The company said the closings are a bid to be more competitive in the softening retail environment.
"We are taking prompt corrective action now, so that we can be properly positioned for an improved year in 2001, despite the retail climate," said Joseph R. Ettore, Chairman and Chief Executive Officer.
News of the restructuring and earnings shortfall sent
Ames shares tumbling, and by midday the stock price had plummeted about 38 percent, or $1-23/32, to $2-7/8 on the Nasdaq stock market, a new 52-week low for the company. Ames' stock price has fallen more than 90 percent since April.
The Rocky Hill, Conn.-based company said the majority of the closures, 31 of the targeted 32, will come from among the stores that were acquired in late 1998 when the company took on the sickly Hills Stores discount retail chain.
The store closings will affect some 2,000 employees in 13 markets and will result in a restructuring charge of up to $140 million in the fourth quarter of this year.
Ames third-quarter consolidated net loss of $37.2 million compares to a consolidated net loss of $27.7 million, or a loss of $.95 per share, for the comparable period last year.
Net sales for the quarter ended on Oct. 28 were $920.3 million, an increase of 4.2 percent over the $883.5 million reported for the third quarter last year.
In addition to the store closings, Ames said it only plans to open five new stores in 2001, all of them during the first quarter.
The company also said it plans to cut capital expenditures next year by about $100 million, including cost reductions in the selling, general and administrative areas.
The result of all these actions will be a reduction in the company's 2001 cash flow requirements by almost $150 million.
The company on Thursday posted a wider-than-expected third-quarter loss of $37.2 million, or $1.27 a share, compared with a loss of $27.7 million, or 95 cents a share, in the corresponding quarter a year ago. Analysts on average had estimated a loss per share of 41 cents, according to data compiled by research firm First Call/Thomson Financial.
Looking ahead, Ames cut its profit outlook for the fourth quarter because of the $140 million restructuring charge and warned it would post a loss for the year, rather than its expected profit.
"Our new estimates reflect the heavy impact on our customers of higher energy prices, rising interest rates and tightening consumer credit that have both reduced their spending power and made them more conservative shoppers," Ettore said.
The company expects fourth-quarter earnings of $2 per shae, resulting in a $1 loss for the fiscal year. The First Call consensus was for a fourth-quarter profit of $2.63 and a full-year profit of 51 cents. Ames also expects fourth-quarter same-store sales, or sales at stores open at least one year, to be flat.
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