Former Waldenbooks chief executive Charles Cumello abandoned his retirement in Florida last month for what may be his biggest challenge yet: squeezing a profit out of Crown Books Corp.
The 55-year-old executive's plans include helping the Landover bookstore chain, which emerged from Chapter 11 bankruptcy protection last month, go public sometime in the next several months. Crown will later open an online store, although details of the Internet venture have not yet been released.
But in many ways Cumello's challenges at Crown are more basic. Cumello must chat up book publishers who have resumed their shipments but still want to be assured that Crown is back on its feet. He must improve the company's computer system, so the chain's buyers have access to key information. And he must fill key corporate positions abandoned during the company's troubles.
"It's tough to play chief financial officer, general merchandising manager and chief executive officer at the same time," Cumello said.
Crown's financial backers say Cumello's experience at Waldenbooks, a chain of mall-based stores, makes him the logical choice for the job. Cumello left Waldenbooks in the mid-'90s after Kmart Corp. announced it would sell control of its Waldenbooks and Borders bookstore chains. Waldenbooks is now a part of Ann Arbor, Mich.-based Borders Group Inc. Cumello then went on to lead Factory Card Outlet Corp. in 1995, retiring three years later.
"We had hired a search firm, and his was one of the first names that surfaced," said Robert Miller, senior managing director of Shenkman Capital, a New York investment firm that purchased creditor claims and will be the retailer's single largest shareholder after the planned stock sale. "It's a small industry, and the list of potential candidates is not a long one."
In an interview last week, Cumello said many of Crown's ailments have been cured. Under his predecessor, Anna Currence, unprofitable stores were closed, an unwieldy computer system was rescued, and financing was secured. But Currence, who was hired as a turnaround CEO, resigned after the company began looking for a different type of leader.
"We think the most serious issues have been tackled," Miller said. "That's like getting the disease out of the body. Now it's the rest and rehabilitation period. The company needs the tutelage of a guy like Charlie and his experience on the merchandising side."
Customers who abandoned Crown have been returning in larger numbers, in part because of catchy advertising promotions that stress the company's discount roots, Cumello said. So far this year, same-store sales -- an industry barometer that measures revenue at stores open more than a year -- have risen 14 percent.
"I think there are a lot of people still shopping Crown," Cumello said. "It's price and convenience. There's room for a Nordstrom and a Kmart. I think it's true in the book business, as well." Industry observers say the odds are stacked against Cumello. Crown was once the leader of the book-retailing industry, but now the 92-store chain is struggling to find its place next to much larger retailers such as Barnes & Noble, Borders Books and Music, and Amazon.com.
Crown began stumbling in the early '90s amid the Haft family feud. Herbert Haft fired his son, Robert, in 1993 as chairman of Crown and president of its parent company, Dart Group Corp. (The two are now duking it out on the Internet, where each sells vitamins.)
Analysts and book-industry officials say Crown was largely ignored during the feud and consequently failed to arm itself against emerging giants Barnes & Noble and Borders.
Its sales plummeting, Crown filed for bankruptcy protection in July 1998. But it continued to hemorrhage money. The company lost $66 million on $216.8 million in sales in its fiscal year ended Jan. 31, 1999.
Company officials say they hope Crown will be profitable by January 2001, but it is much more difficult for a retailer to emerge from bankruptcy today, industry observers said. Vendor communities tend to be less generous about extending credit, and rival retailers aren't about to welcome a reenergized competitor.
"You've got fierce competition from national operators that have better access to sources of funding . . . and perhaps better terms with vendors and landlords," said Marc Abrams, a bankruptcy attorney and partner with Willkie Farr & Gallagher in New York. "You have the corresponding effect of e-commerce, which has taken away foot traffic."
Cumello says Crown still has a strong position as a discounter, and he believes his experience will help improve the still-ailing retailer's bottom line. Yet he knows the company is running out of lives.
Asked how many chances Crown has to revive itself, Cumello pursed his lips. "Not very many," he acknowledged.
Outdoors retailer L.L. Bean Inc. will build a large store at the Mall in Columbia -- its second announced for the Washington area -- offering apparel and sporting goods as well as its "Outdoor Discovery School."
Like other retailers of the same ilk, Maine-based L.L. Bean has discovered it isn't enough to sell products catering to canoeists, kayakers, anglers and bikers. You also have to create customers by inspiring interest in these outdoor activities.
The company plans to offer classes when its store opens in March 2001. The retailer also will open a larger store at Tysons Corner in the summer of 2000.
Stephanie Stoughton's e-mail address is email@example.com