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VALUE MERCHANTS INC. REPORTS FISCAL '92 RESULTS; COMMENTS ON FISCAL 1993 PLANS

 MILWAUKEE, May 4 /PRNewswire/ -- Value Merchants, Inc. (NYSE: VMI), a Milwaukee-based national retailer and wholesaler of close-out merchandise, today reported unaudited financial results for its fourth quarter and fiscal year ended January 30, 1993. "For the fourth quarter, Value Merchants reported net income totaling $1,594,000, or $0.22 per share on 7,378,000 average weighted common shares outstanding compared with earnings of $6,614,000, or $0.89 per share for the fourth period a year ago on 7,436,000 average weighted common shares outstanding," stated Steven J. Appel, president and chief executive officer.
 For the year, Value Merchants, Inc., recorded a loss of $7,956,000 or $1.09 per share on 7,327,000 average weighted common shares outstanding, compared with earnings of $9,175,000, or $1.33 per share on 6,920,000 average weighted common shares outstanding a year ago. The company does not expect the audited results to be materially different.
 "The company is continuing its efforts to obtain a two-year working capital line," Appel stated. Value Merchants also announced a number of steps being taken and other factors whica?ny believes will achieve increased productivity and profitability in 1993. These include:
 -- Limiting store growth to approximately 40 new Everything's $1.00 stores and seven Toy Liquidators stores.
 -- Consolidating the Toy Division distribution center operations from Tracy, Calif., to current facilities in Indianapolis.
 -- Closing approximately 12 Toy Liquidators retail stores, in addition to 10 that were closed just prior to the end of fiscal 1992, which operated at a loss or nominal profit in 1992. closings will be minimal," Appel stated.
 -- Reducing operating division store expenses as a percentage of sales. "We have identified a number of store tasks in our Everything's $1.00 stores which can be eliminated, reducing store employee labor hours substantially," Appel said. "We also expect to achieve a substantial reduction in sales costs in our Toy Liquidators stores," he said.
 -- Lowering operating division general and administration expenses as a percent of sales as a result of combining or eliminating functions.
 -- Reducing pre-opening store amortization costs to an estimated level of less than half the fiscal 1992 amount.
 -- Cutting corporate overhead expenses both in absolute dollars, by an estimated 20 percent, and as a percent of sales.
 Following is a chart summarizing fiscal 1992 and fourth quarter unaudited results:
 52 WEEKS ENDED FOURTH QUARTER ENDED
 JANUARY 30 FEBRUARY 1 JANUARY 30 FEBRUARY 1
 1993 1992 1993 1992
 Net sales:
 EAD
 variety $249,902,000 $127,714,000 $103,316,000 $ 57,323,000
 Toy
 operations 113,594,000 107,530,000 48,516,000 40,900,000
 Total net
 sales 363,496,000 235,244,000 151,832,000 98,223,000
 Net income
 (loss) ($7,956,000) $9,175,000 $1,594,000 $6,614,000
 Income (loss)
 per common
 share ($1.09) $1.33 $0.22 $0.89
 Weighted average
 common shares 7,327,000 6,920,000 7,378,000 7,436,000
 Retail stores
 operating:
 EAD 411 208 --- ---
 Toy 121 111 --- ---
 Total 532 319 --- ---
 Comparable store
 sales:
 EAD (101 stores) (3.0 pct) --- (7.7 pct) ---
 Toy (89 stores) (6.4 pct) --- (2.2 pct) ---
 Fourth quarter results included $3.7 million in structuring and store opening expenses compared with $1.5 million for the same o?d a year ago. Interest expense in the fourth quarter totaled $2.3 million compared with $0.6 million a year ago.
 Full year results included $8.1 million in structuring and store opening expenses compared with $2.9 million a year ago. Interest expense for the year totaled $7.9 million compared with $2.9 million a year ago.
 "Everything's $1.00 operating results were primarily impacted by the delay we experienced in completing our financing earlier in 1992," Appel stated, "making it impossible to meet our planned construction schedule for our new EAD stores. Delayed store openings had a significant, incremental impact on our operating results.
