Weiner’s Stores, Inc.

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Weiner’s Stores, Inc.

6005 Westview Drive
Houston, Texas 77055
U.S.A.
Telephone: (713) 688-1331
Fax: (713) 688-6976
Web site: http://www.weiners.com

Public Company
Incorporated: 1991
Employees: 3,800
Sales: $276.8 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: WEIR
NAIC: 45299 All Other General Merchandise Stores

Houston-based Weiner’s Stores, Inc. is a discount retailer with more than 130 locations in Texas, Louisiana, and Mississippi. The shops offer both name brand and private label apparel and footwear, accessories, gift items, bed and bath products, as well as toys, fragrances, and electronics. Weiner’s promotes its stores, which are primarily located in urban strip malls and shopping centers, as community oriented. The company caters mostly to minority populations, and 80 percent of its clientele are African Americans and Hispanics. Weiner’s Stores was a family-run business until the mid-1990s, when it filed for Chapter 11 bankruptcy protection and brought in outside management.

Building Business: The First 60 Years

Isidore Weiner opened his first Weiner’s Store on Houston Avenue in Houston, Texas, in 1926. The store was a relatively small 3,000 square feet in size and was located on the outskirts of town, where the rents were lower and the competition less fierce. Unfortunately for Weiner, however, the timing of his store opening was less than opportune—the economic depression of the 1930s forced Weiner to file for bankruptcy in 1932. Weiner managed to evade ruin, however, and worked slowly to build up business once again. Eventually, Weiner was able to fully pay all creditors. After the nation emerged from the Depression, Weiner opened his second store, again in a remote locale. Although the decision to locate the store in a spot far from the increasingly popular downtown Houston area may have puzzled some, the strategy worked for Weiner, who purposely placed his stores in neighborhoods, where they could better serve the community.

Weiner’s Stores grew steadily and slowly until the late 1970s, when Isidore Weiner’s two sons, Sol and Leon, assumed command of the company. Although the titles of chairman or CEO were not adopted by the brothers, they were the leaders and primary owners of the business. Sol handled merchandising, while Leon took care of operations. The brothers implemented an expansion strategy for Weiner’s Stores, and the company opened an average of eight to 12 new stores a year over the next decade and a half. By the late 1980s there were more than 130 locations. Although most of the stores operated within a 300-mile radius of Houston, Weiner’s had expanded into the Dallas region, as well as in Louisiana. In 1988 Weiner’s opened outlets in the Louisiana towns of New Iberia and Lake Charles, and a year later the company planned to open three stores in the Baton Rouge area. The stores themselves had grown since Isidore Weiner opened the first 3,000-square-foot location. By the 1980s Weiner’s Stores averaged between 28,000 and 30,000 square feet and offered a wide range of value-priced clothing and accessories for the family.

By 1992 there were 151 Weiner’s outlets located in Texas and Louisiana, and the company continued to grow. The company looked to the Fort Worth area in the early 1990s. Although Fort Worth had struggled economically in the late 1980s and early 1990s, Weiner’s Stores felt the region presented positive opportunities for Weiner’s. In 1992 Weiner’s announced plans to open its first store in Tarrant County. Don Stine, Weiner’s director of advertising, addressed the economic uncertainties of the area and explained in the Fort Worth Star-Telegram, “If you moved Saks Fifth Avenue into Fort Worth, it might have a little trouble there right now, and then again, it might not.… We tend to do well in good times and bad.” Weiner’s added a second store in Tarrant County in 1994 and hoped to have eventually a total of six to eight stores operating in the area. The company, which did not build new stores but inhabited existing open spaces instead, stated that it would continue to be on the lookout for desirable properties in the Fort Worth area.

Increased Competition and Financial Challenges in the Early to Mid-1990s

After a favorable growth period in the 1980s, Weiner’s faced increasing challenges in the 1990s. As the retail industry began to enjoy high productivity in the mid-1980s following a long slump, new and aggressive competitors entered the fray. Numerous discount retailers, including such powerful businesses as TJ. Maxx, Marshall’s, and Venture, entered Weiner’s familiar markets, grabbing valuable market share. The popularity and increasing presence of such major discount department stores as Target, Kmart, and Wal-Mart stores also hurt Weiner’s Stores. In addition, not only did Weiner’s face competition in the discount retail sector, but it also struggled against traditional department stores, which waged their own battles against discounters by reducing prices and staging major sales promotions.

