ShopKo to shutter 23 stores
February 5, 2001,
GREEN BAY, WI -After a "comprehensive review" of its store operations, ShopKo Stores announced that it will close 23 underperforming stores and a distribution center.
This comes after the company announced two weeks ago that it received a commitment from Fleet Retail Finance to provide a new, three-year $600 million senior secured revolving credit facility, which will replace three unsecured facilities that had $293 million remaining. The transaction will close within 45 days.
"This is the culmination of the review launched in November to re-engineer our capital structure and review the asset base," said William Podany, chairman, president and ceo. "When completed, the financing agreement announced last week and these actions position ShopKo well for what has become a challenging retailing environment. Although difficult for everyone involved, improving the productivity of assets and reducing debt is necessary for the ongoing vitality of the company and its employees."
The store closings represent almost 6 percent of its 394 store total, and the company's exit from Missouri, Kentucky, Indiana and Kansas. Liquidation will be completed in the first quarter. ShopKo owns eight of the 23 stores.
These stores, each only several years old, produce half the sales per square foot of an average store, said Brian Bender, cfo. "They're either not profitable or marginally so." For 2000, the 23 stores had sales totaling $205 million, or 7.5 percent of ShopKo's total store base, he said.
The work force reduction of 2,500 people will include 136 workers, about 12 percent, at its corporate office here, and 41 employees, or about 10 percent, at its Pamida corporate offices in Omaha, NE.
The 23 stores to close are located in Galesburg, Macomb, Moline, Pekin, Rockford, IL; two in Evansville, IN; two in Cedar Rapids, IA, as well as one in Bettendorf, Clinton, Coralville, Keokuk, Muscatine, and Spencer, IA; two in Wichita, KS; Paducah, KS; Hannibal, Joplin and Cape Girardeau, MO; and Hastings and Omaha, NE. ShopKo's distribution center in Quincy, IL, currently serves a majority of the stores to be closed and will also be shut down. Remaining traffic will be transferred to ShopKo's distribution center in Omaha, which will service 35 states.
Nine of the closing stores opened less than two years ago in 1999.
"I'm not pleased with our track record," Bender said, adding, however, that there "are clear opportunities for ShopKo in both of its retail formats" of ShopKo and Pamida stores.
Bender added that ShopKo expects sales in 2001 to increase 4 percent to 5 percent, excluding closed stores, and comparable store sales to rise up to 2 percent. He also said that the earnings per share will be between $1.58 to $1.63, and for the first quarter comparable store sales will be "flat to slightly down."
Regarding the changing retail environment, "It's not the smartest or the biggest that will survive," said Podany, "but those that adapt to change." There are many things that ShopKo does well, he added, and in the areas where it underperforms it will focus on making changes.