SERVICE MERCHANDISE ISSUES SECOND OF THREE HOLIDAY SALES UPDATES; COMPANY
REPORTS DECREASED SALES AND EXERCISES INTEREST GRACE PERIOD ON 9% SUBORDINATED
DEBENTURES
NASHVILLE, Tenn.--(BUSINESS WIRE)--Dec. 15, 1998--Service Merchandise
Company, Inc. (NYSE:SME) today issued its second of three holiday sales
updates one day earlier than scheduled. The third update is planned to be
issued on December 30. The update presented in this release covers the period
from September 28, 1998 to December 13, 1998.
For this period, which represents the Company's fourth-quarter-to-date
reporting period, comp store sales were down on a percentage basis in the mid-
teens. Jewelry comps were up in the mid-single-digit range while hardline
comps were down in the low twenty-percent range. This year there will be one
additional shopping day between Thanksgiving and Christmas compared to last
year.
Gross margin dollars were down on an absolute basis in the high-single-
digit percentage range due to lower overall sales, even though the gross
margin rate was up as margin rates increased in hardlines and as the sales mix
included a higher percentage of jewelry.
Additionally, Service Merchandise announced today that it has not made
the approximately $13.5 million interest payment due December 15, 1998, on
its 9% Subordinated Debentures. The related Indenture provides for a thirty-
day grace period to pay the interest, and during that period the Company will
evaluate available alternatives.
The Company has obtained a waiver to its credit agreement from its bank
group waiving any cross default under the credit agreement with respect to the
failure to make the December 15, 1998 interest payment. The waiver expires in
30 days. The Company expects internally generated cash flow to be its primary
source of liquidity to fund its operations through the end of the year and is
exploring alternatives to fund its operations in 1999.
Service Merchandise fine jewelry, gift and home stores offer selections
of name brand products and value pricing. The Brentwood, Tenn.-based company
employs approximately 25,000 associates and operates 359 stores in 34 states.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The Company's liquidity, capital resources and results of operations may
be affected from time to time by a number of factors and risks, including, but
not limited to, continuing availability of trade credit; terms with vendors
and floor planning arrangements; the Company's use of substantial financial
leverage and the potential impact of such leverage on the Company's ability to
execute its operating strategies; to withstand significant economic downturns
and to repay its indebtedness; the Company's ability to fund, and its success
in implementing plans regarding the Company's alternative store formats; the
ability to fund and execute a strategic repositioning of the Company;
competitive pressures from other retailers, including specialty retailers and
discount stores which may affect the nature and viability of the Company's
business strategy; trends in the economy as a whole, which may affect consumer
confidence and consumer demand for the types of goods sold by the Company;
availability, costs and terms of financing, including the risk of rising
interest rates; the ability to maintain gross profit margins; the seasonal
nature of the Company's business and the ability of the Company to predict
consumer demand as a whole, as well as demand for specific goods; the ability
of the Company to attract and retain customers by executing the Company's
remerchandising strategy and improving customer service; costs associated with
the shipping, handling and control of inventory and the Company's ability to
optimize its supply chain; potential adverse publicity; availability and cost
of management and labor employed; real estate occupancy and development costs,
including the substantial fixed investment costs associated with opening,
maintaining or closing a Company store and the ability to effect conversions
to new technological systems, including becoming year 2000 compliant.
This report includes, and other reports and statements issued on behalf
of the Company, may include certain forward-looking statements in reliance on
the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. Any such forward-looking statements are subject to a number of risks
and uncertainties, including but not limited to the factors identified above.
Actual results may differ materially from those anticipated in any such
forward-looking statements. The Company undertakes no obligation to update or
revise any such forward-looking statements.
CONTACT:
Service Merchandise Company Inc.
Greg Winnett, Communications, 615/660-7092
or
Kekst and Company
Jason Lynch, 212/521-4841 |
