Company - Local Eddie Bauer closing unrelated to bankruptcy

Eddie Bauer is closing its Westfield Shoppingtown West Park store in Cape Girardeau on April 19, but a company spokeswoman says the decision had nothing to do with the announcement that its parent company has filed for Chapter 11 bankruptcy protection.

"The store in Cape Girardeau is closing," said company spokeswoman Lisa Erickson. "But that is because of a regular portfolio review. We decided to close that store before the announcement. Anything to do with the bankruptcy, well, it's way too early to say."

Spiegel Inc. filed for the protection on Monday, a victim of falling sales at its nearly century-old catalog business and Eddie Bauer stores along with mounting credit-card woes.

Spiegel lined up $400 million in bankruptcy financing and said its stores and catalog operations will remain open as usual as it begins a bankruptcy process it expects to last six months to a year.

Eddie Bauer operates about 535 of the outdoor-inspired clothing stores.

The Cape Girardeau store employs about 20 employees and all will be out of work when the store closes.

William Kosturos, chief restructuring officer and interim CEO, said after the Downers Grove, Ill.-based company's filing in New York that the process should be "relatively seamless to the customer" in stores that are remaining open.

"It's certainly going to be business as usual," he said. "With our obtaining financing of $400 million ... I think we have sufficient liquidity to really look hard at the operation and to emerge as a very strong company at the end of the process."

Retaining customers

Kosturos said the retailer is focused on retaining its customers and still assessing what needs to be done in a reorganization.

But analysts said the parent of Eddie Bauer, Newport News and the Spiegel Catalog needs to make swift improvements in bankruptcy and could put the Eddie Bauer stores and other assets up for sale to raise cash.

"Spiegel has been on the edge for a long time," said retail consultant Sid Doolittle, a partner with Chicago's McMillan/ Doolittle. "Sales at Eddie Bauer have been on a slippery slope, and the Internet has taken a lot of market share away from existing catalog retailers.

"The whole catalog industry has been pecked away at by all the specialty catalogs over the last 15 to 20 years," he said. "They're one of the dinosaurs."

Another retail specialist, Madison Riley of the retail consulting firm Kurt Salmon Associates, said Spiegel's strong brand names for both its catalog and Eddie Bauer gives it an excellent chance to successfully reorganize.

Spiegel and its filing subsidiaries listed assets of $1.74 billion and liabilities of $1.71 billion as of Feb. 22.

The company follows such retailers as Kmart, FAO Inc., and Montgomery Ward into bankruptcy during a period of economic turmoil industrywide.

Spiegel was founded as a furniture store in downtown Chicago in 1865 by German immigrant Joseph Spiegel; it issued its first catalog in 1905, offering credit services through the mail.

Southeast Missourian business editor Scott Moyers contributed to this report.

It was acquired in 1982 by Germany-based Otto Versand, the world's largest catalog company, which later transferred its shares to a group of individual investors.

After seeing an increase in annual sales as recently as 2000, Spiegel's overall sales sank 9 percent in 2001 and 18 percent to $2.3 billion in 2002. At the same time, it was experiencing a growing problem with unpaid credit-card bills that analysts said resulted from both the economy's slump and Spiegel's failed gamble on faster credit growth.

The company has warned for the past month that it would have to file for bankruptcy unless new financing emerged. Kosturos took over as the company's top official on Feb. 28 after Martin Zaepfel resigned as chief executive officer.

On March 7, the U.S. Securities and Exchange Commission accused it of violating securities laws by skipping quarterly filings last year to conceal its auditor's conclusion that it might not be able to stay in business.

Spiegel partly resolved the civil complaint with a consent and stipulation agreement, but it still faces a federal court decision on penalties. Last week, it pulled the plug on its private-label Visa and MasterCard credit cards for lack of funds.

Bank of America, Fleet Retail Finance Inc. and the CIT Group/Business Credit Inc. agreed to Spiegel's debtor-in-possession financing facility, which was arranged by Banc of America Securities LLC.

Spiegel said it expects to be able to gain access to the initial $150 million of financing upon approval by the U.S. Bankruptcy Court. It must meet certain conditions in bankruptcy to access the entire amount.

Analysts say the company must rethink the market for big-book catalogs, perhaps switching to specialty catalogs, lower its cost structure and decide what changes to make to its Eddie Bauer stores in the United States and Canada.

Southeast Missourian business editor Scott Moyers contributed to this report.