City Stores Co., owner of the W & J Sloane furniture stores and Franklin Simon women's specialty shops, filed a bankruptcy reorganization petition in federal court here today.
Citing "substantial losses" during the recent spring season and "a generally poor retail climate" that resulted partially from gasoline shortgages, City Stores and three subsidiaries asked for court protection under Chapter XI of the Bankruptcy Act. The firm's sales last year totaled $328 million.
City Stores will continue to operate all current stores under court supervision, including a Franklin Simon store in the District of Columbia and six Sloane furniture stores in the Washington area. Lansburgh's, a 113-year old Washington department store firm formerly operated by City Stores, went out of business in 1973 after several years of steep losses. City had purchased Lansburgh's in 1951.
In a Chapter XI proceeding, actions of creditors against a corporation are stayed as the firm seeks to negotiate interim financing and to work out a plan for reorganizing its debts and restoring financial health. The Sloane furniture and home furnishings chain includes 50 stores and is among the largest retail furniture companies in the Washington region.
City Stores President Morris Goldstein said today that Sloane's has been "consistently profitable" and trade sources said the premiere furniture chain remains one of the company's key assets. Overall, C;ty Stores said in its petition, assets on May 5 were $153.3 million while liabilities ere $105.1 million.
Commenting on the City Stores action, Wall Street analysts agreed that an impending recession and skyrocketing inflation will probably result in a poor year for retailers across the country.
But City Stores, a publicly held subsidiary of Bankers Securities Corp., has been in financial difficulty when other retailers were experiencing banner years. According to its executive vice president, Alberta Assa, City Stores sustained net losses of $4 million in 1974, $5.7 million in 1975, and over $24 million in 1976 when it was forced to liquidate 11 Lit Brothers department stores in the Philadelphia area.
Assa added that City had a net income of $1.75 million last year and $962,000 the year before. But the firm posted a net loss of $1.8 million during the 13-week period ending May 5.
City Stores owns 29 department stores under the trade names of Maison Blanche in Louisiana, Richard's in Florida, Loveman's in Alabama, B. Lowenstein's in Tennessee, Hearn's in the Bronx section of New York City and R. H. White in Massachusetts. In addition, it operates 42 Franklin Simon stores in 11 states.
"The situation was particulary difficult in May and June with the gas crunch," Goldstein explained. "That has eased a bit, but neither we nor any other retailer anticipates a boom business from here on. It's going to be difficult, but we intend to survive."
City Stores also has been largely unsuccessful in attempts to sell some real estate holdings to ease its cash-flow problem. Goldstein emphasized today that a high priority of the company will be to complete these transactions as soon as possible.
"City Stores wasn't exactly in the center of anyone's mind on Wall Street," said Daniel Barry, a retailing analyst for Kidder Peabody & Co. "I think it has been ignored for years because people here are looking at growth companies." Barry added that other retailers can expect a weak year because of the economic climate of the country.
"The retail environment until spring was fairly strong," he said. "But recession is on everyone's mind now, and that, more than inflation, will affect the Christmas season this year. The Christmas season represents between 50 and 70 percent of the retail profits of the fourth quarter, which means that 1979 will not end well." CAPTION: Picture, The Franklin Simon and W & J Sloane stores on lower Connecticut Avenue are part of the City Stores chain. UPI