Coupled with the increased competition was an industrywide decline in profitability in the mid-1990s. Not only had the rise in competition created a saturated market, but the increased productivity of the late 1980s and early 1990s had led to weakened profitability as costs began to rise and cut into profit margins. According to the Daily News Record, more than 100,000 retailers had filed for bankruptcy protection between 1990 and 1996, a jump of 60 percent compared with the period ranging from 1984 to 1989. Hardest hit was the discount store market, in which most of the significant competitors, with the exception of the “Big Three” players—Wal-Mart, Kmart, and Target, had at some point struggled against bankruptcy. For example, Venture Stores, which had grown rapidly in the early 1990s, announced in 1995 that it would cease its expansion and remodel existing stores. Marshall’s stores, suffering from sagging sales, closed more than 280 of its 330 unprofitable stores before being acquired by TJX Companies, Inc., the parent company of rival TJ. Maxx. TJX in turn planned to close about 200 underperforming locations in 1996. Michael Exstein, an analyst with Paine Webber, explained to Bloomberg Business News, “Off-pricers are having a hard time drawing customers.… The industry is a mess.”

Even the “Big Three” of discount retailing, which accounted for about 80 percent of industry sales, were affected by increasing costs. Kmart, for instance, announced in 1995 that it would close 72 stores. Still, the superstores had advantages over smaller rivals, and the Daily News Record reported that super-centers were expected to account for nearly half of the sales in the discount store industry by the year 2000. In addition, except for growth of the supercenters, flat growth was projected for the discount store industry.

Regional retail chains felt the industrywide pinch strongly, and many struggled to remain afloat. Kurt Barnard, publisher of Barnard’s Retail Marketing Report, told the Houston Chronicle, “Regional discounters are wriggling and writhing in an effort to assure themselves a continued lease on life.… The outcome of those efforts is very much in doubt.” With competition from the dominant superstores and anticipated industry consolidation that would inevitably lead to a growing number of massive discount chains, small regional stores appeared to face a highly gloomy outlook.

In April 1995 Weiner’s Stores filed for Chapter 11 bankruptcy protection. The 158-store chain was affected by the same problems and aggressive competition plaguing similar businesses, and Weiner’s also blamed an unseasonably warm winter in 1994 that left store shelves filled with winter apparel that subsequently had to be sold for severely discounted prices. Weiner’s was left with liabilities of $70.4 million and assets of $96.7 million. Immediately after filing, Weiner’s received a $30 million line of credit from CIT Group/Business Credit, Inc., of New York. The loan allowed Weiner’s Stores to continue operations while restructuring debt. The company remained confident that Weiner’s Stores would pull through. Andy Weiner, grandson of founder Isidore and a vice-president at the company, told the Houston Chronicle, “We’ve been in business 69 years.… We’re going to be in business another 69 years.” Others in the local business community agreed with Weiner. Maury Aresty, president of the Houston Retail Merchants Association, said in the Houston Chronicle, “Weiners [sic] has always been a remarkably efficient machine. They have very low corporate overhead.… They have a young, bright team inheriting the business. They will be a lot stronger company when they emerge from bankruptcy.”

As a first step in its restructuring, Weiner’s Stores made plans to close ten unprofitable stores—five in the Houston region, three in Dallas, one in Longview, and one in Lafayette, Louisiana. In November 1995 Weiner’s announced additional closures, which included the exiting of Tarrant County. By December the company had closed 20 underperforming stores. In late 1995 Weiner’s made another significant move toward reorganization when it hired Herbert R. Douglas as the new president and CEO. Douglas was the first leader in Weiner’s history who was not a member of the family. Douglas also was named to the company’s board of directors, which would continue to be chaired by Sol and Leon Weiner. The Weiner brothers announced they would head into semiretirement and were optimistic about the new management and future of Weiner’s Stores. Sol Weiner told the Houston Chronicle, “It’s a changing of the guard. I think it’s another era in the firm, you could say.”

Company Perspectives:

Our strategy is to offer our customer a unique shopping experience which emphasizes the following:

Value priced, branded merchandise tailored to the distinct needs of our urban and rural customers; Merchandise offerings for the entire family and home; Provide better assortment and pricing than off-price retailers and specialty stores; Convenient neighborhood stores of approximately 25,000 square feet located predominantly in strip shopping centers; and Local buyers who understand regional preferences and trends

Restructuring and Regrowth: Late 1990s

Herbert Douglas, who had 32 years of experience in the retail industry, began to tackle the task of bringing the struggling retailer out of bankruptcy protection. Douglas had served most recently as the CEO of New Jersey-based James-way, a company that Douglas led through liquidation in December 1995. At Weiner’s, Douglas assembled a management team that included several people from Jamesway—Jerome Feller as vice-president and general merchandise manager; Joseph Kassa as vice-president of sales, promotion, marketing, and real estate; John Dineen as director of merchandise for men’s and children’s clothing; and James Berens as vice-president of store operations.

Unfortunately for Douglas, increased competition and a warm winter were not the only reasons for slumping sales at Weiner’s Stores. The new management team hired a market research firm to conduct a survey to assess customer opinions of Weiner’s and learned that the stores had a poor image among customers. Weiner’s Stores had neglected to keep up with modern demands, the survey indicated, and Weiner’s offered a hodgepodge of close-out merchandise that was often outdated. Douglas explained in Discount Store News, “Most customers thought that Weiner’s had old, defective, irregular merchandise of low quality. They said the stores were very difficult to shop, the sales associates were not friendly, and the return policy was not good.” In addition, stores were disorganized and dirty, poorly lit, and filled with broken shelving. “There were tens of millions of square feet added to added to Texas’ retail scene during the early 90s, and Weiner’s never changed,” Douglas continued. “The stores were never renovated, and there was no new technology brought into the chain. No one had control of what was going onto the sales floor, and the company was run with an enormous inventory.”

