ch17_Binder1-1

ch17_Binder1-1 - March 9, 2000 Page One Feature 'Category...

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Unformatted text preview: March 9, 2000 Page One Feature 'Category Killers' Look Vulnerable, Not Deadly In a conference room high above midtown Manhattan, auctioneer Harold Bordwin tries to coax another bid from about 60 retailers, lawyers and wholesalers for the lease on the Just For Feet store in Huntsville, Ala. Mr. Bordwin, who is liquidating the bankrupt athletic-shoe chain, is angling to maximize the proceeds. "I have a bid for $10,000 from Shoe Show," he says. But he can't accept that sum because it won't cover the $98,000 the leaseholder owes to landlords, utilities and other claimants. Shoe Show's owner, Robert Tucker, shakes his head. His North Carolina chain isn't willing to raise its offer to cover the debt. "I don't want to be in this room next year," he drawls. The rest laugh. Just For Feet Inc., based in Birmingham, Ala., was one of a slew of "category killers" that remade the retailing landscape in the 1990s. Now, many of those specialty superstore chains are being killed off themselves, by poor strategy, weak execution, too much "me-too" competition and discounter Wal-Mart Stores Inc. And it hasn't helped that many time-strapped consumers are taking their business to the Internet or shopping at smaller outlets closer to home. The term "category killer" appeared in the 1980s, referring to pioneers such as Toys "R" Us Inc., whose huge specialty stores, with discount prices, were making whole categories of products unprofitable for higher-cost retailers. As long as they were underpricing department stores and mom-and-pops, the category killers couldn't be stopped. Kmart's Gamble The trend looked so hot that in 1990, discount retailer Kmart Corp. started buying and building superstore chains that sold office supplies, books, building materials and sporting goods. But Kmart's core business suffered, and rivals Wal-Mart and Target Corp., who stuck to their broad-line discount-store model, quickly surpassed it in both size and stock-market appeal. In 1995, investors forced out the Kmart chief executive responsible for the specialty-superstore strategy and demanded the spinoff of the chains. While Kmart now is on the mend, those spinoffs have had a tough time. Sports Authority Inc., the athletic chain, went public in 1994 at $16 a share and has posted losses for the past three years; Wednesday, it was at $2.25 in 4 p.m. New York Stock Exchange composite trading. OfficeMax Inc., which reported a 79% plunge in earnings for 1999, went public at $10 a share in 1995; Wednesday, it was at $6.3125 in 4 p.m. trading. And Kmart sold Builders Square Inc. in 1997 to home-improvement rival Hechinger's Inc., only to be saddled with a $230 million charge for lease guarantees last year when Hechinger's was liquidated....
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This note was uploaded on 01/27/2011 for the course ACCT 340 taught by Professor Marcum during the Spring '08 term at American.

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ch17_Binder1-1 - March 9, 2000 Page One Feature 'Category...

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