Linens 'n Things Promotes Progress

Clifton, N.J. — Linens 'n Things' senior executives last week emphasized areas of progress in textiles and housewares, and fielded questions from analysts about liquidity, inventory levels, markdowns and clearance rates.

During the second-quarter conference call, LNT executives stressed that when the company amended its financial instruments during the second quarter by $100 million, bringing availability to $700 million, it did so to ensure it had liquidity in excess of its anticipated needs.

"All vendors are being paid in a timely manner according to terms, and in full," said Frank Rowen, svp and cfo. Chairman and ceo Robert DiNicola said there had been no significant changes in terms being offered to the retailer's approximately 1,100 vendors, whom he praised for their understanding during the first 18 months of the multi-year turnaround period.

Asked about where the company stands vis-à-vis factors, the pair demurred, saying the factoring relationship was one held between vendor and factor.

DiNicola indicated there will be no sweep of store closures, noting: "It's actually the bottom 100 stores showing the greatest improvement" now that the company has begun to execute its plan.

Nor will there be any strategic shift in that plan, which calls for stabilizing the business, building traffic around key items, improving merchandising and marketing and driving execution at store level.

"We outlined the game plan on day one. It's a fairly simple plan," DiNicola said, adding LNT is operating "with essentially the same resources inventory dollar-wise … We'll just make better use of those inventories and those dollars, and have a better and more qualitative assortment for the guests when they arrive at the store."

During the first half of the year, LNT posted a net loss of $100.2 million, an improvement over the net loss of $104.6 million during the first half of last year. Sales fell 3.3% to $1.165 billion. Comps declined 6.3%.

Net loss for the quarter ended June 30 was $42 million, slightly wider than the net loss of $39.1 million in last year's second quarter. Sales slipped 2.9% to $593.6 million. A comp decline of 7.3% was partially offset by the opening of seven new stores.

Executives could point to some successes, notably comp store sales improvements month-by-month sequentially through the quarter as well as higher gross margins. DiNicola asserted that balance of the mix has also improved in the two key areas of textiles and housewares.

"In certain parts of the textiles business, we're very pleased with amount of progress we've been able to make a short amount of time," said DiNicola. "Remember, it's been many years since Linens 'n Things had anything positive to talk about in textiles."

He added: "We feel good about the sales momentum moving into back-to-school. We feel even better about textiles and housewares. We continue to improve in all regions [of the country], though much more work remains to be done."