Friday, January 12, 2001
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Posted on: Friday, January 12, 2001

Liberty House continues to gain strength

By Andrew Gomes
Advertiser Staff Writer

As Liberty House nears what could be the end of its nearly three-year struggle to emerge from bankruptcy, financial results show continued gradual strengthening that is a strong sign for the kamaaina retailer’s long-term viability.

Amid a somewhat disappointing holiday shopping season for Hawaii retailers and dismal performances from department stores around the nation, Liberty House increased profits 29 percent in December over the same month in 1999 despite flat sales.

Excluding restructuring expenses, the retailer earned $8.8 million on $50 million in sales last month, compared to $6.8 million on about $50 million in sales in December 1999.

The holiday shopping season typically defines a good or bad year for department store retailers, which generate 20 to 25 percent of annual sales and most profits or losses.

"From a profitability standpoint, we had a decent December," said Liberty House president John Monahan. "We would have liked to have done better."

For the entire year, Liberty House, which has been building strength since filing for Chapter 11 bankruptcy protection in March 1998, earned $8.9 million on sales of about $289 million. That was a 2.3 percent increase from 1999 earnings of $8.7 million on sales of almost $284 million.

The performance is more good news for the Hawaii retailer stuck in bankruptcy because dueling factions of creditors cannot agree on how to pay off the company’s debts. It was the second consecutive year that sales did not increase materially but profits did because of lower expenses.

"It is an indication of the viability of Liberty House," said Monahan, who indicated a year ago that the company was ready to operate outside bankruptcy protection.

A hearing is set for Jan. 22 to debate a plan that proposes to lead the company out of bankruptcy. Officials have said the company could be out of bankruptcy as early as February.

The retailer’s December sales figures were disclosed in a preliminary financial report filed in U.S. Bankruptcy Court this week. The report was subject to adjustments, but Monahan said changes shouldn’t be material.

Profits for the month did not factor in legal fees and restructuring expenses associated with bankruptcy, which typically have pulled down Liberty House earnings into net losses. Through November, 33 months of bankruptcy restructuring expenses totaled $16.3 million.

But Monahan emphasized that the best picture of the company’s financial health is cumulative profit, excluding reorganization costs, since the company filed for bankruptcy in March 1998. As of last month, that figure was about $10 million.

Geographically, the strongest performance came from stores on the Big Island, especially in Kona, Monahan said. Neighbor Island stores, in general, did better than Oahu stores. Liberty House’s Kaneohe and Kailua stores showed improving strength, he said.

By merchandise category, home products led Liberty House sales. "Particularly our local manufactures are very strong," Monahan said. "Any product that mirrors our local customers’ lifestyle is doing appreciably better than traditional merchandise from traditional vendors."

Liberty House operates 18 stores: 12 department stores, five resort stores and one boutique.

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