Carter Hawley Sells 10 Million Shares to Dress Up Stores

Carter Hawley Hale Stores on Friday issued 10 million shares of new stock to help finance an ambitious remodeling plan for much of its Broadway department store chain.

It was the Los Angeles-based retailer’s first public offering of new stock since emerging from bankruptcy reorganization in October. Carter Hawley will issue an additional 1.45 million shares Wednesday with expectations of raising a total of $148.6 million from the two offerings.

Carter Hawley set the offering price for the new stock at $13.75 on Friday. The company’s stock closed Friday at $13.875, unchanged in trading on the New York Stock Exchange.

Carter Hawley plans to spend $300 million over the next three years on store modernization at many of its 83 Broadway, Emporium and Weinstocks stores. Broadways are located throughout the Southwest, while Emporiums are in Northern California and Weinstocks are in Central California and Nevada.

The retailer hopes to improve its sales by reconfiguring its store displays, giving more space to merchandise generating the highest profits and reducing space devoted to its least profitable items. The company last year averaged only about $137 in sales per square foot of selling space and hopes to reach the industry average of $174 per square foot.

For example, items such as furniture, men’s suits, household products and consumer electronics generate only 11% of the company’s profit but occupy 29% of the floor space at Carter Hawley stores. Under the remodeling plan, only 11% of the selling space will be set aside for those products.

On the other hand, the strongest merchandise areas--cosmetics, men’s sportswear, young women’s apparel, women’s sportswear and men’s furnishings such as shirts, socks and underwear--generate 46% of profit. The selling space for those items will be expanded from the current 25% to 39%.

The company also plans to spend $13 million to enhance the look of product displays.

For example, the company will rely less on racks and hangers--which tend to cramp apparel into clusters--and use more display tables that give consumers a better look at goods.

“The remodeling is absolutely essential,” said New York-based retail analyst Kurt Barnard. “They need to brighten the look to bring in more customers and encourage them to spend more.”

As a result of the new stock issue, the stake of Carter Hawley’s principal investor--Chicago-based Zell/Chilmark Fund--will be reduced from 67.5% to 52%.