Boscov's files Chapter 11, to close 10 stores
By ERIK ORTIZ Staff Writer, 609-272-7253

Published: Tuesday, August 05, 2008
http://www.pressofatlanticcity.com/185/story/221870.html

After more than a week of rumors about bankruptcy and store closings, Boscov's Inc. made a not-so-surprising announcement Monday: It filed for Chapter 11 bankruptcy protection and will shut down 10 underperforming stores.
"This will help us realize additional cost savings and operational efficiencies, and improve our financial base so that we can better serve all of our constituencies," CEO Kenneth Lankin said in a statement about the closing of 10 of its 49 department stores in six states.

In southern New Jersey, locations at the Cumberland Mall in Vineland and the Shore Mall in Egg Harbor Township will remain open. The Shore Mall store, which opened 20 years ago this fall, reportedly is one of the company's top-performing locations.

The only store to close in New Jersey is at the Monmouth Mall in Eatontown, Monmouth County. Also closing are five stores in Pennsylvania, three stores in Maryland and one in Virginia. About 1,400 employees could lose their jobs, company officials said. Boscov's, based in Reading, Pa., blamed credit issues and a decline in consumer spending.

Michael Hughes, Boscov's executive vice president, said the global credit crunch led vendors to clamp down on their agreements with the company. The privately held company could no longer pay suppliers, leading some to stop shipping merchandise. "The recent addition of these pressures and constraints to a broadline retailing industry that already operated on thin profit margins has forced the debtors into inadequate liquidity levels," Hughes said in a filing in U.S. Bankruptcy Court in Wilmington, Del.

The 97-year-old retailer, which calls itself "America's largest family owned independent department store," said that by filing for Chapter 11 protection it has the tools and time to strengthen its balance sheet.

It said it has secured $250 million in financing from Bank of America, which will allow it to pay for shipments of merchandise for the back-to-school and holiday shopping seasons.

With the sale of its stores to begin by Aug. 15, the company said it will liquidate about $34 million in merchandise.

In its court filing, as of May 3, the company listed its assets at $538 million and debts at $479 million.

A list of the company's top 40 unsecured creditors shows how much money it owes to each company. The largest amount is owed to Jones Apparel Group Inc., a designer and marketer of brands such as Nine West and Easy Spirit, at $3.1 million.

Other apparel companies include: Hanes ($1.15 million), Adidas ($1.03 million) and Levi Strauss & Co. ($834,285).

Philadelphia Newspapers LLC, which owns the Philadelphia Inquirer and Philadelphia Daily News, is owed $930,047 in advertising bills, according to the court filing.

Two years ago, in a bid to position itself as a major retail player in the Mid-Atlantic, Boscov's purchased 10 Macy's, Kaufmann's and Strawbridge's stores in New Jersey, Pennsylvania and Maryland from Federated Department Stores Inc. for an undisclosed price.

Boscov's believed the market - prior to the housing and credit crisis and dragging U.S. economy - would be receptive to its mid-price merchandise of clothing, electronics, housewares and jewelry.

But the company said the new stores failed to bring in adequate cash flow. Its stores earned almost $1.3 billion in the year ending this February, according to court documents.

Exact earnings of the Cumberland Mall and Shore Mall locations are unavailable.

Boscov's first opened at the Cumberland Mall in 1997. Pennsylvania Real Estate Investment Trust, the mall's owner, declined to comment about the chain's bankruptcy. Boscov's is one of three anchor stores at the Cumberland Mall and covers 150,000 square feet of space.

Leo Ullman, CEO of Cedar Shopping Centers in New York, which owns the Shore Mall, said Boscov's has been a good fit.

"We understand that the Shore Mall Boscov's is one of the best operating stores," Ullman said. "It is a very good operation there. We expect sales to continue apace."

Boscov's bankruptcy is only the latest in a line of retail and restaurant chains pummeled by the weak economy. Passaic County-based Linens 'n Things filed for Chapter 11 protection in May, and said it will close 177 stores, including its Mays Landing location.

Staff writers Thomas Barlas, Donald Wittkowski and The Associated Press contributed to this report.

E-mail Erik Ortiz: EOrtiz@pressofac.com