Amazing Savings to reorganize in midst of bankruptcy

DSN Retailing Today,  Feb 7, 2005  by Debbie Howell

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SOUTH PLAINFIELD, N.J. -- Buying a struggling chain more times than not becomes the purchaser's undoing, as was the ease recently with regional closeout specialist Amazing Savings. The company, which purchased the 74-store chain Odd Job Stores in mid-2003, last month filed for bankruptcy protection and announced plans to close most stores.

Of the 86 stores the company operates called Amazing Savings and Mazel, just 17 will remain open as the company attempts to reorganize.

Going-out-of-business sales commenced Jan. 14 at 69 stores. Inventory sales are also taking place at the remaining 17 stores, with plans to remerchandise and reopen those locations. Stores are located in nine Eastern and Midwestern states. The chain's revenue for the period ended Nov. 27, 2004, was $194.3 million, according to a court filing.

A motion from Amazing Savings shed light on the company's travails. It said in mid-2004, Amazing Savings "experienced a dramatic decrease in customer traffic and a significant decline in sales." Then on Jan. 6, 2005, the company defaulted on its credit agreement, leading to bankruptcy. On Nov. 27, the company listed assets of $67.5 million and liabilities of $90 million.

As of press time, ceo Jeffrey Parker did not return calls seeking comment regarding the sales decline. A press release from Amazing Savings about the liquidation of $44 million in inventory from all 86 stores indicated that the company "hopes to try to reorganize after these sales and emerge from the bankruptcy process as a viable business."

The Ozer Group's Frank Morton, representative of a consortium of retail specialists hired to handle the liquidation, said he anticipated the group of 69 stores would be closed within weeks.

"The 17 [remaining] stores will be liquidated to the piece, but then re-inventoried and run as part of a 'going concern' operation," Morton told DSN Retailing Today.

Closeout merchandise sold by Amazing Savings includes casual family apparel, household merchandise and electrics. It is unknown how the mix will change in the remaining stores, though one scenario is a return to Amazing Savings' old format of upscale closeout goods.

Privately owned Amazing Savings operated 14 stores at the time it purchased Odd Job Stores in July 2003. Odd Job Stores, public at that time, had been unable to reverse a three-year pattern of losses and declining sales. Amazing Savings wanted to use the deal to jumpstart its own growth, intending to affect a turnaround at the struggling Odd Job stores.

Although Amazing Savings' downfall likely related to taking on a high-risk turnaround situation, the fact that economic pressures were hurting others in the extreme-value sector didn't help. High gas and fuel prices have impacted low-income shoppers this past year, leading to low or negative comparable-store sales in recent months at chains such as Big Lots, the largest closeout chain with annual sales of more than $4 billion.

Patrick McKeever, an analyst with SunTrust Robinson Humphrey, suggested at least part of the trouble at Amazing Savings was related to a tough market this past year in closeout retailing.

"A lot of the weakness we saw after the first quarter seemed closely related to what we saw with gasoline prices. These companies, Big Lots included, are generally speaking going after a low-income consumer. They're going after the low-income consumer's discretionary dollar, and there just weren't a lot of discretionary dollars in that space," McKeever said.

For extreme-value retailers that did grow same-store sales, such as Dollar General, a great deal related to sales of need items such as food and household goods, he added.

"I have to think a lot of it was just environmental," McKeever said of Amazing Savings' downturn. "It was a tough year. Gas is a big overhang. Heating costs are a big overhang. But definitely, some things are starting to stabilize or improve."

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