Carter Expects $24-Million Loss Due to Restructuring

Times Staff Writer

The costs of Carter Hawley Hale Stores' pending restructuring will result in a fourth-quarter loss of about $24 million, compared to a profit of $19 million in the same quarter a year earlier, the company disclosed Tuesday.

However, operating earnings for the period will be up sharply, to $66 million from $24 million a year earlier, reflecting improvements in margins and expense control, the company said.

"Not counting all the writeoffs, . . . the numbers look very good," said Peter J. Siris, an analyst with the Buckingham Research investment firm in New York. "It looks like inventories were in line and (expenses) were well below last year."

For the year, the Los Angeles-based retailer, parent of the Broadway and Neiman-Marcus chains, expects to report a profit of $4 million, down from $48 million a year earlier. After payment of preferred dividends, there will be no per-share earnings for the year, the company said.

On a pretax basis, the company will show yearlong operating earnings of $140 million, up from $72 million, Chairman and Chief Executive Philip M. Hawley told Dow Jones News Service.

Included in results for the quarter ended Feb. 1, which are to be released officially Thursday, will be a pretax charge of $25 million from the restructuring, including previously disclosed fees to investment adviser Morgan Stanley & Co., and an after-tax charge of $30 million for the early retirement of debt over the year's final quarter.

According to Siris, the results also indicate that the company's stores, particularly the specialty units, had some extra markdowns in the quarter in anticipation of the restructuring.

Revenue for the quarter is expected to be flat at $1.3 billion, with full-year revenue up slightly to $4.1 billion from just under $4 billion the year before. Sales for fiscal 1985 included a full year of revenue from the Holt Renfrew and John Wanamaker chains, which have been sold. The 1986 results include no Renfrew revenues but 11 months of Wanamaker sales. Overall, the company said, sales from continuing operations for the year rose about 3%.

A spokesman said improvements in pretax operating earnings reflect lower overall expenses as well as improved profit margins resulting primarily from increased sales of private-label merchandise.

In trading Tuesday on the New York Stock Exchange, Carter Hawley shares rose $1.25 to $57.125.

Under its restructuring, Carter Hawley will spin off its specialty store chains into a separate, publicly traded company that is expected to carry the name Neiman-Marcus Group and be controlled by General Cinema, now the retailer's largest investor. Shareholders will receive $17 in cash and stock in the new company for each Carter Hawley share, in addition to retaining their stock in the pared-down Carter Hawley, which will operate department stores.

Separately, Federated Department Stores, parent of Bullock's and I. Magnin, reported earnings for the fourth quarter of $171.2 million, up 11.2% from the same quarter a year earlier. Sales were $3.4 billion, up 6.6%.

For the full year, the company reported net income of $287.6 million, up just 0.3%. Sales rose 5.4%, to $10.5 billion. The full-year figure included a one-time charge of $14.3 million relating to the repurchase of debt.

The Cincinnati-based company said full-year earnings were also reduced by several actions taken to improve long-term growth. Among those was a capital investment of $113 million to buy and open 14 Ralph's Giant stores and four other supermarkets in Southern California as well as to modernize and expand Ralph's distribution center. The company also closed and sold 18 smaller, older Ralph's locations.

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