BUSINESS, Page 77Special Report: Raiders on The RunDebacle on 34th StreetHow takeover debt helped kill off the venerable B. Altman chainBy Barbara Rudolph
As shoppers streamed through the B. Altman department store in
Manhattan last week, many of them looked wistfully at the lush
elegance that surrounded them. The Renaissance-style emporium,
completed in 1914 and situated across the street from the Empire
State Building at 34th Street and Fifth Avenue, boasts crystal
chandeliers and parquet floors, lofty ceilings and broad aisles.
B. Altman, with its 124-year-old reputation for quality and
gentility, is going out of business. Six of Altman's seven stores,
situated mostly in New York, Pennsylvania and New Jersey, will be
shuttered next month because its current owners were unable to
attract any suitable bids during its six weeks on the block. Though
the chain was long past its glory years, it finally expired at the
hands of George Herscu, an overleveraged Australian corporate
raider whose L.J. Hooker Corp. bought B. Altman in 1987.
Like other department-store chains, B. Altman has been hurt by
weak retail sales and tough competition from specialty outlets.
Several other chains are for sale by their foreign owners: Canada's
Campeau is trying to unload Bloomingdale's, while Britain's B.A.T
Industries has put Saks Fifth Avenue and Marshall Field's on the
block. However, Altman's problems went deeper, in part because it
had acquired a dowdy, passe image. The company might have been
turned around by the right owner, but Herscu, saddled with $1.5
billion in debts, had neither the cash nor the vision to pull off
such a difficult renovation.
The chain was founded in 1865 by Benjamin Altman, the son of
a milliner. In recent decades, the stores were run by the Altman
Foundation, which gave $500,000 of the firm's profits to charities
each year. Four years ago, the foundation sold Altman's to B.A.
Realty Associates for a price estimated at more than $100 million.
The investors then sold the chain, without the real estate, to two
accountants, Anthony Conti and Philip Semprevivo, who quickly cut
costs and revived the store's merchandising by turning over some
departments to savvy outside retailers like toy seller F.A.O.
Schwarz. After losing $17 million in 1985, Altman's earned a $3.5
million profit the following year.
Herscu entered the picture in 1987. The Rumanian-born survivor
of a Nazi labor camp, Herscu immigrated to Australia, made a
fortune as a homebuilder and became famous for his flashy style.
(His mansion is designed to look like Tara in Gone With the Wind.)
He decided that U.S. retailing was a glamorous and growing
business, so his Hooker Corp. bought B. Altman and the Bonwit
Teller chain, which has grown to 17 stores, for $150 million.
By the beginning of this year, though, Herscu found himself in
serious trouble. Hit by rising interest rates in Australia and
declining retail sales in the U.S., the 61-year-old empire builder
did not have enough cash to weather the slowdown. By August,
Hooker's U.S. subsidiary filed for bankruptcy, and Herscu resigned
as chief executive.
Toward the end, B. Altman was losing more than $4 million a
month. Retailing experts estimated that any potential savior would
have to spend as much as $100 million to renovate the stores and
rebuild basic inventories. Stock had become severely depleted
during the past year, in part because manufacturers refused to
extend credit to the store and withheld clothing shipments. The
bankruptcy court put the chain up for sale but decided to liquidate
when no acceptable bidders came forward.
The going-out-of-business sale, which began the day after
Thanksgiving, was hailed in full-page newspaper ads promising 20%
discounts across the board. On the first day, a crowd of shoppers
waited in line for more than an hour before the paneled doors were
opened. The crush of people was so intense that fights broke out
and fire fighters had to lock the doors to keep any more shoppers
from squeezing inside.
Replacing Herscu as L.J. Hooker's chief was Sanford Sigoloff,
a turnaround king who says he was not surprised to see B. Altman
die. "With so many choice properties on the market, like
Bloomingdale's and Saks Fifth Avenue, who would want Altman's? I
hate to say the store was old, but it was outmoded." KMO Realty
Partners, which now owns Altman's real estate, controls the rights
to the store's name. KMO will probably try to make some use of it,
perhaps selling it to an apparel maker or retailer, but the B.
Altman name will probably never grace another department store.
That prospect is disappointing to Altman's devotees. "I'll be
very sorry to see it go," said G.V. Biden, a customer since 1951.
As shoppers last week scouted for bargains among Ralph Lauren
shirts and Anne Klein coats, some decided to hold out for even
steeper discounts. Sigoloff concedes that in the next few weeks
"you'll see some serious price cutting as we try to move the older
B. Altman inventory." GOING OUT OF BUSINESS, blared the bright red
signs scattered throughout the old emporium. CLOSING OUR DOORS
