FINANCE

Brookstone preparing to file bankruptcy; eyes acquisition by Spencer’s

BY Marianne Wilson

New York — Saddled with high levels of debt and sluggish sales, Brookstone Inc. is preparing to file for bankruptcy protection, with a plan already in place to be bought by specialty retailer Spencer Spirit Holdings Inc.

"While we have implemented various successful cost-cutting initiatives, the search for a strong strategic partner who shares our vision and passion was a natural progression,” Jim Speltz, Brookstone president and CEO said in a statement. “We think we have found that in Spencer Spirit and are excited about the opportunity to begin leveraging the resources of the two companies and popularity of the Spencer, Spirit, and Brookstone brands."

Spencer, which is based in Egg Harbor, N.J., operates Spencer’s and Halloween seasonal retailer Spirit stores. It has been in discussions with Brookstone for weeks and both companies are looking to finalize sale paperwork, the Wall Street Journal said.

Spencer is expected to pay around $120 million for Brookstone, according to the report.

Based in Merrimack, N.H., Brookstone currently operates approximately 250 stores in the United States and Puerto Rico. The specialty retailer was taken private in 2005 by a group of investment firms.

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FINANCE

Wal-Mart files $5 billion suit against Visa over card fees

BY Dan Berthiaume

Bentonville, Ark. – Wal-Mart Stores Inc. filed suit with the U.S. District Court for the Western District of Arkansas suing Visa for $5 billion, alleging that the financial services company overcharges on the credit and debit card swipe fees it charges retailer.

The suit claims that Visa colluded with banks to fix swipe fees between January 2004 and November 2012, forcing it to raise prices and reduce customer service, resulting in lost retail sales.

Wal-Mart claims the swipe fees violated federal antitrust regulations and generated $350 billion for card issuers and banks during the period covered by the suit.

Wal-Mart would not publicly comment on the possibility of suing MasterCard. Other major retailers that did not take part in the class action settlement include Target and Amazon.com.

In December, a judge approved a settlement over card fees between 19 merchants and Visa and MasterCard. The settlement was originally valued at $7.25 billion. But it was reduced to about $5.7 billion because some retailers opted out.

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FINANCE

Restoration Hardware swings to Q4 profit; plans seven new stores

BY Dan Berthiaume

Cortre Madera, Calif. – Restoration Hardware Holdings Inc. (RH) swung to a profit in the fourth quarter of fiscal 2013 amid ongoing sales growth. The retailer posted net earnings of $26.64 million, compared to a net loss of $28.36 in the year-ago period.

Net revenues grew 18.5% to $471.69 million, from $398.05 million. Same-store sales grew 17%.

RH also announced the appointment of Doug Diemoz as chief development officer. He joins the company after 20 years at brands such as MEXX, Williams-Sonoma, and Gap, and will be responsible for guiding the company’s future international growth and global expansion efforts.

“In 2013, RH continued to outperform the home furnishings industry by a wide margin,” said Gary Friedman, chairman and CEO. “We increased net revenues 33% on a comparable week basis, and comparable brand revenue increased 31% on top of 28% last year, delivering our fourth consecutive year of more than 25% comparable brand revenue growth. As we enter 2014, we remain focused on our two largest value-driving strategies–the expansion of our offer and the transformation of our retail stores."

The company said it will open new stores in Greenwich, Conn., Los Angeles, and its first next-generation “Full Line Design Gallery” in Atlanta. The company is significantly expanding the size of its New York store, adding two additional floors.

“We now have signed leases for five next generation Full Line Design Galleries and are in negotiations for an additional 25 locations. Once our real estate transformation is complete in North America, we believe we will deliver $4 billion to $5 billion in annual sales, achieve mid-teens operating margins, and generate significant free cash flow,” Friedman added.

As of Feb. 1, RH operated a total of 70 stores, consisting of 62 Galleries, five Full Line Design Galleries and three Baby & Child Galleries, as well as 17 outlet stores throughout the United States and Canada.

During the full fiscal year, net income was $18.19 million, compared to a net loss $12.79 million the prior fiscal year. Net revenues increased 30% to $1.55 billion, from $1.19 billion. Same-store sales rose 27%.

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