Wickes keeps wobbling in latest financial report.

Wickes keeps wobbling in latest financial report

Wickes Cos. Inc., the Santa Monica-based retailer-manufacturer bought out by two New York leveraged-buyout firms in 1988, last week turned in a mixed financial report for its latest fiscal year, which ended Jan. 27.

Still best known as the one-time home of television pitchman and former Chairman Sanford Sigoloff, the debt-laden Wickes reported a loss on continuing operations of $170.3 million for the year, on overall revenues of $2.99 billion. That compared with losses on continuing operations of $119.4 million on revenues of $3.22 billion in the previous fiscal year.

Wickes had enough cash to buy back $850 million worth of debt at face value in 1989 because it has sold almost $1.3 billion worth of subsidiaries since the acquisition - including Wickes Furniture and the Orchard Supply hardware retailing chain. As a result, it has cut annual interest owed on debt to $140 million from $220 million, Wickes reported.

Wickes also announced last week it would buy back up to $125 million more of its debt this year, depending upon market conditions. Wickes also reported it had $200 million in free cash to meet obligations.

Separately, the latest figures reveal that Sigoloff's aborted buyout effort of Wickes in 1988 may have cost shareholders even more than the $25 million initially reported. Wickes said last week, "During 1988 a total of $51.2 million in charges were reflected in earnings as a result of an unsuccessful acquisition attempt by prior management and certain severance costs."

Wickes, although now a private company, is still required by federal regulations to report financial data because of its publicly traded bonds. The company was bought in December 1988 by Wasserstein Peralla L.P. and the Blackstone Capital Partners.

In a prepared statement, Wickes Co-chairman and Chief Executive Officer James Birle said the "operations of Wickes have yet to return to their historical levels of profitability." Birle has been unavailable for interviews for several months.

Wickes bonds have traded down since last October, partly on market news that has savaged the whole junk bond market, and partly because New York-based credit-rating agency Moody's issued a December that Wickes may be unable to service its debt. Moody's rates Wickes debt as "Caa," or "poor to default."

In the junk bond markets last week, Wickes debt traded for between 39 cents and 73 cents per dollar of face value, for effective current yields between 16 percent and 27 percent, depending maturity and subordination. For example, subordinated 15 percent Wickes bonds, due 1995, traded last week for 57 cents of face value, for an effective current yield of 26.2 percent.

Traders are mixed on whether the Wickes bonds, despite hefty interest payments and the potential for capital appreciation, are a good investment.

Wickes' problem is fairly simple: Its operations do not generate enough cash to meet interest payments. It has been selling assets to pay down debt, but appears to have come to the end of the road in terms of selling subsidiaries.

"Wickes is a company at the mercy of the economy," said Jay Lustig, director of the high-yield bond department at Drake Capital Securities Inc. in Santa Monica. "I feel somewhere along the line they will have to do a debt restructuring (reschedule debt payments). If I was looking to buy a bond, Wickes wouldn't be on the list."

The company's main lines of business are its chain of 119 Builder's Emporium hardware retail stores, its Collins & Aikman textile and wallcovering manufacturing operations, and its Kayser-Roth Hosiery operations. Wickes also manufactures automotive products for domestic manufacturers and for the automotive "aftermarket" of consumers and repair shops.