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 NATICK, Mass., Nov. 16 /PRNewswire/ -- Waban Inc. (NYSE: WBN), operator of HomeBase and BJ's Wholesale Club, announced today that it will take a pre-tax charge of approximately $100 million in the fourth quarter ending Jan. 29, 1994, to cover nonrecurring expenses primarily related to repositioning its HomeBase division by:
 (1) Closing or relocating approximately 16 HomeBase stores where the potential to achieve the company's objectives is limited. This group consists mostly of older units with either non-prototypical buildings or unacceptable retail locations for HomeBase's current "category dominant" format;
 (2) Additionally, closing the eight HomeBase warehouses in the Midwest, including disposing of five operating units in the Chicago market to The Home Depot Inc.; and
 (3) Liquidating discontinued and redundant merchandise.
 Herbert J. Zarkin, Waban president and chief executive officer, commented, "As we have previously indicated, we have been evaluating every aspect of our HomeBase business. We have examined all of our geographic markets and determined that we should focus our management attention and capital resources on building HomeBase into a major regional home improvement retailer in the western United States, a position similar to that held by BJ's Wholesale Club as the dominant membership warehouse club in the Northeast. To accomplish this we will narrow our store base to those markets and locations whose operating characteristics exhibit the ability to meet our financial objectives and concentrate on improving our core group of stores in the western United States.
 "With the disposition of these stores and inventory," continued Zarkin, "we expect to generate substantial cash inflow and to improve our ongoing profitability. More importantly, these actions now set the stage for HomeBase to successfully execute its key customer service, marketing, merchandising and operational programs in the remaining stores."
 Five HomeBase warehouses in Chicago and two which are under development in that market are being conveyed to Home Depot either by sale or assignment of lease. The five units in operation will be closed in early 1994 prior to their transfer to Home Depot. The two other warehouses in Chicago and one in Toledo are planned to close within the same time frame.
 Also included in the reserve are expenses related to the relocation of the BJ's Wholesale Club in Syracuse, N.Y., and certain nonrecurring administrative expenses.
 Third Quarter Results
 The company also announced its results for the third quarter ended Oct. 30, 1993. Note that these results do not reflect the restructuring charge, which will be taken in the fourth quarter. Sales grew 9.4 percent to $898 million for the quarter and 11.5 percent to $2.7 billion year-to-date. Net income for the third quarter totaled $8.1 million, or $.24 per share, vs. $11.2 million, or $.33 per share, fully diluted, last year. For the first nine months of the year, net income totaled $27.1 million, or $.81 per share, fully diluted, vs. $30.2 million, or $.90 per share, fully diluted, last year.
 Included in the current year-to-date results are two items that offset each other on a per share basis: a post-tax expense of $610,000 related to the resignation of Waban's previous president, and post-tax income of $905,000 resulting from the adoption of certain accounting principle changes.
 Sales at BJ's Wholesale Club increased 14.7 percent to $485 million during the third quarter on a comparable store sales decline of 11.0 percent. Year-to-date, BJ's generated total sales of $1.4 billion, an increase of 14.7 percent over the prior year, on a comparable store sales decline of 10.4 percent. Operating income at BJ's grew by 39.1 percent to $8.8 million for the third quarter and by 25.5 percent to $22.7 million year-to-date. Contributing to increasing profits at BJ's were strengthening gross margins resulting from an improved mix of sales and freight efficiencies, and continued solid expense control.
 "While comparable store sales at BJ's are still challenging," Zarkin explained, "the business continues to be extremely well managed and operating margins remain strong. We expect to see an improvement in comparable store sales during the fourth quarter as we anniversary many competitive and self-cannibalistic openings of last year and as we implement several new and innovative marketing programs."
 The HomeBase division generated sales of $413 million for the third quarter, an increase of 3.7 percent from last year, on a comparable store sales decline of 3.5 percent. For the first nine months of the year, HomeBase's sales grew 8.3 percent to $1.3 billion on a comparable store sales decline of 2.4 percent. Operating income declined to $8.4 million vs. $14.8 million last year, and year-to-date was $35.1 million vs. $39.2 million last year. Over the past year HomeBase has implemented many customer service programs designed to increase sales. The expected sales did not materialize and, thus, the higher expense structure compressed operating margins. Gross margins remained under pressure as the mix of sales shifted toward lower margin merchandise, while buying and occupancy cost ratios increased.
 "Our recent results at HomeBase are clearly unsatisfactory and, as the actions we have announced today demonstrate, we are taking the necessary steps to improve that business," added Zarkin. "We continue to view the home improvement industry as an attractive one and are confident that HomeBase will solidify its position as a strong regional competitor."
