The Wall Street Journal-20080123-Retail Ventures May Sell Value City Chain
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Retail Ventures May Sell Value City Chain
The parent company behind the Value City retail chain is expected to announce a plan to sell the discount stores as early as today, said people familiar with the matter.
The likely scenario, these people said, would involve a group of investors essentially being paid to take Value City Department Stores off the hands of Retail Ventures Inc., the chain's parent company controlled by the Schottenstein family of Columbus, Ohio.
There are about 113 Value City stores, mostly in the Midwest and Southeast. The chain lost $44.2 million for the first nine months of the year on sales of $854.7 million.
The investor group will be led by Crystal Capital Fund LP, a Boston group that was spurned in its effort last year to take over Bombay Co., a home-furnishing chain that was eventually liquidated. Crystal is backed in part by SAC Capital Advisors, the Connecticut fund for billionaire investor Steven Cohen. Other planned investors include Mesirow Financial Holdings Inc., of Chicago, and Emerald Capital Management, of Naples, Fla., people familiar with the matter said. Exact financial terms weren't disclosed.
Retail Ventures announced in December 2006 that it was exploring the sale or closing of Value City. It quit placing orders for future inventory and assigned certain leases at 24 stores to another retailer, Burlington Coat Factory. "Negotiations are continuing," said a Retail Ventures spokeswoman.
The past few years have been difficult for smaller, general-discount retailers like 91-year-old Value City, which has struggled to compete against larger competitors like Wal-Mart Stores Inc. and Target Corp. Value City specialized in selling cut-rate merchandise ranging from children's clothes to TVs to jewelry.
"I think the Schottenstein focus has been on other businesses, like [shoe retailer] DSW, and not as much on Value City. In a tough retail environment like this, the better-funded operators like a Target will do much better," said Steven Buxbaum, executive vice president at the Buxbaum Group, a retail turnaround firm in Agoura Hills, Calif.
The consortium will try to keep open most of the Value City stores, though closings remain a possibility, said the people familiar with the situation. In the short term, new owners will need to quickly refill the chain's inventory, which is depleted. The Value City chain employs about 7,500 people, though Retail Ventures has been cutting jobs there recently.
Retail Ventures shares have lost nearly three-quarters of their value in the past year amid increasing losses at Value City and another wholly owned retail property, Filene's Basement. Retail Ventures owns a majority stake in DSW Inc., a discount shoe retailer and supplier with 250 stores in 36 states. Filene's and DSW aren't a part of the planned sale.
Retail Ventures' shares yesterday rose 6.7%, or 36 cents, to $5.71, in 4 p.m. New York Stock Exchange composite trading, down from a 52- week high of $21.95 in April. Retailers have been hit hard by slowing consumer spending, which led to a disappointing holiday shopping season for many stores.
Before the holiday season, Value City sales were down more than 10% for the first nine months of 2007. The chain has lost money for three years and was expected to do so again in the fourth quarter of 2007 as demand slowed on some of its cut-rate merchandise like jewelry and appliances.
