seem to support the reorganization plan, which will pay creditors cash, secured notes and stock to settle $1.6 billion in claims.

Ames was a small New England-based chain until it brought the Zayre discount store chain for $788 million in 1988. The acquisition doubled Ames’ size, making it the nation’s fourth largest discount retailer. But within a year the company began floundering amid falling sales and mounting debts.

Ames has closed more than 300 stores since it filed for bankruptcy protection. It plans to scale down to 309 stores.

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