 "Everything's $1.00 stores opened in 1992 operated at budgeted levels through the first 10 periods," Appel stated, "however, in the fourth quarter -- the critical last three periods of the year -- sales in all our stores fell short of budget due to an inadequate merchandise assortment directly related to delays in concluding our financing, and to lower than anticipated mall traffic. Everything's $1.00 reduced its general and administrative expenses in the fourth quarter as a percent of sales from a year ago."
 Retail and wholesale operations, which represented about 30 percent of Value Merchants' sales volume for the year, accounted for about 50 percent of the company's decline in operating income. "The 1992 loss reflects an $11.2 million decline in our Toy retail and wholesale operating pre-tax profits," Appel said, "and a $6.1 million decline in our Everything's $1.00 operating income.
 "In 1992, Toy operations were negatively impacted early in the year by the one time costs associated with relocating three toy retail and wholesale distribution centers," Appel stated. "Additionally, we did not have a proper merchandise assortment including adequate higher priced merchandise similar to what we had in 1991. Our merchandise assortment was corrected by the Christmas season, and we achieved a 3.2 percent same store sales increase in December," he said.
 "An improved merchandise mix in the late months of the year had a positive impact on comparable store average transaction size," Appel said, "however, store traffic was down considerably from the same period of 1991.
 "Although our financial results for fiscal 1992 were disappointing, Appel stated, "the company had a number of significant accomplishments including doubling the annualized sales of Everything's $1.00 and the number of its stores, and increasing Toy Liquidators stores by 10 percent; maintaining our decided market leadership in the dollar store niche with an estimated 35 percent market share, well in excess of our nearest competitor; opening five strategically located distribution centers and closing three with minimal disruption; implementing a point of sale (POS) system in all our Toy Liquidators stores and strengthening our store operations and merchandising management," he said.
 According to Appel, "the seasonal nature of our business again in 1993 will result in an imbalance of earnings through the year. The fourth quarter should account for substantially all of the year's earnings," he said, "since higher interest costs and amortization of our structuring and pre-opening store costs will most substantially impact earnings during our lower volume quarters. We expect a loss again in the first quarter when sales volume historically has been about 16 percent of annual sales," Appel said. "Due to the impact of bad weather conditions during parts of the first quarter, cautious consumer spending attitudes and for Everything's $1.00 an imbalance in our merchandise assortment, we anticipate that our loss for the first quarter of this year will exceed the 1992 first quarter loss of $0.49 per share." Appel also announced that Value Merchants has changed its quarterly reporting period to reflect the predominant retail reporting calendar. The first quarter of fiscal 1993 will be a 13-week quarter ended May 1, 1993, compared with a 16-week first quarter a year ago ended May 23, 1992.
 VALUE MERCHANTS, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE FISCAL YEARS ENDED JAN. 30, 1993
 FEB. 1, 1992 AND FEB. 2, 1991
 Fiscal 1992 Fiscal 1991 Fiscal 1990
 NET SALES $363,496,000 $235,244,000 $140,403,000
 COST OF SALES, INCLUDING
 WAREHOUSE EXPENSES 217,536,000 135,489,000 82,636,000
