Carter Hawley Hale Stores Inc. on Monday reported earnings of $43.6 million for the five-week period over the holiday sales season, the company's first profit since filing for federal bankruptcy protection a year ago today.
The Los Angeles-based parent of the Broadway and other California department stores said the earnings for the period ended Jan. 5 came despite lower revenue. It attributed the profit to cost-cutting the last year, including elimination of more than 1,000 of its 25,000 jobs. The company also consolidated the operations of its Sacramento-based Weinstocks and San Francisco-based Emporium department stores and cut companywide inventories.
However, analysts and a Carter Hawley spokesman cautioned against reading too much into the first profitable five-week period since the bankruptcy filing.
"We are getting back into shape. But I don't want to suggest that we are already there," said William Dombrowski, the company's vice president for corporate affairs. "We still have work to do before we can pronounce this company fully turned around. This is just one step in the process."
Sales were $387 million, 4.2% below the $404 million recorded in the prior-year period. The company attributed the decline to a "very, very weak" economy in California, where the majority of its 88 stores are located.
The profit compared to a $30.1-million gain in the year-ago period. Carter Hawley is required by the bankruptcy court to file earnings every four- or five-week period.
The biggest retailer in the West was forced to file for protection from creditors under Chapter 11 of the U.S. bankruptcy code last February after a disappointing holiday sales season that left it strapped for cash to pay suppliers and other creditors. Similar problems have hit R. H. Macy & Co., operator of the Bullock's and I. Magnin chains, which filed for bankruptcy protection last month.
Carter Hawley has said that it expects to file a reorganization plan with the bankruptcy court within several months and emerge from Chapter 11 by the end of the year.
The company has already cleared major hurdles in its plans to reorganize. Last month, it announced that it had reached agreement with Prudential Insurance Co. of America to restructure payments on its $344 million in mortgage debt. Other creditors and junk bond holders have agreed to accept 47 cents on the dollar for their debts from the Zell/Chilmark investment fund, which is expected to gain majority control of Carter Hawley when it emerges from bankruptcy.
Among issues awaiting settlement are the disposition of mall leases for the 10 to 12 stores the company expects to close while in bankruptcy proceedings. It has not identified those stores.