A majority interest in the Korvettes department store chain will be sold to a French retailing and clothing manufacturing group, said Arlen Realty and Development Corp., the company that now owns the chain.
The French company, Agache-Willot, will pay the financially pressed Arlen $30 million in cash for Korvettes and will invest another $30 million in the chain.
Korvettes has 50 stores, including four in the Washington area that are among the company's most successful operations.
The agreement in principle announced yesterday provides for Agache-Willot to acquire 51 percent of Korvettes; the French company also has expressed interest in buying the 16 Korvette store properties that are owned by Arlen's shopping center division, said Phillip Kaplan, Korvettes' treasurer.
The deal will provide badly needed cash to Arlen, a diversified developer and operator of real estate, which lost $110 million last year and another $13.8 million in the six months ended Aug. 31.
The additional investment in Korvettes will allow the chain to complete the refurbishing and upgrading campaign started with "The New Korvettes" advertising drive. That program produced a $1.5 million pre-tax profit for Korvettes last year and is expected to yield a $6 million gain before taxes this year, said Kaplan.
Founded as one of America's original discout stores - selling appliances out of a second-floor loft in New York - Korvettes tried repeatedly and unsuccessfully to move into the budget department stores business.
It apparently has succeeded with the "New Korvettes" strategy, playing the chain's traditional strength as a promotional discounter of hardgoods - appliances, records, books, housewares and the like - against a new emphasis on fashion clothing.
But the success of the new marketing approach has been limited by the inability of Arien to provide funds from suppliers because of its parent company's financial weakness.
The deal with the French firm is supposed to provide the cash, but still allow Arien to benefit from appreciation by maintaining a minority interest. Arlen has no plans to sell its remaining share, Kaplan stressed.
There are no plans to change Korvettes' management or to close any of its stores, the company said.
The company buying control of Korvettes is a $2-billion-a-year business that in Europe runs chains with the names Bon Marche, Conforama, Belle Jardiniere and Galleries Anspach. It also owns several major fashion labels including Ted Lapidus and Christian Dior.