Carter Hawley Sale of Division Raises Much-Needed Cash

Carter Hawley Hale Stores got a much-needed boost Friday when it completed the sale of Thalhimers, its Southeastern retail chain, to May Department Stores for $317 million.

Carter Hawley’s executives “now have the wherewithal to go at least another year” without taking further steps to overhaul the company, said Frederick H. Taylor, a bond analyst at Salomon Bros.

The sale price was down from the $325-million to $340-million range that Los Angeles-based Carter Hawley projected when the deal was disclosed Oct. 9. Analysts termed the reduction relatively insignificant, variously attributing it to this year’s unexpectedly weak Christmas sales or to recent inventory adjustments.

Selling Thalhimers cuts Carter Hawley’s burdensome debt to $1.3 billion from $1.6 billion, but it also reduces the firm’s annual revenue by about one-sixth to $2.5 billion and jettisons one of its top two divisions.

Carter Hawley now operates 88 department stores in four divisions: Broadway-Southern California, Phoenix-based Broadway-Southwest, San Francisco’s Emporium and Weinstocks in Sacramento.

Taylor speculated that Carter Hawley will also sell Weinstocks or Emporium within 18 months to further cut debt.

May, based in St. Louis, is the nation’s biggest department store company. It now owns 329 stores, including the Southern California-based May Co. California and Robinson’s chains.

The sale of the 26-store Thalhimers chain continues Carter Hawley’s contraction in recent years. Three years ago, it fended off a takeover by taking on debt and spinning off its supposed crown jewels, the Neiman Marcus, Bergdorf Goodman and Contempo Casuals stores.

So far, the overhaul hasn’t worked. The company lost $26 million in its fiscal year ended Aug. 4.

Over the years, Carter Hawley has been faulted for failing to develop a clear-cut merchandising strategy or to refurbish its stores. Some of the proceeds of the Thalhimers sales are expected to help finance the current store modernization program.

The deal also is expected to relieve its short-term financial pinch. Two New York-based credit agencies, Credit Exchange and Bernard Sands Credit Consultants, advised clients in recent weeks against shipping merchandise to Carter Hawley stores as a result of what they said was the company’s pattern of late payments.

Credit agency executives have said, however, that they expected the payments issue to be resolved soon after the Thalhimers deal was completed.

Bill Dombrowski, a Carter Hawley vice president, contended that the company’s payment problems were isolated and already have been resolved, but he added that the Thalhimers deal “improves our liquidity.”