Faced with dwindling profits caused in part by frugal customers struggling in a tough economy, Boscov’s Inc., has filed for bankruptcy and plans to close 10 stores, including five in Pennsylvania.
Boscov’s shoppers, including some Bloomsburg University students, are now waiting to see if 79-year-old Albert Boscov, who recently came out of retirement to take over as CEO and chair, can turn things around. One BU student, Annie Carper, recalled a pleasant shopping experience at the Steamtown Mall in Scranton.
“I bought my first prom dress from Boscov’s and I couldn’t have been happier,” said Carper. “I easily found a nice dress for a decent price. The employees were so helpful and seemed genuinely interested in assisting me. I remember the cashier telling me a story about her daughter’s “quest” for the perfect prom dress as I checked out. I couldn’t imagine having the same experience anywhere else.”
The Boscov’s in Scranton is not listed among the five Pennsylvania stores slated for closure.
After nearly a two-hour hearing in late November, a U.S. Bankruptcy Court judge in Delaware approved the $300 million sale of most of the assets of Boscov’s Inc. to family members Al Boscov and his brother-in-law, Ed Lakin. The sale received a guaranteed amount of $35 million in federal loans.
After retiring from the company in 2006, Boscov and Lakin constructed a recapitalization plan, which allowed them to sell their interests and turn over management to other family members. Boscov was the former chairman and CEO. Lakin served as president. Lakin’s son, Kenneth, has been chairman and CEO of Boscov’s 49-store company since 2006. Lakin said the downturn in the economy and consumers spending, along with the credit crunch, “have put severe pressure on our company’s financial position.”
Many Boscov’s shoppers were surprised when hearing about the company’s plans to close a significant number of stores around the area. “I wasn’t aware so many stores were closing, let alone how many are located right here in Pennsylvania,” said BU student Druann Welsh. “If that many have closed already, then it may only be a matter of time before more in the area close.”
Meanwhile, company officials are putting a positive spin on the reorganization.
“As we move toward the completion of our restructuring process, Boscov’s will be well-capitalized and have the resources to build a stronger and more competitive business,” said Lakin in a statement. “Boscov’s ability to reach this point in our restructuring, in the face of an economic recession and one of the most challenging periods the retail sector has ever encountered, is a testament to the hard work and commitment of our co-workers, the loyalty and encouragement of our customers and the support and belief in our company among the vendor community.”
Boscov has also asked the city of Scranton, to help him secure a federal loan to help save the city’s downtown Boscov’s store. He made a personal appearance at Scranton’s city council meeting in February of this year. Scranton Mayor Chris Doherty had promised a $3 million loan in federal money under a plan to revive the struggling department store chain.
Boscov said his 39 stores, including the one at the Mall at Steamtown are at stake, and without that anchor store, the mall could also collapse. “We would hope it doesn’t happen but if Boscov’s closes its store at Steamtown, I don’t think the mall could survive. We’re a major anchor,” said Boscov.
Boscov family members are investing $53 million in the purchase, Gov. Ed Rendell stated in late November. The company also is borrowing other money from various lenders, which include Bank of America Corp., Wells Fargo & Co. and GE Capital.
Rendell announced that the state would direct $35 million of federal money to help Boscov complete the purchase. Without the state-guaranteed federal loans, Boscov would not be able to secure the necessary financing, leaving the company no choice but to liquidate its assets, affecting 5,000 employees and closing 25 stores in the state.