Montgomery Ward Reports Gross Margin Rate Improvement in Third Quarter. Company Takes Charges in Quarter Related to Strategic Turnaround

Furniture World Magazine

Montgomery Ward and Co., Incorporated announced a full six-point improvement in gross margin rate for the third quarter of 1997 from the first six months of 1997. Total revenues for the quarter ended September 30, 1997 decreased 26% to $1.16 billion from $1.57 billion for the third quarter of 1996. Revenues for The Signature Group, the Company's direct response marketing subsidiary, increased 12% to $214 million from $191 million in the third quarter of 1996. The Company reported an operating loss of $194 million for the third quarter versus a loss of $48 million for the comparable 1996 period. The results for the third quarter include reorganization costs of $582 million associated with the Company's Chapter 11 filing, the closing of 44 Lechmere and Electric Avenue & More stores, the closing of 47 underperforming full line Montgomery Ward stores and the restructuring of the Company's contractual agreement with Value Vision International, Inc. Revenues for the period were impacted by the closure of Montgomery Ward's specialty stores, Lechmere and Electric Avenue & More, temporary interruptions in the flow of goods, decreased advertising, reduced credit card mailers and letters and the Company's exit from the personal computer business and other product areas. The Company also noted that as of the end of the third quarter it had not drawn on its $1 billion DIP facility, leaving Wards in a strong cash position with ample liquidity for the holiday and 1998 selling seasons. "Management has acted quickly in determining and implementing the necessary changes to Wards' business, which is evidenced by the margin improvements and reflected in the restructuring charges," said Roger Goddu, Chairman and CEO. "We believe that moving swiftly with these initiatives and putting the difficult decisions behind us enables all of our associates to focus on the important task at hand -- restoring Wards to profitability." "In a quarter which was heavily impacted by costs pertaining to our decision to seek bankruptcy protection and to our initial restructuring activities, we are encouraged by the dramatic improvement shown in margin rate and the revenue growth of The Signature Group," added John Workman, Executive Vice President, Corporate Restructuring. "As we move forward with our turnaround strategy, we will be concentrating on increased margin dollars as the driver of our business performance. We fully expect that the merchandise strategy and operational improvements we are instituting will produce growth in this important area in coming quarters." Montgomery Ward also announced that it has been given approval by the United States Bankruptcy Court in Delaware to exit its leases on eleven vacant properties. The properties, which were the subject of long-term lease agreements, include former warehouses, product service centers and retail facilities. The sites are located in a number of states across the country including Illinois, Tennessee, Minnesota and Pennsylvania. Wards, in addition to lease payments, was also responsible for real estate taxes, maintenance costs and insurance on the properties. "Our ability to shed a number of properties for which the company has no further need provides us with significant cost reductions, now and in the future." said Spencer Heine, President Montgomery Ward Properties and Executive Vice President, Secretary and General Counsel. "This is just one example of the important progress we are making in correcting cost inefficiencies and improving performance throughout the company. We will continue to be vigilant and quickly address situations where our assets are not being fully utilized and where critical savings can be realized." Montgomery Ward is one of the largest privately held retailers in the United States. Upon the completion of its announced store closings, Montgomery Ward will operate 295 full line stores in 37 states.