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Execs, O.C. Investment Firm to Acquire Strouds

Retailing: Bankruptcy Court OKs $39.5-million sale to senior management and Cruttenden Partners.

April 17, 2001|LESLIE EARNEST | TIMES STAFF WRITER

Ailing bed and bath retailer Strouds Inc. is being sold to an Orange County investment firm and the retailer's senior executives for about $39.5 million.

A U.S. Bankruptcy Court judge in Delaware has approved the sale to a venture of Cruttenden Partners in Newport Beach and the executives, Strouds said Monday.

Virtually all of Strouds' management team will continue to work for the new controlling entity, Strouds Acquisition Corp., Strouds said.

Robert F. Valone, the retailer's general merchandise manager, will become president of the reorganized company. Gary A. Van Wagner, Strouds' chief financial officer, will keep that title and also will become chief operating officer.

Analysts say the Industry-based retailer still faces some of the same obstacles that contributed to its financial difficulties.

The company has heavy competition from Bed Bath & Beyond Inc. and Linens 'n Things Inc., larger stores that typically carry a broader range of merchandise, including small appliances. It also must do battle with such huge retailers as Wal-Mart Stores Inc., Target Corp. and May Department Stores Co., which sell similar merchandise.

"It's going to be a challenge," said Shelly Hale, an analyst with Banc of America Securities. "The Strouds format of just offering soft goods may be the wrong format for the times."

But others think Strouds should continue to concentrate on soft goods, such as bedding, bath products and table linens.

"They might have a chance if they stay focused on the linens business," said Joan L. Bogucki-Storms, an analyst with Wedbush Morgan Securities.

Management could not be reached for comment about the company's strategy.

Although sales have cooled somewhat in the industry, housewares sales still look promising, Hale said. Baby boomers continue to pour money into their houses, and second-home ownership is at an all-time high.

Strouds, which opened its first store in Pasadena in 1979, filed for Chapter 11 bankruptcy protection in September. At that time, it was operating 70 stores. Today, it has 50 stores in California, Nevada, Minnesota and Arizona.

Its over-the-counter stock closed unchanged Monday at 1.5 cents a share.

The sale is scheduled to close in late April.

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