 Waban Inc. is a major participant in the rapidly growing field of warehouse merchandising through its HomeBase and BJ's Wholesale Club businesses. HomeBase is a leading merchandiser of home improvement products in the western United States, currently operating 90 warehouses. BJ's Wholesale Club is the largest chain of membership warehouse clubs in the northeastern United States with 49 clubs currently in operation.
 Financial Summary (Unaudited)
 (Dollars in Thousands Except Per Share Amounts)
 13 Weeks Ended 39 Weeks Ended
 Oct. 30, Oct. 24, Oct. 30, Oct. 24,
 1993 1992 1993 1992
 Net sales $897,646 $820,648 $2,699,080 $2,420,161
 Cost of sales,
 including buying and
 occupancy costs 773,477 704,877 2,324,094 2,079,647
 Selling, general and
 expenses 108,495 96,449 323,583 288,824
 Interest on debt and
 capital leases (net) 3,057 1,610 9,067 3,055
 Income before income
 taxes 12,617 17,712 42,336 48,635
 Provision for income
 taxes 4,530 6,514 16,120 18,481
 Income before cumulative
 effect of accounting
 principle changes 8,087 11,198 26,216 30,154
 Cumulative effect of
 accounting principle
 changes (See Note 1) --- --- 905 ---
 Net income $8,087 $11,198 $27,121 $30,154
 Primary earnings per share:
 Income before cumulative
 effect of accounting
 principle changes $0.24 $0.34 $0.79 $0.91
 Cumulative effect of
 accounting principle
 changes --- --- 0.03 ---
 Net income $0.24 $0.34 $0.82 $0.91
 Fully diluted earnings
 per share:
 Income before cumulative
 effect of accounting
 principle changes $0.24 $0.33 $0.78 $0.90
 Cumulative effect of
 accounting principle
 changes --- --- 0.03 ---
 Net income $0.24 $0.33 $0.81 $0.90
 Number of common shares
 for earnings per share
 Primary 33,174,765 33,127,920 33,166,181 33,200,118
 Fully diluted 37,562,644 37,605,211 37,554,060 35,043,164
 Selected Segment Information
 (Dollars in Thousands)
 13 Weeks Ended 39 Weeks Ended
 Oct. 30, Oct. 24, Oct. 30, Oct. 24,
 1993 1992 1993 1992
 Net sales:
 BJ's Wholesale Club $484,644 $422,566 $1,403,410 $1,223,246
 HomeBase 413,002 398,082 1,295,670 1,196,915
 Total $897,646 $820,648 $2,699,080 $2,420,161
 Operating income:
 BJ's Wholesale Club $8,810 $6,335 $22,693 $18,077
 HomeBase 8,359 14,785 35,088 39,167
 Total 17,169 21,120 57,781 57,244
 General corporate expense 1,495 1,798 6,378 5,554
 Interest on debt and capital
 leases (net) 3,057 1,610 9,067 3,055
 Income before income taxes $12,617 $17,712 $42,336 $48,635
 Warehouses in operation --
 end of period:
 BJ's Wholesale Club 47 34
 HomeBase 90 86
 Condensed Balance Sheets
 (Dollars in Thousands)
 Oct. 30, Oct. 24,
 1993 1992
 Current assets
 Cash and cash equivalents $32,129 $23,386
 Marketable securities --- 74,043
 Merchandise inventories 570,758 539,193
 Other current assets 87,865 64,532
 Total current assets 690,752 701,154
 Property, net of depreciation 410,118 311,165
 Property under capital leases
 net of amortization 13,941 14,783
 Other assets 9,503 9,776
 Total assets $1,124,314 $1,036,878
 Liabilities and Shareholders' Equity
 Current liabilities
 Short-term debt $25,000 ---
 Current installments of
 long-term debt and capital
 lease obligations 15,258 3,226
 Accounts payable and accrued
 expenses 413,911 395,994
 Total current liabilities 454,169 399,220
 Long-term debt 160,692 174,500
 Long-term obligations under capital
 leases 17,211 17,924
 Other noncurrent liabilities 17,806 15,329
 Deferred income taxes 9,816 9,016
 Shareholders' equity 464,620 420,889
 Total liabilities and
 shareholders' equity $1,124,314 $1,036,878
 Condensed Statements of Cash Flows
 (Dollars in thousands)
 39 Weeks Ended
 Oct. 30, Oct. 24,
 1993 1992
 Cash flows from operating
 Net income $27,121 $30,154
 Depreciation and amortization 27,121 21,440
 (Increase) decrease in
 merchandise inventories, net of
 accounts payable 20,261 (53,694)
 Other (18,118) 7,429
 Net cash provided by operating
 activities 56,385 5,329
 Cash flows from investing activities
 Purchase of marketable securities --- (130,093)
 Sale of marketable securities 16,905 124,697
 Property additions (99,239) (127,263)
 Property disposals 123 115
 Net cash used in investing
 activities (82,211) (132,544)
 Cash flows from financing activities
 Borrowings of short-term debt 25,000 ---
 Borrowings of long-term debt,
 net of issuance costs --- 106,031
 Repayment of long-term debt and
 capital lease obligations (3,217) (2,735)
 Proceeds from sale and issuance
 of common stock, net 528 948
 Net cash provided by financing
 activities 22,311 104,244
 Net decrease in cash and cash
 equivalents ($3,515) ($22,971)
 Notes to consolidated condensed financial statements:
 1. The cumulative effect of accounting principle changes includes the following post-tax items (in thousands):
 Statement of Financial Accounting Standards
 (SFAS) No. 109, "Accounting for Income Taxes" $1,616
 SFAS No. 106, "Employers' Accounting for
 Postretirement Benefits Other Than Pensions" and
 SFAS No. 112, "Employers' Accounting for
 Postemployment Benefits" (711)
 Total $905
 2. Certain amounts in the prior year's financial statements have been reclassified for comparative purposes.
 -0- 11/16/93
 /CONTACT: Jane W. McCahon, assistant VP investor relations, of Waban, 508-651-6640/

CO: Waban Inc. ST: Massachusetts IN: REA SU: ERN

JB-JL -- LA034 -- 5213 11/16/93 15:58 EST
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Date:Nov 16, 1993

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