Carter Hawley Hale dreams of a green Christmas: retailer's survival may hinge on brisk holiday sales.

Carter Hawley Hale dreams of a green Christmas

Retailer's survival may hinge on brisk holiday sales

Bankrupt Carter Hawley Hale Stores Inc.'s successful reorganization hinges on its performance during the upcoming holiday season, according to both sources and documents filed in bankruptcy court.

"The only quarter they can make any money is Christmas," said David Jackson, a retail analyst with Beverly Hills-based Western Group, a brokerage firm.

Carter Hawley officials underlined the importance of the Thanksgiving-through-New Year's season in a document asking for a nine-and-a-half-month extension of the time the company has the exclusive right to file a reorganization plan with the court. The original deadline was this month, but U.S. Bankruptcy Court Judge James Dooley, who is known in legal circles as a pro-debtor judge, last week extended the deadline to March 31, 1992.

During this time, only Carter Hawley itself can file a reorganization plan. Creditors or other players in the bankruptcy have to wait until after the exclusivity deadline before they can file a plan.

"The holiday season is so pivotal to merchandisers like Carter Hawley that any long-range business plan which did not take these sales figures into account would risk serious inaccuracy," quotes the Carter Hawley document.

Los Angeles-based Carter Hawley, parent of the 43-store Broadway-Southern California department store chain and other outlets, filed for Chapter 11 bankruptcy protection Feb. 11.

The company last week reported a loss of $32.4 million on revenues of $430 million in its latest quarter ended May 4. Because Carter Hawley recently changed its fiscal year, this quarter can best be compared to the company's fiscal third quarter 1990, when Carter Hawley lost $6.6 million on revenues of $591 million.

"It's a little better than the goal we set out," said Carter Hawley spokesman Bill Dombrowski.

The latest loss, tied in with a projected loss for the next quarter and a loss of $72 million during the quarter preceding this one, indicates the holiday season quarter is the only time Carter Hawley may show a profit, Jackson said.

Carter Hawley's request for a post-holiday extension is legitimate because department store performance is more cyclical than that of specialty stores, said Richard Hastings, senior retail credit analyst with Solo Credit Service Corp. in New York.

But a document filed by Carter Hawley's official unsecured creditors' committee argues "one holiday season will not provide all the answers needed."

Formulating a reorganization plan will always involve making projections, and there is no reason Carter Hawley can't proceed with formulating a conceptual plan, the document states.

The Carter Hawley document counters that a post-holiday extension is necessary because, between now and then, Carter Hawley management plans to formulate and implement programs that will help with the company's restructuring and "set the stage" for both short-term performance and long-term profitability.

Dombrowski outlined the changes the company has made and plans. Since October 1990, Carter Hawley has implemented programs that will save $85 million during the current fiscal year. These include consolidations of operations and generally being "tough on the expense line," Dombrowski said.

The company has also:

* Announced the consolidation of the Weinstocks and Emporium department stores operations.

* Reduced the size of its information services in Anaheim.

* Received court approval to consolidate its credit card operations in Phoenix.

* Closed three company clearance centers.

In addition the company has strengthened its merchandise in the housewares and childrens departments of the Broadway stores and has a new advertising format in the Los Angeles Times, Dombrowski added.

All of these changes should improve sales and profits both before and during the upcoming holiday season, he said.

Most of Carter Hawley's changes are on the cost side of the business, rather than the demand side, said Ira Kalish, an economist with Management Horizons, a retail consulting firm in Dublin, Ohio. Cutting costs sets the stage for long-term profits, and if the changes are successfully implemented before Christmas, it should help the company's profits during that time, he said.

Retailers have tended toward cutting costs in recent years to help profits, rather than just trying to improve sales, Kalish added.

"It's always Christmas in the merchandising business," a creditors' committee document stated. It also said, "The debtor has admitted that virtually the entire calendar year is taken up with planning, executing and analyzing the holiday season."

With an extension "there is nothing to prevent the debtor from making the same argument next year, since it would be time to launch into planning the 1992 holiday season," the document goes on to say.

Carter Hawley's extension of nine-and-a-half months is unprecedented in bankruptcy history, noted Jeffrey Werbalowsky, financial adviser to the creditors committee. "They got it in one fell swoop," which is "something I've never heard of before," he said.

There have been extensions as long as Carter Hawley's, he explained, but they are usually granted in 90-day or 120-day increments.

Carter Hawley gave other reasons for wanting an extension aside from the significance of the holiday season. The company's case is one of the largest ever filed in the Central District of California, making this case one beyond ordinary size and complexity, the Carter Hawley document states.

Yet the creditors' committee document states that the corporate structure of Carter Hawley is simple, making the basic variables to be considered in the plan formulation process "less complicated than the debtor would have the court believe."