HEILIG-MEYERS TO SELL ITS 236 MATTRESS STORES: DIVESTITURE MAY ENABLE RETAIL GIANT TO PAY DOWN ITS DEBT
As you may know, Heilig-Meyers is going to sell its profitable futon mattress retail store chain, Mattress Discounters. According to a professional analyst, it is recommended action that the company should do to become the largest furniture retailer in this country.
Based on the official report, the company’s managers are considering to divest in 236 stores of Mattress Discounters and 96 stores of Rhodes. As a result, Don Shaffer, a specialist in the futon mattress industry, becomes the new president and chief operation officer of this company. In the past, he was Sears’s president in Canada. He has a lot experience in queen size futon industry.
As Raymond James’s vice president of equity research, Bud Bugatch, said, the divestiture of Mattress Discounters and Rhodes may help the futon mattress retailer to pay for its current debt as well as narrow its concentration to smaller and customer-oriented market.
“It is a payoff, difficult but must-to-do in appropriate period of time,” Bugatch stated. “It is the first time for several years that I think Heilig-Meyers has done the right thing.”
“Mattress Discounters is surely a success that no one easily puts down their hands, but that is what they need to do to cover other obligations. It will help the company to pay off the huge amount of debt,” Bugatch added.
He also estimates that the divestiture of Rhodes will be announced by this company in the first quarter of the year, before the selling of Mattress Discounters in the second or the third one. You still can find some futon mattress reviews about this brand in the website.
"At that point, the prospects for Heilig-Meyers begin to look significantly better," he noted. "There are some different things Heilig-Meyers needs to do; there will be some other missions for them to complete."
However, he didn’t estimate the exact moves.
Rhodes and Mattress Discounters contributed about $695.5 million in 1998 in term of $2.7 billion total income of Heilig-Meyers. About $40 million was lost out of by Rhodes in the same year.
With the divestitures, Heilig-Meyers will be able to come back to its major market segment: residential area America. As Bugatch said "It'll be an across-the-nation retailer, even after the divestiture," "Be that as it may, it will be engaged in the market it knows the best, which is a credit-concentrated, predominately residential community advertise."
The obtaining of Rhodes, Bugatch stated, "was a case of an organization's endeavor to become larger, however was not really effective.”
"I thought it was anything but a solid match for Heilig-Meyers," he said. "Rhodes place them into significant metro markets, where Heilig-Meyers had not been especially effective. Heilig-Meyers is a credit-concentrated configuration that isn't that fruitful in the primary markets where you have a more refined credit buyer."
Although Heilig-Meyers has taken some key strategies, FICO assessments organizations still felt it suspicious about the ability to control itself.
Heilig-Meyers was placed into BB+ corporate credit rating on CreditWatch by Standard and Poor with negative ramifications and put its BB+ in risk debt on Heilig-Meyers' MacSaver Financial Services on CreditWatch with negative ramifications as well.
On Rating Watch-Down, Duff and Phelps Credit Rating Co. (DCR) additionally put the MacSaver rating. "There is vulnerability in the planning and extreme continues from the arranged resource deals, the loss of income from the demeanors and the probability of more key changes," as per DCR. "At last, the greatness of obligation decrease and its effect on the organization's use will be key contemplations going ahead."
Standard & Poor plans to arrange a meeting with Heilig-Meyers's board of management in order to evaluate the ability of their futon mattress business plan and the financial balance as well to see which level of rating they should give out.
"How the company operates will be obviously reflected by the rating," Bugatch said. "While not many people are welcome this news, it truly is coming late, after the organization has effectively taken activities intended to explicitly cure those issues. I don't figure this should startle anyone."
The board of management of Heilig-Meyers announced the profit of the first quarter on 23rd March. Each share could gain about 7 cents.
Heilig-Meyers is the biggest furniture and bedding in the America. There are about 815 stores of Heilig-Meyers, 236 stores of Mattress Discounters, 96 stores of Rhodes and 70 stores of RoomStore located in the United States, and 32 stores of Berrios located in Puerto Rico.Other Post: Betting on bedding: mattress vendors look to September Market to start turnaround for industry