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Road to Restructuring: Retailers Drive Toward More Cutbacks

Even without the high drama of a Chapter 11, restructuring continues to be the order of the day across retailing.

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Penney’s is considering selling its Eckerd drugstore chain, but that’s not a definite, according to Questrom. “We are now in an evaluation process, for the first time.” He said the value of the chain continues to rise each year. “We are going to sell it or keep it, whichever makes the most sense.” If Eckerd does get sold, it’s likely to be sold to a financial buyer or somebody from overseas, rather than another drugstore chain here where there would be too much overlap in locations.

There’s also the possibility that Penney’s might eliminate certain smaller stores that don’t have the space for the chain’s new apparel initiatives. Penney’s has been shutting about 15 to 30 stores for a couple of years, after shutting down 47 in 2001. It now has about 1,040 department stores.

Other retailers such as Federated Department Stores, which is consolidating its Macy’s nameplate onto all of its divisions except Bloomingdale’s, as well as Saks Inc., will continue to prune locations. However, in each of these cases, the store base is expected to remain pretty constant.

Once unheard of, it’s now possible for a Wal-Mart, Costco or Target to move into space formerly occupied by a Sears or Lord & Taylor. Previously, those big discounters were regarded solely as off-the-mall or power center tenants. A Lord & Taylor closing could benefit another May Co. division in the same mall. May Co. typically has a Lord & Taylor on one end of the mall and a Foley’s, Hecht’s or Filene’s, for example, on the other end of the mall.

“We are seeing a pickup of Wal-Mart, Costco and Target moving into the mall,” Weinswig said.

Compared with department stores, there is not as much downsizing occurring in the specialty arena, with Charming Shoppes and Limited Stores having already downsized, though Express could free up some space through the combination of the former Structure men’s wear division into Express, according to analysts.

According to Bronstein, if a store is oversized, such as many believe is the case with Old Navy, it may pay just to wall off an area, hopefully sublease it, rather than keep it as unproductive sales space. The Gap has given no indication of a major restructuring, though the group’s store expansion has slowed for now and the company could be down 2 or 3 percent in square footage for 2003, said analysts.
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