January 30, 2009
Boscov’s Needs Loan Even After Record Month
The Boscov’s
Department Store chain had its most profitable December ever, but the company’s
chairman said it still needs the $35 million in loan guarantees it negotiated
with the state of Pennsylvania to help it get through what promises to
be tougher months ahead.
Some counties
have recently hesitated to sign on to what is commonly viewed as a “bailout” over
concerns they could be left with the bill if the chain should fail. Pennsylvania
economic development officials recently met with county representatives
to offer assurances that it would be the state on the hook should
Boscov’s not make it.
So far, however,
Boscov’s is off to a surprisingly strong start.
Al Boscov,
chairman of the chain, told The Patriot-News, “Everyone makes
profit in December. We all lose money in January. But I can tell you that
our December and January combined will be profitable.”
“That’s
surprising in today’s recession. In fact, it’s shocking,” said Audrey Guskey, a Duquesne University associate professor of marketing.
“I think
it’s really good news for all of Pennsylvania, because it suggests maybe
our economy isn’t as bad as it seems,” she added.
Discussion Questions:
What are your views on the Boscov’s bailout? Should governments be stepping
in to help retailers survive?
BrainTrust
Recent Discussions
Discussion Questions
Poll
Chain retailers should be included as a cause of the current economic situation versus the commonly popular opinion that they are experiencing the effects.
If you examine the entire retail supply chain (manufacturer, shipper, distributor/warehouse, financier) as a discrete business, you will see that this supply chain did not earn sufficient profit to sustain growth.
It is and was the management practices of these [entities] that sent them on their downward spiral. They ALL fell into the trap sprung by Sam Walton’s family. They all chased price as the prime component of value and thus managed to erode eachother’s margins to the extent that profit was impossible.
Consumer spending (at the retail outlets) comprises nearly 70% of the American Economic engine. The deployment of all the resources comprising the retail plant, services and equipment requires profit as sustenance.
Spending may be the fuel of the engine, but profit is the seed of growth.
Until/unless the retailers put profit back into their margin equation the recovery will not take hold.
They require no government assistance. They require intelligence and value pricing instead of appealing to the low-price race to the bottom.
No, the government should not be stepping in. Retailers fail because they don’t offer the shopper a compelling shopping experience or they are poorly managed. If the government is eager to give retailers a loan, they should loan the money to the most successful retailers who know what they are doing and can put the money to good use.
I feel the same about the auto industry. The bailout money should go to Toyota and Honda, who have proven they know how to make and sell cars in a more efficient and profitable way.
I can’t agree about the auto industry since the U.S. is one of the few countries in the world that doesn’t subsidize its auto industry. Obviously, that’s changing.
Do we learn nothing from companies like Merrill Lynch? How many people are going to line up for a bailout? No, no, no government bailouts for retailers. The good ones will survive and eventually flourish!
Sorry, but the taxpayers’ money shouldn’t be used to bailout retailers of any type or size. If the taxpayers (read: consumers) determine a retailer should survive, they’ll do so by shopping there. There are literally billions of dollars still being spent daily in stores. It’s not unfair to ask retailers to earn them. Putting a hand out for government money is ridiculous.
“That’s surprising in today’s recession. In fact, it’s shocking,” said Audrey Guskey, a Duquesne University associate professor of marketing.
“I think it’s really good news for all of Pennsylvania, because it suggests maybe our economy isn’t as bad as it seems,” she added.
What is shocking is that anyone would make the comment above in late January 2009! If Boscov’s can’t save itself, then no one else can. Shoring up losers just creates more losses.
It is vital to save regional department stores like Boscov’s. 1) We are losing the local flavor of more and more towns as the national boxes take over.
2) The consolidations and subsequent stadardization of brands and merchandise eliminates consumer choice.
3) Loss of regional stores drives down competition on a larger basis.