 Gross profit 145,960,000 99,755,000 57,767,000
 OPERATING EXPENSES:
 Selling and store expenses 116,788,000 63,680,000 36,967,000
 General and administrative
 expenses 25,153,000 15,480,000 9,929,000
 Structuring and store
 opening expenses 8,054,000 2,896,000 875,000
 Total operating
 expenses 149,995,000 82,056,000 47,771,000
 Income (loss) from
 operations (4,035,000) 17,699,000 9,996,000
 INTEREST EXPENSE, NET 7,890,000 2,937,000 1,571,000
 Income (loss) before
 provision for (benefit
 from) income taxes and
 cumulative effect of
 accounting change (11,925,000) 14,762,000 8,425,000
 PROVISION FOR (BENEFIT
 FROM) INCOME TAXES (3,969,000) 5,587,000 3,142,000
 Income (loss) before
 cumulative effect of
 accounting change (7,956,000) 9,175,000 5,283,000
 CUMULATIVE EFFECT ON PRIOR
 YEARS OF CHANGE IN METHOD
 OF VALUING INVENTORIES,
 LESS RELATED INCOME TAX
 EFFECTS --- --- 721,000
 Net income (loss) ($7,956,000) $9,175,000 $6,004,000
 INCOME (LOSS) PER SHARE:
 Income (loss) before
 cumulative effect of
 accounting change ($1.09) $1.33 $0.90
 Cumulative effect on prior
 years of change in method
 of valuing inventories --- --- 0.12
 Net income (loss) ($1.09) $1.33 $1.02
 PRO FORMA AMOUNTS, ASSUMING THE
 NEW INVENTORY VALUATION METHOD
 IS APPLIED RETROACTIVELY:
 Net income (loss) ($7,956,000) $9,175,000 $5,283,000
 Income (loss) per share ($1.09) $1.33 $0.90
 VALUE MERCHANTS, INC. AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
 AS OF JAN. 30, 1993 AND FEB. 1, 1992
 Jan. 30, 1993 Feb. 1, 1992
 ASSETS
 CURRENT ASSETS:
 Cash and cash equivalents $ 4,934,000 $ 9,092,000
 Accounts receivable,
 trade and other, less
 allowance for doubtful
 accounts of $662,000 and
 $504,000, respectively 6,379,000 7,828,000
 Inventories 109,718,000 75,213,000
 Prepaid expenses and other
 current assets 7,125,000 6,200,000
 Refundable income taxes 4,313,000 ---
 Total current assets 132,469,000 98,333,000
 LEASEHOLD IMPROVEMENTS, FURNITURE
 AND EQUIPMENT:
 Leasehold improvements 33,783,000 12,124,000
 Furniture and equipment 50,077,000 28,984,000
 Costs for stores under
 construction 142,000 1,729,000
 Total 84,002,000 42,837,000
 Less: Accumulated depreciation
 and amortization 14,705,000 7,752,000
 Net leasehold improvements,
 furniture and equipment 69,297,000 35,085,000
 GOODWILL, Net of accumulated
 amortization of $331,000 and
 $226,000 2,774,000 2,879,000
 OTHER ASSETS 2,006,000 1,324,000
 Total $206,546,000 $137,621,000
 LIABILITIES AND SHAREHOLDERS' INVESTMENT
 CURRENT LIABILITIES:
 Short-term borrowings $ 14,893,000 $ 702,000
 Accounts payable 43,687,000 18,700,000
 Accrued salaries and wages 2,809,000 1,774,000
 Accrued liabilities - other 7,316,000 2,750,000
 Accrued income taxes payable --- 3,951,000
 Current maturities of long-term
 debt 19,029,000 3,733,000
 Total current liabilities 87,734,000 31,610,000
 LONG-TERM DEBT 39,930,000 26,580,000
 DEFERRED CREDITS 5,752,000 ---
 DEFERRED INCOME TAXES 570,000 322,000
 SHAREHOLDERS' INVESTMENT:
 Cumulative preferred stock,
 par value $.10 per share,
 2,000,000 shares authorized,
 none issued --- ---
 Common stock, par value,
 $.01 per share, 15,000,000
 shares authorized, 7,378,202
 and 7,228,452 shares issued
 and outstanding, respectively 74,000 72,000
 Additional paid-in-capital 50,946,000 49,006,000
 Retained earnings 22,075,000 30,031,000
 Unamortized value of restricted
 stock (535,000) ---
 Total shareholders' investment 72,560,000 79,109,000
 Total $206,546,000 $137,621,000
 -0- 5/4/93
 /CONTACT: Gary I. Kastel of Value Merchants, Inc., 414-274-2976/
 (VMI)


CO: Value Merchants, Inc. ST: Wisconsin IN: REA SU: ERN

AR -- CL007 -- 4244 05/04/93 10:49 EDT
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