Retailing expert in fight for Pic'N'Save finds profit elusive.

Retailing expert in fight for Pic'N'Save finds profit elusive

A Long Beach investor whose retailing ventures have lost money in recent years would occupy a key post at Pic'N'Save Corp. if Girard Partners Ltd. wrests control of Pic'N'Save from its management.

Robert J. McNulty, a partner in David H. Batchelder's Girard Partners group, is slated to take a post on Pic'N'Save's board if the corporate-raiding Girard group is successful in its proxy fight and gains control of the board.

McNulty represents the putative "retailing smarts" of Girard Partners, but many of his various retail endeavors have not posted profits since at least 1986.

McNulty's big success was the $151 million sale of HomeClub Inc. to Zayre Corp. in 1986. He made a personal fortune in the sale of the company that he started in 1983 with about $5 million in venture capital. But, after the 1986 sale, Zayre management openly complained about the HomeClub deal because the warehouse chain was not as profitable as Zayre had expected it would be during the purchase negotiations.

Neither McNulty nor David H. Batchelder, leader of the Girard group and a former strategist for takeover artist T. Boone Pickens, returned telephone calls regarding McNulty's possible role in a Pic'N'Save takeover. But Securities and Exchange Commission documents and financial reports filed by McNulty companies show that some retail ventures have posted significant losses in recent years.

McNulty's SportsClub Inc. is the big failure. An eight-store sporting goods warehouse chain, SportsClub went from a $35 million venture offering to investors in 1986 to Chapter 11 bankruptcy and Chapter 7 liquidation by 1988. In the aftermath, McNulty blamed management and said that he still believes the idea of a giant discount sporting goods store could fly.

After an initial high-profile stance, including a feature story in the Torrance Daily Breeze, McNulty's participation in the Girard partnership has been downplayed to the media, raising speculation that Batchelder's group is more comfortable with McNulty in the silent partner's role than at center stage. A spokesman for McNulty, however, said that he is not commenting because of a "gentleman's agreement" between Pic'N'Save management and the Girard Group stipulating that they will not talk to the press until after the June 20 shareholders meting and proxy vote.

McNulty founded Long Beach-based HQ Office Supplies Warehouse Inc. in June 1988 and HQ Office International Inc., a Canadian subsidiary, in April, 1989. The president of privately owned American Business Ventures Inc., McNulty began serving as chairman of the board of the fledgling A.G. Automotive Warehouses Inc. late last year.

HQ lost $13.3 million ($1.10 a share) for the year ended Dec. 31 on revenues of $38.6 million. The Canadian HQ International subsidiary reported a development loss of $952,000 and A.G. Automotive is expected to report a first-quarter loss this week. The losses are expected in new business ventures, said company spokesmen, and to judge the companies on early returns is premature, they added.

McNulty's privately owned American Business Ventures has close links with the three publicly traded companies, operating as a landlord to the three fledgling ventures. Established in 1986 to invest in medium to large-scale privately and publicly held businesses, the three fledgling companies are ABV's main start-up ventures.

Raising about $18.1 million in public offerings for the three companies, McNulty has entered into private business deals with the three publicly traded entities through his ABV operation.

All three of the companies are headquartered at 115 Pine Ave. in Long Beach, a property owned by a limited partnership in which McNulty has a 30 percent interest. HQ Office Supplies pays $17,483 a month, HQ International pays $8,471 a month for its headquarters and A.G. Automotive pays $10,988 a month for its headquarters.

McNulty collects consulting fees from the three companies as well. HQ Office Supplies pays $13,000 a month to McNulty's American Business ventures.

HQ International paid American Business Ventures about $200,000 for a consulting agreement that expired April 30. According to the company's Securities and Exchange Commission filing, a new consulting agreement was being negotiated.

A.G. Automotive paid American Business Ventures consulting fees of $13,000 a month in an agreement that expired April 10.

The consulting fees were for ABV's aid in helping the companies start operations, according to the SEC filings.

In December 1989, ABV borrowed $230,000 from A.G. Automotive at 10 percent interest. The loan is due June 11, 1990.

Other aspects of the three companies' businesses are intertwined.

A.G.'s computer time and services are leased from HQ, at an average cost of $12,500 a month. A $33,000 cache of start-up office supplies was purchased by A.G. from HQ Office Supplies.

In October, 1989, A.G. purchased a car from McNulty for $25,000, to be used for company business.

A new retailer was brought into the Girard Partner's fold this week when Bill M. Thomas, a Pic'N'Save executive from 1971 to 1986, told the SEC that he had jumped aboard Girard's bandwagon. Thomas' addition to the group adds momentum to the bid, giving Girard's raiders an 11 percent stake in the company's shares outstanding.

Strengthening its stance, the Girard group also said it would dump Lewis B. Merrifield III. Pic'N'Save chairman and chief executive officer, if it gains control of the close-out retailer.