One of the first items on the agenda of Weiner’s new management was to liquidate $40 million worth of outdated merchandise to lower excess inventory levels. The strategy of buying close-out apparel and merchandise in mass quantities, often regardless of quality or style, was changed to a more select buying policy. Weiner’s cut its vendor base from about 800 people to 400 people and worked to build closer relationships with its vendors. Stores were remodeled along a more consumer-friendly design and were modernized with new computerized systems. Weiner’s also launched a major advertising campaign designed to update and reinvigorate the chain’s stodgy image. Douglas outlined the need for a new marketing tactic in Discount Store News and said, “When we took over, we found that there was so much dislike for our company that we felt we needed something to represent us that was extremely consumer-friendly.” The resultant campaign featured a humorous superhero named Weinerman. Weinerman’s cause was to fight for lower apparel prices and prevent consumers from overpaying for name-brand items. His arch rival was Needless Markup.

Weiner’s Stores also adopted a new mission to serve a predominantly minority clientele. Many of the company’s stores that were located in predominantly white, suburban areas were closed as Weiner’s focused on lower income, urban neighborhoods. The store merchandise was altered to include more name-brand items, such as Levi’s, Nike, Reebok, adidas, and Fila. Explained Douglas in Discount Store News, “Our customer is mostly an African-American or Hispanic inner city resident, and labels are very important to them.” To better serve its clientele, Weiner’s also began to carry a wider variety of sizes.

With its new structure in place, Weiner’s Stores emerged from bankruptcy protection in August 1997. Since filing for Chapter 11 bankruptcy protection, Weiner’s had closed 27 unprofitable stores and opened several new locations, including two in the Dallas region. By mid-1997 only one member of the Weiner family remained with the company—Michael Klaiman, son-in-law of Sol Weiner, was the director of the shoe division. Weiner’s had sales of about $263.6 million for the fiscal year ended January 31, 1997.

In the late 1990s Weiner’s Stores worked to adjust to its new corporate mission. The year 1998 proved to be a difficult one for a number of reasons. Ironing out the quirks of a new merchandising system affected sales during the first quarter, and during the second and third quarters the industrywide drop in demand for Levi’s jeans and name-brand athletic footwear led to decreased profitability, despite positive sales growth. Also during the third quarter, many stores were adversely affected by extreme weather conditions, including floods and hurricanes. Because of these factors, Weiner’s reported a net loss of $5.0 million on revenues of $260.9 million for the fiscal year ended January 30, 1999. The company reported a net income of $12.7 million during the previous year and a net loss of $17.2 million the year before that. Bankruptcy-related items, including a gain of $18.7 million during 1997 due to the discharge of debt, affected Weiner’s bottom line in 1996 and 1997.

Although sales were not as strong as Weiner’s had hoped during 1998, the company managed to log some positive events. Weiner’s opened seven new stores and closed three and added “Bed and Bath” sections to a number of its stores, marking the company’s first foray beyond apparel and footwear. By early 1999 Bed and Bath shops were in 35 stores, and during the fourth quarter that ended January 1999, Bed and Bath shops contributed about $2.7 million in sales. In the summer of 1998 Weiner’s returned to the Fort Worth region and opened a second store in the area a year later. Weiner’s was profitable for the first nine months of 1999, earning $463,000 during the second quarter on sales of $79.53 million. The company continued to expand geographically, opening new stores in Mississippi, and added more variety, including toys, candy, videos, and electronics, to its merchandise mix.

Key Dates:

1926:: Isidore Weiner opens the first Weiner’s Store in Houston, Texas.
1978:: Brothers Sol B. Weiner and Leon Weiner assume leadership of Weiner’s Stores.
1991:: Company incorporates.
1995:: Weiner’s files for Chapter 11 bankruptcy protection. Herbert Douglas joins Weiner’s Stores as president and CEO.
1997:: Weiner’s emerges from bankruptcy protection.
1998:: Weiner’s becomes a publicly traded company on the over-the-counter bulletin board service.

As Weiner’s Stores greeted a new century, it had 132 store locations. Weiner’s reported revenues of $276.8 million for the year ended January 29, 2000, an increase of 6.1 percent compared with the previous year. The company planned to open ten new stores during 2000, including several in a new market—Arkansas. Weiner’s, which had teetered on the brink of extinction twice in its 73 years, would face future challenges as it battled rivals in the highly competitive discount retail store industry. Weiner’s appeared to have a solid future, however, serving the retail needs of its preferred niche—the minority communities in Texas, Louisiana, Mississippi, and Arkansas.