By Andrew Shaw, The York Dispatch, Pa.
Aug. 4--Boscov's announcement on Monday it will file for bankruptcy won't affect its York Galleria store but could affects its plans for one in the North Hanover Mall.
The company filed under Chapter 11 of the U.S. Bankruptcy Code, citing weak consumer spending as the primary cause.
The Reading-based department chain plans on closing 10 underperforming stores in coming weeks as part of its reorganization, including its Harrisburg East, White Marsh Mall, Md. and Owings Mills Mall, Md., locations.
The company said it will continue to operate without interruption during the reorganization and its stores and Web site are open for business. Boscov's Travel Center and Boscov's Business Travel, separate entities, are not part of the filing.
Decline in spending: The decision to file for Chapter 11 protection was driven largely by the impact the current economic downturn and a decline in consumer spending has had on the company's operating performance, said Boscov's chief marketing officer Maralyn Lakin.
"It was definitely the last option," Lakin said of filing for Chapter 11. "There was a decline in consumer spending, and it impacted the entire sector. Who would guess that going to the gas station would cost you $50 to fill up, and you can't buy milk for less than $4 or $5 a gallon."
The company's statement said filing for Chapter 11 will provide the company with the tools and time to strengthen its balance sheet, close underperforming stores, revisit certain
agreements and position the company for long-term success.
The company expects to be able to continue paying active employee salaries and benefits as well as to honor current gift cards, product warranties and bridal registries, the statement said.
Retail analyst Stevan Buxbaum of Minneapolis-based consultants Buxbaum Group said Boscov's announcement isn't surprising given the tough economic climate for regional department stores.
"Unfortunately, the day of the regional (department store) is pretty much over," Buxbaum said.
National chains like JCPenny's can create their own merchandise, while niche, discount stores like TJ Maxx can undercut Boscov's prices, he said.
"You're going to get eaten alive," he said.
The weak national economy exposed stores like Boscov's he said, because they no longer sold the volume of merchandise needed to cover up their lack of margin.
"The consumerism was holding them up artificially," Buxbaum said. "Boscov's was holding on to... the old model."
Store closures: North Hanover Mall has been planning to open a Boscov's in spring of 2009, a date already pushed back because of a slow economy.
Lakin said that store opening is now "up in the air."
Boscov's spokesman Rich Tauberman said they still intend to go forward with the opening, although the date could be affected.
The store's fate won't be known for sure until after the company's reorganization this fall, he said.
The store closures will come within the next few weeks, Lakin said. The store involved were informed Monday.
York Galleria's site is "a viable store for us," she said. There are no foreseeable plans to continue store closures beyond this round, she added, and customers can expect the same level of service.
"It is still business as usual," Lakin said.
Boscov's operates 49 stores in Pennsylvania, New York, New Jersey, Maryland, Delaware and Virginia.
Stores that will be closed include those located at the following malls:
In Maryland: White Marsh Mall, Marley Station Mall, Owings Mills Mall;
In Pennsylvania: Harrisburg East Mall, Monroeville Mall, South Hills Village Mall near Pittsburgh, Oxford Valley Mall near Langhorne, Montgomery Mall in North Wales;
In Virginia: Piedmont Mall in Danville;
In New Jersey: Monmouth Mall in Eatontown.
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