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Ames' results trigger store closings

ROCKY HILL, CT -Pummeled by falling margins and eroding same-store sales, Northeastern discounter Ames Department Stores recorded a sharply worsening third-quarter loss of $37.2 million, compared with a year-ago deficit of $27.7 million.

As its financials continue to deteriorate in a worsening retail environment, the chain unveiled a sweeping plan to shut down 32 stores, lay off roughly 200 workers and slash its capital spending by almost $100 million from this year's level.

In addition, the retailer won a little more wiggle room from its bank lending group. The group approved an amendment to Ames' revolving credit agreement that permits a quarterly, rather than a monthly, test for its fixed charge coverage ratio, which requires a specified distance between earnings and fixed costs.

Ames' sales increased by 4.2 percent, to $920.3 million from $883.5 million a year ago. But the crucial gauge of same-store sales declined by 2.6 percent, up against a year-before increase of 4.6 percent.

Dragging down the bottom line, average gross margin tightened by 260 basis points, to 25.1 percent from 27.7 percent a year ago. Gross margin dollars declined by 5.9 percent, to $230.6 million from $245.0 million the prior year.

To cut costs, the retailer pared its overhead by 120 basis points, to 28.5 percent of sales from 29.7 percent last year. And measured in absolute dollars, costs were whittled down by 0.2 percent, to $261.9 million from $262.3 million a year ago.

Looking ahead to the all-important Christmas quarter, Ames revised its sales and earnings targets, now saying fourth-quarter same-store sales will be virtually flat, while earnings are expected to come in at $2.00 a share, resulting in a loss of about $1.00 a share for the full fiscal year.

Ames Department Stores Inc.


Qtr. 10/28 (x000) 2000 1999 %CHG

Sales

$920,321

$883,500

4.2

Oper. income (EBIT)

(16,709)

(8,030)

-

Net income

(37,236)a

(27,700)a

-

Per share

(1.27)

(0.95)

-

Average gross margin

25.1%

27.7%

-

SGA expenses

28.5%

29.7%

-

nine months

2000

1999

%CHG

Sales

2,623,012

2,559,634

2.5

Oper. income (EBIT)

(23,601)

(30,105)

-

Net income

(88,432)b

(78,924)b

-

Per share

(3.01)

(2.92)

-

Average gross margin

26.7%

29.0%

-

SG & A expenses

28.9%

31.3%

-


( ): Denotes loss

a-The third-quarter loss includes an income-tax benefit of $22.8 million, compared with a year-ago benefit of $15.6 million.

b-Nine-month loss includes an income-tax benefit of $54.2 million, compared with a prior-year benefit of $43.8 million. The year-ago nine-months also includes a $1.1 million charge stemming from la change in accounting for layaway sales.

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