HRT Industries appeared late last week to be heading toward closing most of its 32 ailing Zodys discount department stores and leasing the properties to other major retailers.
Lease agreements on many Zodys locations appear to be all but locked up, with such prospective new tenants as Ralphs and HomeClub. In addition, some current and former employees say Zodys has eliminated layaway purchases and the sale of lottery tickets. It also is shutting down its leased optical departments.
Speculation about the future of Zodys heated up after a Connecticut company issued a statement that it had been "advised of the high probability" that some or all of the Zodys stores might close. The chain operates 29 stores in Southern California and three in Las Vegas.
In an interview last Tuesday, HRT Chief Executive Steven J. Green said no decision had been made by HRT to shut Zodys. He also said company officials had not set a date to review last year's results. However, sources said the company's board is scheduled to meet today.
There were many indications that Zodys stores may be closing.
Knowledgeable industry officials said that Ralphs Grocery Co., a Compton-based unit of Federated Department Stores, has agreements to lease as many as 11 Zodys locations, including stores in Canoga Park, Anaheim, Santa Ana, Lynwood and Redondo Beach. An employee of Lang Lampert Architects in Costa Mesa said the firm had been hired by Ralphs to convert four Zodys stores. She then referred calls to Christine Lampert, a principal in the firm, who had no further comment.
Like other supermarket companies, Ralphs recently launched a program to expand its superstore concept. The Zodys stores range in size from 60,000 to 100,000 square feet and could easily be converted. Byron Allumbaugh, chairman of Ralphs, had no comment.
In addition, HomeClub Inc., a Fullerton-based chain of discount home-improvement stores, said in October it has entered into an agreement with Sterik Co., a real estate partnership controlled by HRT Industries, to lease up to five warehouse locations from Zodys. Rudolph Hirsch, a HomeClub executive vice president, had no comment beyond saying that what was stated in October still stands. HomeClub was acquired by Zayre Corp. in January.
Vons Grocery Co. in El Monte has expressed interest in Zodys properties as well. Vons chairman Roger E. Stangeland said his company is talking to Zodys about leasing one or two properties that could be converted into stores geared to Mexican-Americans.
Meanwhile, there were reportedly changes inside Zodys. Sources familiar with operations at HRT headquarters in West Los Angeles said 30 to 40 employees in the merchandising operation had been laid off.
Store managers at several Zodys stores acknowledged that the chain stopped selling lottery tickets on Friday and stopped accepting layaway purchases on Sunday. The managers said these actions were taken to cut costs.
No New Merchandise
Some former and current employees of Zodys said that the store has stopped accepting new merchandise and that managers have been asked to stock shelves with inventory in store basements. One employee complained that her department is so thin on merchandise that she can no longer keep shelves stocked.
In addition, optometrists who operate leased optical departments in 19 Zodys stores have been placed on notice that they must vacate by the end of February.
In recent years, Zodys has also leased space to Circuit City Stores, a Richmond, Va.-based retailer that announced weeks ago that it was withdrawing from Zodys and opening several appliance and consumer electronics stores in Southern California. Circuit City said last week that it intends to phase out all those departments by the end of this month.
Additionally, Zodys leases space for linen and domestic departments to Three D Departments, the East Hartford, Conn., company that last Tuesday issued the statement about a possible closing of Zodys. Bernard Abrams, chairman of Three D, said last week that he issued the release because the company had been hearing a multitude of rumors about Zodys and decided that they could no longer be discounted.
HRT Industries sends rent checks on about half its properties to Sterik Co., a company with an address in Auburndale, Mass. A source said that company was established two months ago to negotiate purchases of more popular Zodys properties from landlords.
Sterik is controlled by Green and Meshulam Riklis, chairman of Rapid-American Corp., HRT's parent company. Several sources said the establishment of Sterik points to HRT's becoming a real estate company.