Ask anyone in the wholesale business whom they would prefer to do business with: Boscov’s or any other big box national retailer. Boscov’s is a pleasure to work with, they are loyal and support their suppliers, and they allow you to make a profit.
If the taxpayers of Pennsylvania want to have choices, healthy pricing competition, and retain their local traditions this is a small price to pay.
Retailers succeed or fail based on how the consumer reacts to their offerings. Government bailout of a failing retailer is not going to bring more consumers into their stores. Government support is not buoying consumer confidence, currently.
I pushed my legislative reps hard at the federal level *not* to bailout the auto industry because I believe we’ve already given them enough and you’ve got to know when to say when! Of course President Bush decided to give them one more chance; OK, I lost my argument, we’re giving the big-3 “one more chance.”
But let us not lose sight of the fact that we make economic development loans and give tax breaks all the time; its SOP in every municipality, county, state and at the federal level–we’ve been doing it for years. The news media is calling an apple an orange and then saying we shouldn’t compare apples and oranges. Mr. Boscov put his own equity on the line, so if he fails he will suffer extreme losses from his own pocket; there is nothing wrong with co-signing his loans to get his business jump started provided he has a sound business plan and can make a solid case–which he has and can! Is it socialist, or is it making us more competitive to prevent him from moving his HQ and distribution centers to Delaware and getting the funding from them? Every state “bribes” business to stay in their state, so we’re just stuck with the reality that NY, MD, NJ and DE would *love* for Al Boscov to take his x-years of successful ventures into their states instead of keeping his businesses in ours. I say “Rock On” with being flexible enough to look at the big picture!
“Relative utilities…” – Ben Ball
Wow–quoting Ben Ball twice in the same day.
The (subsidizing to retain) “local flavor” argument doesn’t wash with me, nor should it with the taxpayers.
If the ‘utility’ of “local flavor” isn’t important enough to be sufficiently supported by (local) consumers to allow a business to sustain itself, why should those same consumers (now wearing their hat as ‘taxpayers’) along with many other taxpayers have their pockets picked by government so as to support by fiat what they wouldn’t support voluntarily?
A truly great local store, restaurant or other business is indeed a local treasure and ought to be able to generate the revenues to sustain itself.
As much as I’m sympathetic to Boscov’s and the “local flavor” argument, I find it hard to disagree with the libertarian views expressed here; of course we should be consistent, and eliminate all subsidies…my first cut (?) pro sports teams and their lavish taxpayer-supported Tah Mahal’s; so on this Super Bowl weekend–coincidentally featuring a PA team whose stadium nearly drove its hometown into bankruptcy–let’s all support fiscal responsibility by turning off the TV and visiting a local/regional department store instead (and let them earn their money the old-fashioned way)!
I suspect that before 2008, had Boscov’s been in the same financial position it’s in today, they wouldn’t need any second-position financing from the state. Borrowing’s a lot tougher these days, even for reasonably strong middle-market companies (not just no-documentation mortgage applicants.) Retailing is a labor-intensive business, and it might be less expensive for Pennsylvania to lend money to Boscov’s than have more folks on unemployment.
I wonder: would Boscov’s employees lend x% of their pay to the company to keep it going? Would that be enough to allow the first-position loans to go forward?
Years ago, union auto workers signed up for bonus programs based on their companies’ future profitability, in exchange for giving up part of their regular compensation. Would this work at Boscov’s? BTW, the auto workers ended up with very nice bonuses, years later, so it ended up being a good deal for them.
The funding is HUD Section 108 loan guarantee money, part of the jurisdictions entitlement funds to save jobs. Boscov’s is a very important part of these communities; PA, NJ, DE, NY and its location in Frederick, MD. They employ thousands of employees, have a very loyal following, give back to the community tirelessly, and sell good quality promotional value items to the masses.
Al Boscov has saved several downtowns such as Wilkes-Barre and Steamtown Mall in downtown Scranton as well as Binghamton, NY, by keeping his department stores open to make these downtowns vibrant and vital.
