Eddie Bauer is off the selling block. Bankrupt retailer Spiegel said yesterday it would reorganize around its profitable Eddie Bauer division.
Eddie Bauer is off the selling block.
Bankrupt retailer Spiegel said yesterday it would reorganize around its profitable Eddie Bauer division, which it had previously put up for sale, and form a new parent company, Eddie Bauer Holdings. That company will be based in Redmond, where Eddie Bauer has 600 headquarters employees.
The reorganized company will shutter all 34 of its Eddie Bauer Home stores in the second half of 2005 to focus on its core apparel and accessories business, which accounts for more than 90 percent of sales.
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The Home stores posted sales of $48 million in fiscal 2004 — a 15 percent decline from the prior year.
These changes are part of Spiegel’s proposed reorganization plan — filed with federal bankruptcy court in New York — in a move Spiegel said would take it a step closer to completing its restructuring.
The retailer said Eddie Bauer would continue to sell its outdoor-inspired clothes, gear and home furnishings through its 418 stores, catalogs and the Internet.
Bill Kosturos, Spiegel’s interim CEO and managing partner in turnaround specialist Alvarez and Marsal, said the reorganization plan values Eddie Bauer at $865 million. The company did not sell Eddie Bauer because buyers failed to offer what executives thought it was worth, he said.
Eddie Bauer reorganized
Corporate parent: Eddie Bauer Holdings, to be owned by creditors of Spiegel
Headquarters: Redmond, with 600 corporate employees
Planned cuts in 2005: 34 Eddie Bauer Home stores will be closed
Projected 2005 results: Estimated sales of $1.12 billion, down 5.5 percent (adjusted for discontinued operations); estimated net income of $23.5 million
Source: Spiegel filings in Bankruptcy Court
The company did not rule out a future sale provided it received the right offer.
“We are very confident in Eddie Bauer going forward,” Kosturos said. “This has just been a home run for everyone.”
Spiegel’s filings yesterday offered the first close look at Eddie Bauer in more than a decade, since it did not break out financial details on its units in the past.
Excluding taxes and reorganization costs, Eddie Bauer’s profit was $108 million in 2004, up from $102 million in 2003. Revenue in 2004 was $1.24 billion, compared with $1.42 billion a year earlier.
CEO Fabian Månsson, who joined the company in July 2002, said such financial disclosures have made it easier for the company to attract experienced senior management. In the past six months, it has hired vice presidents that headed departments for J. Crew, Tommy Hilfiger and Ann Taylor.
“It has blown a lot of people away based on what their perception was,” Månsson said.
Founded in Seattle in 1920 by rugged outdoorsman Eddie Bauer, the company was purchased in 1988 by Downers Grove, Ill.-based Spiegel, which added 300 stores over the next eight years.
Spiegel filed for bankruptcy in March 2003. Analysts attributed it to huge losses in Spiegel’s credit-card business and noted that the Eddie Bauer brand no longer had the kind of cachet that had allowed it to charge premium prices in the causal apparel market.
Spiegel last April put the Eddie Bauer unit up for sale after the parent company failed to strike a deal with creditors to restructure the company.
Under the reorganization plan, general unsecured creditors, excluding Spiegel Holdings and its affiliates, would recover about 90 percent of their claims through a combination of cash and common stock, Spiegel said.
The company estimated about $1.28 billion in general unsecured creditors’ claims would be met this way and said creditors, with some exclusions, would initially receive 100 percent of the equity in the new company.
Spiegel said it expects a hearing to be held on its disclosure statement in bankruptcy court on March 29.
Reuters and Bloomberg contributed
to this report.