THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, February 11, 1996 TAG: 9602100345
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
LENGTH: Long : 120 lines
Fine's, the 63-year-old clothing chain that began as a small shop on Granby Street, is trying to get a fresh start after staggering under debt for several years.
The Norfolk-based apparel chain, which now has 48 stores across the Southeast, emerged from bankruptcy protection Nov. 21. It has been corporately restructured, but the owners are pretty much the same.
For customers, Fine's legal wranglings went largely unnoticed. The banner on the stores - Fine's - stayed the same. And the stores' inventory, everything from denims to ties, never suffered.
``Mitchell Fine has worked very hard to keep this company alive and save jobs for people who have worked for the company for years,'' said Paul Campsen, who represented Fine, his father, Barry Fine and senior management in U.S. Bankruptcy Court in Norfolk.
Leaner and unburdened by debt, the 48-store chain still faces several challenges. It must cope with customer's changing shopping patterns, a competitive climate and a changing retail environment. Fine's must fine-tune its niche and strategy to keep a strong grasp on its markets.
The Fine's menswear tradition began in 1933, when brothers Ruby and Leon Fine opened a 600-square-foot shop, selling hats and clothing, in downtown Norfolk. At the time, the selling space inside was smaller than the display area in front.
By 1970, the company expanded to nine stores in Virginia and North Carolina. That year, Interco Inc., a St. Louis-based apparel manufacturer and retailer, purchased Fine's and made it a wholly owned subsidiary.
But Interco had its own problems. During a reorganization in 1989, it agreed to spin off Fine's back to the company's management. As part of the $22.5 million deal, Fine's management also would have to buy another one of Interco's subsidiaries, United Shirt Distributors Inc., a Detroit-based apparel chain.
Mitchell Fine, grandson of Ruby, and other company officials would later regret that decision. The two companies never blended well, so United Shirt was shut down in 1991. In addition, they realized they had paid too much for Fine's - a mistake many companies made during the buying frenzy of the late '80s. Payments on the debt were too high.
``We did overpay,'' said Fine, the company's president and chief executive officer. ``I don't think there's any secret about that.''
By the early '90s, the chain was hurting. Desert Storm had slowed down spending in the Southeast - Fine's stronghold. A slump in the apparel industry, combined with changing trends in clothing, further dragged sales.
The company's lenders and then clothing manufacturers began to see warning signs. Fine's management found it was growing more difficult to convince leery manufacturers to ship merchandise.
``You try to be as much of a detective as you can,'' said Tom Linker, a credit manager with DonnKenny Apparel Inc. in Wytheville, Va., which supplied Fine's before the bankruptcy. ``It's a very volatile market out there.''
And, ``if you don't have merchandise, you don't exist,'' Fine said.
They all knew bankruptcy was near.
After negotiations with lenders died down, Fine's Men's Shops Inc. and its parent, Azalea Acquisition Corp., filed for bankruptcy protection in July 1994. At the time, Fine's owed about $20.1 million, mostly to two lenders.
Fine's largest creditor was Heller Financial Inc., a Chicago-based lender that provided a big chunk of the financing for the management-led buyout in 1989.
In October 1995, the court agreed to a plan to liquidate Fine's Men's Shops Inc., transferring its liabilities and assets into parent Azalea Acquisition. A month later, the court approved the chain's reorganization plan.
Under the plan, the retail chain, then owned mostly by Heller, was put up for sale. Fine, his father and senior management formed STAMOR Corp. and repurchased the apparel chain for about $6 million.
The chain's ownership is mostly the same as it was before the bankruptcy filing, except for a few changes in the senior managers who invested.
In the end, Heller, which was owed about $16 million, got $5 million. Fine's kept up with its payment plan. All unsecured creditors were fully reimbursed.
In addition to shedding much of its debt, Fine's also is leaner. About 21 stores have been closed since the company filed for bankruptcy, leaving Fine's with about 48 stores in the Southeast. Shut down were stores in struggling malls, upscale shopping centers and in markets too far from the company's distribution center in Norfolk.
The chain now has 300-350 employees, down from 475 before the bankruptcy filing.
Mitchell Fine says Fine's is now carefully focusing on its target market: young men between the ages of 18 and 35. He says ``basic'' clothing, like those sold at The Gap, is now hot in the market. But Fine's, he says, is concentrating on the young men who desire something between basic and trendy.
``We're looking for the young guy who might have just started working, who still goes out at night to dinner or to clubs,'' Fine said. ``He's trying to get ahead of the pack, as far as fashion goes, but not too far ahead.''
So, shoppers at Fine's might find everything from Levi's to Boss baggy jeans. And they might find the most casual shirt next to a sharp vest, which was a hot item during the holiday shopping season.
Fine's may have found the correct mix. Same-store sales - revenues at stores open at least a year - fell 3 percent in December 1995 compared with the same month a year earlier. But profitability was about the same or slightly better because the company did not have to pay for as many promotions.
Same-store sales for January rose.
While the company's focus looks clearer, officials are still concerned about changes in shopping patterns. Customers have more places to shop, including catalogs, mammoth outlets like Target Stores and outlet shopping centers. Competition is fierce, and many apparel retailers - from small boutiques to Merry-Go-Round - are going out of business.
So any expansion or big alterations at Fine's will come slowly.
``I think Fine's is unique in that it has a format that so far has lasted 63 years,'' Mitchell Fine said.
Fine says that format will remain the same, though with some evolution over the years. Expansion, he said, will come slowly.
``We're still looking to expand in the Southeast,'' he said. ``We still feel there is a need for our merchandise, in small markets, especially.''
But until the company has fine-tuned its approach and identity, it won't jump on any massive expansion program.
``We're still going to run our business cautiously,'' Fine said. ILLUSTRATION: Graphic
FINE'S HISTORY
[For complete graphic, please see microfilm]
by CNB