I understand that this is a loan, not a grant. Al is good for it, always has been, always will.
Do we want to see another 39 huge stores shuttered, because there is a lending freeze out there? This $35 million is bridge financing. It will save jobs, just as the bailout loan did for Chrysler did thirty years ago. Sometimes it is both necessary and proper to government to lend a hand to American businessmen, such as Al Boscov. Do we want to live in an “only Walmart” world? Monopoly is not what our retail sector deserves.
It’s a temporary loan, it should be allowed to happen.
More Discussions
As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…Is Supply Chain Volatility Here To Stay?
Can we expect an ongoing volatility to remain in terms of retail supply chain?Has Same-Day Delivery Become an Expectation Across Retail?
Are expectations around retail delivery speed in flux?
Chain retailers should be included as a cause of the current economic situation versus the commonly popular opinion that they are experiencing the effects.
If you examine the entire retail supply chain (manufacturer, shipper, distributor/warehouse, financier) as a discrete business, you will see that this supply chain did not earn sufficient profit to sustain growth.
It is and was the management practices of these [entities] that sent them on their downward spiral. They ALL fell into the trap sprung by Sam Walton’s family. They all chased price as the prime component of value and thus managed to erode eachother’s margins to the extent that profit was impossible.
Consumer spending (at the retail outlets) comprises nearly 70% of the American Economic engine. The deployment of all the resources comprising the retail plant, services and equipment requires profit as sustenance.
Spending may be the fuel of the engine, but profit is the seed of growth.
Until/unless the retailers put profit back into their margin equation the recovery will not take hold.
They require no government assistance. They require intelligence and value pricing instead of appealing to the low-price race to the bottom.
No, the government should not be stepping in. Retailers fail because they don’t offer the shopper a compelling shopping experience or they are poorly managed. If the government is eager to give retailers a loan, they should loan the money to the most successful retailers who know what they are doing and can put the money to good use.
I feel the same about the auto industry. The bailout money should go to Toyota and Honda, who have proven they know how to make and sell cars in a more efficient and profitable way.
I can’t agree about the auto industry since the U.S. is one of the few countries in the world that doesn’t subsidize its auto industry. Obviously, that’s changing.
Do we learn nothing from companies like Merrill Lynch? How many people are going to line up for a bailout? No, no, no government bailouts for retailers. The good ones will survive and eventually flourish!
Sorry, but the taxpayers’ money shouldn’t be used to bailout retailers of any type or size. If the taxpayers (read: consumers) determine a retailer should survive, they’ll do so by shopping there. There are literally billions of dollars still being spent daily in stores. It’s not unfair to ask retailers to earn them. Putting a hand out for government money is ridiculous.
“That’s surprising in today’s recession. In fact, it’s shocking,” said Audrey Guskey, a Duquesne University associate professor of marketing.
“I think it’s really good news for all of Pennsylvania, because it suggests maybe our economy isn’t as bad as it seems,” she added.
What is shocking is that anyone would make the comment above in late January 2009! If Boscov’s can’t save itself, then no one else can. Shoring up losers just creates more losses.
It is vital to save regional department stores like Boscov’s. 1) We are losing the local flavor of more and more towns as the national boxes take over.
2) The consolidations and subsequent stadardization of brands and merchandise eliminates consumer choice.
3) Loss of regional stores drives down competition on a larger basis.
Ask anyone in the wholesale business whom they would prefer to do business with: Boscov’s or any other big box national retailer. Boscov’s is a pleasure to work with, they are loyal and support their suppliers, and they allow you to make a profit.
If the taxpayers of Pennsylvania want to have choices, healthy pricing competition, and retain their local traditions this is a small price to pay.
Retailers succeed or fail based on how the consumer reacts to their offerings. Government bailout of a failing retailer is not going to bring more consumers into their stores. Government support is not buoying consumer confidence, currently.
