A Pre-Post-Christmas : Pic ‘N’ Save Spinoff Sells Cut-Rate Holiday Trappings; It Wraps Up Dec. 31

If Scrooge were to get into the retailing game, he might open a chain that looks something like Christmas Close-outs.

This Southern California chain of 25 stores is for all those shoppers who just can’t wait for the after-Christmas sales. And the stores will vanish just as surely as St. Nick, closing their doors Dec. 31.

With its cut-rate ribbons, decorations, toys and gift items, the chain resembles a Yuletide version of Pic ‘N’ Save--and that’s exactly what it is.

Analysts say the bargain-basement retailer’s scheme, launched quietly in October, is a good way to take advantage of the seasonal spurt in retail sales as well as the recession-spawned abundance of empty storefronts.

Pic ‘N’ Save and its parent company, MacFrugal’s Bargains Close-outs, could use the boost. The Dominguez-based company, which operates more than 200 stores in 12 states under the Pic ‘N’ Save and MacFrugal’s names, has been fighting lagging sales, and earlier this month posted a $19.9-million loss for the third quarter. (The company recently dropped the Pic ‘N’ Save title for all its stores outside of Southern California because of a name conflict with a retailer in Jacksonville, Fla.)

MacFrugal’s executives declined to be interviewed for this story despite several requests.

The Christmas Close-out stores are much smaller than the typical 19,000-square-foot Pic ‘N’ Save/MacFrugal’s outlet, but they share those stores’ densely packed, Turkish-bazaar look with low-priced merchandise stacked high. The stores tap into Pic ‘N’ Save’s constantly changing collection of manufacturers’ overruns, packaging changes, discontinued lines and close-outs.

Stark metal shelves and temporary signs give Christmas Close-out stores the air of the plain-wrap aisle at the supermarket. The stores are stuffed with such items as Barbie patio party play sets for $3.99, six-foot artificial trees for $29.99 and tree ornaments starting at 39 cents each. Similar Christmas merchandise can be found in regular Pic ‘N’ Save stores.

“It’s got good prices,” said Inglewood resident Anna Roland, who bought a large plastic snowman and other holiday decorations at the cluttered Fox Hills Mall Christmas Close-out.

Retail consultant Larry Ebel called the idea “a pretty good application of the entrepreneurial spirit, particularly in the gift business, which typically does 75% of its business in 45 days.”

Temporary stores are becoming more common because their owners can enjoy the holiday bulge in sales without worrying about the expense of supporting the stores during slower parts of the year, he said. What’s more, there is plenty of space available, particularly in smaller malls and strip centers, thanks to the recession’s slaughter of retail stores.

“The interesting thing is the (mall) developers’ willingness to do things they’ve never done before,” said Ebel, senior vice president for Alpha 20/20, a New York-based retail design and consulting firm. “It’s so much better than hanging a dust curtain in an empty storefront, which is akin to having a missing front tooth.”

“If this works, this should be pretty good” for MacFrugal’s, said David Jackson, an analyst who follows the company for Laidlaw Holdings, a Los Angeles-based investment firm.

MacFrugal’s could use some good news. The company recently reported a $19.9-million loss for the third quarter compared to year-ago earnings of $4.3 million. MacFrugal’s would have recorded third-quarter earnings of $2.98 million, or a 45% decline from the year before, were it not for a $36.6-million write-down the company took on its New Orleans distribution center, which was built by previous management to handle a now-scrapped East Coast expansion.

MacFrugal’s sales have been sluggish this year at a time when discounters have been leading the retail pack. Overall sales fell 4.5% in November and 3.1% for the 11-month period. Sales at stores that have been open for at least a year declined 12.5% in November and 5% for the 11-month period.

“I’m surprised they’re not knocking (shoppers’) socks off,” said Jonathan Ziegler, an analyst with Hancock Institutional Equity Services in San Francisco. “The quarter was pretty ho-hum.”

MacFrugal’s chief executive, Len Williams, has said in news releases that comparisons with last year are difficult because the company had a particularly good year in 1991. In addition, California’s economic problems have hurt the company, he has said.

Analysts note that the company has hired a new merchandising vice president, and they hope that the chain is regaining its stride.

“I might like to see them upgrade their merchandise” by carrying more well-known brands, said Jan H. Loeb, an analyst with Legg Mason Wood Walker. “I think that they are moving in the right direction. People want to save money and to be value shoppers, and I think Pic ‘N’ Save offers that.”

Saving money was on the mind of a vacationing Gloria Rodriguez, who made a special trip to a Christmas Close-out store to load up on wrapping paper, boxes and toys before she boarded a flight home to Mexico.

“It’s a very good store,” she said. “They have very good prices, much better than in Mexico City.”