Gimbels To Sell 7 Area Stores Deal Concluded With N.y. Firm

Posted: June 18, 1986

Gimbels, one of Philadelphia's most venerable retailers, is all but certain to vanish from the area following the announcement yesterday that seven local stores will be sold.

The chain's owner, Batus Inc. of Louisville, Ky., announced plans to sell 10 Gimbels stores - including seven of the nine Gimbels outlets in Philadelphia and its suburbs - to Allied Stores Corp. of New York. The deal, which is subject to federal approval, is valued at between $150 million and $175 million.

The companies had been negotiating since early this year, when Batus announced that it would sell all of its 36 Gimbels stores throughout the nation as part of a major corporate restructuring. Batus acquired the Gimbels stores in 1973, only to see the chain lose its competitive edge to newcomers such as Bamberger's.

Nine of the 10 Gimbels stores purchased will be converted to Allied's chain of Stern's department stores, said Allied spokesman Orren F. Knauer. Included in that list are the seven Philadelphia-area stores, plus two New York stores, in Yonkers and Garden City. The 10th Gimbels, in Lancaster, Pa., will become part of Allied's chain of Pomeroy's stores, Knauer said.

The remaining two Gimbels stores in the Philadelphia area, the Upper Darby and Cheltenham stores, could simply be closed. Batus spokesman Gene Russell said the two stores, which employ a total of about 300 people, would close for inventory at the end of business tomorrow. In about a week, both will reopen for major sales, he said.

"Then at the end of 12 weeks, the Upper Darby store will close. Period," Russell said. "The Cheltenham store will continue to operate for an indefinite period after the 12 weeks."

Russell said Batus was continuing to seek a buyer for the Cheltenham store. Although Russell would not comment on the store's fate if a buyer is not found, retail analysts said the store would almost certainly be shut.

One clerk at the Upper Darby store said employees had feared such news.

"We could see it coming," said the clerk, who declined to give her name. ''As soon as we heard that they had canceled the orders for fall merchandise, we knew something was happening."

Russell said Batus would provide severance pay, counseling and placement services for those workers, as well as for workers at the other seven Gimbels stores who are not offered jobs at the new Stern's stores.

In all, the seven Gimbels stores that are to become Stern's stores employ about 2,000 people. The stores are located at the Gallery in Center City, the Roosevelt Mall, the King of Prussia Plaza, the Oxford Valley Mall in Langhorne, the Granite Run Mall near Media and at the Echelon and Moorestown

Malls in South Jersey.

Allied's Knauer could not say how many of the 2,000 workers would be offered jobs.

"The people who work at those stores will be given every opportunity to work at the new Stern's stores," he said. "But there will be places, like at the central location, where we don't want duplication."

Knauer said Allied took a long look at the Upper Darby and Cheltenham stores, but rejected both.

"The Upper Darby store would have required a substantial cash investment," he said. "And the Cheltenham store never fit in with our program."

Retail analysts said the sale would be beneficial to both companies. In addition to the store locations, the sale includes receivables and related inventories, plus the lease on the Gimbels distribution center in Jersey City.

Allied, the nation's fourth-largest department-store operator, with 1985 sales of $4.1 billion, has been seeking new markets for its 17-store Stern's chain, which is now situated in New York and New Jersey. Analysts described Stern's as a well-managed, aggressively marketed department-store chain that should flourish in its new Philadelphia market.

Analyst N. Richard Nelson Jr. of Duff & Phelps Inc. of Chicago estimated that Stern's generated sales of $420 million last year. Nelson said Stern's had sales of about $150 per square foot, which ranked it high on the industry's measure.

By comparison, the Gimbels East division, which included the Philadelphia stores, had sales of $94 per square foot. The division posted a loss of $25.9 million last year on sales of $470 million.

"The Gimbels stores were not very productive for Batus, so Allied probably got a good buy," said Nelson. "They will probably make winners out of those stores."

Batus, meanwhile, stands to shed a lackluster part of its $3.5 billion retailing business. In addition to the sale to Allied, Batus yesterday said it was selling a Gimbels store in Paramus, N.J., to Associated Dry Goods Corp.

Batus is also selling its Kohl's stores in Wisconsin and Illinois; its Frederick & Nelson stores in Washington and Oregon; and its Crescent stores in Washington.

With yesterday's sale, Russell said, the company has reached agreements on 59 of the 93 stores it intends to sell. Only 16 Gimbels stores are left now when the Upper Darby and Cheltenham stores are included, he said.

Retailing analysts believe Gimbels' appeal eroded because it was too broad in its marketing. New entries such as Bamberger's and veterans such as Strawbridge & Clothier have fared better by aiming at smaller portions of the enormous middle-class market, they said.

Still, Gimbels will be missed.

"This used to be a nice shopping district," said Rhonda Miller, a Yeadon resident who has shopped regularly at the Upper Darby Gimbels. "But over the years, everything has changed. If Gimbels shuts down, you'll only have one department store left around here - J.C. Penney."

And, for Philadelphians, there is another casualty of yesterday's announcements. At least for this year, the traditional Gimbels Thanksgiving Day Parade is off, Knauer said.

"Gimbels has done nothing in terms of planning for this year's parade," he said. "Putting a parade like this together is a year-round job, so there's no way we can do it this year."

Knauer added, however, that Stern's would consider reviving the Thanksgiving parade in subsequent years.

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