I pushed my legislative reps hard at the federal level *not* to bailout the auto industry because I believe we’ve already given them enough and you’ve got to know when to say when! Of course President Bush decided to give them one more chance; OK, I lost my argument, we’re giving the big-3 “one more chance.”
But let us not lose sight of the fact that we make economic development loans and give tax breaks all the time; its SOP in every municipality, county, state and at the federal level–we’ve been doing it for years. The news media is calling an apple an orange and then saying we shouldn’t compare apples and oranges. Mr. Boscov put his own equity on the line, so if he fails he will suffer extreme losses from his own pocket; there is nothing wrong with co-signing his loans to get his business jump started provided he has a sound business plan and can make a solid case–which he has and can! Is it socialist, or is it making us more competitive to prevent him from moving his HQ and distribution centers to Delaware and getting the funding from them? Every state “bribes” business to stay in their state, so we’re just stuck with the reality that NY, MD, NJ and DE would *love* for Al Boscov to take his x-years of successful ventures into their states instead of keeping his businesses in ours. I say “Rock On” with being flexible enough to look at the big picture!
“Relative utilities…” – Ben Ball
Wow–quoting Ben Ball twice in the same day.
The (subsidizing to retain) “local flavor” argument doesn’t wash with me, nor should it with the taxpayers.
If the ‘utility’ of “local flavor” isn’t important enough to be sufficiently supported by (local) consumers to allow a business to sustain itself, why should those same consumers (now wearing their hat as ‘taxpayers’) along with many other taxpayers have their pockets picked by government so as to support by fiat what they wouldn’t support voluntarily?
A truly great local store, restaurant or other business is indeed a local treasure and ought to be able to generate the revenues to sustain itself.
As much as I’m sympathetic to Boscov’s and the “local flavor” argument, I find it hard to disagree with the libertarian views expressed here; of course we should be consistent, and eliminate all subsidies…my first cut (?) pro sports teams and their lavish taxpayer-supported Tah Mahal’s; so on this Super Bowl weekend–coincidentally featuring a PA team whose stadium nearly drove its hometown into bankruptcy–let’s all support fiscal responsibility by turning off the TV and visiting a local/regional department store instead (and let them earn their money the old-fashioned way)!
I suspect that before 2008, had Boscov’s been in the same financial position it’s in today, they wouldn’t need any second-position financing from the state. Borrowing’s a lot tougher these days, even for reasonably strong middle-market companies (not just no-documentation mortgage applicants.) Retailing is a labor-intensive business, and it might be less expensive for Pennsylvania to lend money to Boscov’s than have more folks on unemployment.
I wonder: would Boscov’s employees lend x% of their pay to the company to keep it going? Would that be enough to allow the first-position loans to go forward?
Years ago, union auto workers signed up for bonus programs based on their companies’ future profitability, in exchange for giving up part of their regular compensation. Would this work at Boscov’s? BTW, the auto workers ended up with very nice bonuses, years later, so it ended up being a good deal for them.
The funding is HUD Section 108 loan guarantee money, part of the jurisdictions entitlement funds to save jobs. Boscov’s is a very important part of these communities; PA, NJ, DE, NY and its location in Frederick, MD. They employ thousands of employees, have a very loyal following, give back to the community tirelessly, and sell good quality promotional value items to the masses.
Al Boscov has saved several downtowns such as Wilkes-Barre and Steamtown Mall in downtown Scranton as well as Binghamton, NY, by keeping his department stores open to make these downtowns vibrant and vital.
I understand that this is a loan, not a grant. Al is good for it, always has been, always will.
Do we want to see another 39 huge stores shuttered, because there is a lending freeze out there? This $35 million is bridge financing. It will save jobs, just as the bailout loan did for Chrysler did thirty years ago. Sometimes it is both necessary and proper to government to lend a hand to American businessmen, such as Al Boscov. Do we want to live in an “only Walmart” world? Monopoly is not what our retail sector deserves.
It’s a temporary loan, it should be allowed to happen.