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AFTER ROUGH AND TUMBLE TIMES, ROSE'S STORES READY FOR BATTLE

AFTER ROUGH AND TUMBLE TIMES, ROSE'S STORES READY FOR BATTLE

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Armed with financing and a new marketing strategy, Rose's Stores heads back into the discounters' battle.

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The management team at Rose's Stores Inc., equipped with a long-term financing agreement and a new marketing strategy, was ready for the analysts.

They assembled last week, about a dozen followers of Rose's stock, at the company's Henderson headquarters. And some of them came away impressed.``We didn't do this to hype our stock,' said George Jones, who took over as the chief executive at Rose's last summer. ``This was for analysts who showed interest.'

The past few years have been rough for Rose's, with company stock plummeting from a high of nearly $23 to less than $2 per share. The company lost nearly $28 million last year and another $4 million in the first quarter of 1992. That was followed by arduous negotiations for a long-term lending agreement to stock its stores.

An agreement was reached earlier this month, but not before the company had come close to filing for bankruptcy protection. Now there's a new marketing strategy aimed at getting the company back on firm footing.

``They basically said the problems that occurred at Rose's are fixable,' said Guy Ford of Scott & Stringfellow in Richmond. ``They've got a window to turn it around.

``The problems, excluding competition, really have been merchandising ones. It (strategy) may not work. But they have a history of being able to manage retail operations,' he said.

``I personally feel they can make money, they can survive,' said Larry Coates of Legg Mason in Raleigh. ``The question is how long will it take to get through the transition period? Can they ever make the margins that Wal-Mart makes? Probably not.'

Rose's, a chain of 217 stores, 10 in the Triad, does hope to recapture some of the success that it enjoyed before the boom of retail giants like Wal-Mart and Kmart.

``We know we're not there yet, but some of our customers tell me it's getting better,' Jones said.

``But it hasn't been without its challenges and frustrations,' he said. ``We know this is not going to turn around overnight.'

Jones described the company's problems as a Catch-22 situation.

Without the loan agreement, the chain did not have the money to stock its shelves. The credit problems compounded when flyers, often prepared months in advance, advertised sale items that never made it to stores.

``The customers felt they were lied to, and this is a big thing we have to overcome. It's like you invite somebody over for dinner and there's no food,' he said in an interview at the company's headquarters on Henderson's main thoroughfare.

Competition from Wal-Mart and Kmart is something Rose's founders didn't have to contend with.

Founded as a small chain of five-and-dime stores in 1915 by Paul H. Rose, the family-owned company enjoyed decades of growth. By the 1930s, Rose's had invaded many southeastern markets.

The good times continued during the 1960s and into the 1970s, when the Rose family began replacing smaller variety stores with larger discount stores.

``Our troubles began in the mid-1980s when Wal-Mart entered our markets and brought in tougher competition,' said Jones, the first executive from outside the Rose family to run the company. ``Ever since then we've been losing market share to Wal-Mart and Kmart.'

Rose's has most of its stores in small, rural towns in the Southeast, a market that also was attractive to the late Sam Walton. Wal-Mart now competes in 70 percent of Rose's markets, and Kmart competes in nine of every 10.

There's even a Wal-Mart less than 10 miles from Henderson.

``In some ways we're glad they put one in close to our headquarters,' Jones said. ``This way we can go there any time we want to see what's happening at Wal-Mart.'

Jones, who was courted from Target Stores of Minneapolis, said Rose's recorded more than 100 million sales transactions last year.

``The problem is the average transaction at Rose's was about $14 while at Target it was more like $29,' he said. ``If we could get each of our customers to spend $1 more, that's $100 million in revenue.'

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