Filene’s Basement Finds a Buyer
By Tom Ryan
While Filene’s Basement
filed for bankruptcy last week, the bigger surprise to many was that the
legendary Boston upscale off-pricer appears to have avoided liquidation.
Two real estate firms made a bid to buy 17 of its 25 stores – including
the Boston flagship and Union Square, NY locations – with plans to operate
them under the same upscale off-price model.
The bankruptcy was blamed
on the economic downturn, poorly performing suburban stores, liquidity
issues that impaired buying, and increased competition.
Particularly harmful has been the temporary closing since 2007 of its flagship
store in Downtown Crossing in Boston as a result of a stalled construction
project. The longtime tourist attraction, famous for its ‘Running
of the Brides’ wedding gown sales, accounted for one-fifth of sales. Steep
discounts at upscale retailers such as Saks during the downturn also impacted
Filene’s Basement’s rock-bottom prices on luxury goods formula.
But some believe the
same problems that led to its first bankruptcy in 1999 never left. These
include greater competition from bigger rivals such as TJX, as well as
over-expansion in the nineties. While facing strong competitors such as
Century 21 in New York City, opening branches outside its
core market diluted its overall appeal.
"The branch stores
didn’t have the automatic markdowns [of unsold merchandise], the lunchtime
traffic, the running of the brides," Michael Tesler,
a partner at Retail Concepts, told The Boston Globe.
"Instead of seeing Filene’s Basement as something special, people saw
it as a store like any other."
Bob Gottlieb, president
of Sceptre Marketing Group, agreed. "The
intrigue of shopping at Filene’s Basement was mostly a Boston thing, a
New England thing," he said.
But Stanley Chera,
the founder of Crown Acquisitions, one of the bidders, said credit issues
at luxury retailers is opening up rare access to quality designer goods
for upscale off-pricers like Filene’s.
"People would come
to us if we had the right merchandise. The magic of Filene’s Basement is
well-known," Mr. Chera told The Boston Herald.
Crown, along with the Chetrit Group,
said the chain was making money at the store level, but overhead was too
a wonderful brand, and we have the expertise and the credit and cash to
do what the company really needs: good buying, paying the bills, lots of
money behind it and quality merchandise at good prices like the Century
Stanley Chera, the founder of Crown Acquisitions.
"It’s all current goods. It’s not stale merchandise."
The group’s $22 million
bid requires bankruptcy approval and faces an auction at which competing
offers may be offered.
How should Filene’s Basement be reorganized? Is it still a viable brand
and concept? How would you rate the market opportunity for upscale off-pricers
such as Filene’s and Century 21?
- Bidder has big plans for bankrupt
Filene’s Basement – The Boston Herald
- How Filene’s Basement got sold at
markdown – The Boston Globe