New Jersey-based Syms Corp. and Vornado Realty Trust had a winning bid of $62.4 million for discount retailer Filene”™s Basement, which filed for Chapter 11 protection in May.
“It is a high-risk deal, no question about it,” said Howard Davidowitz, chairman of New York City-based Davidowitz & Associates Inc., a national retail consulting and investment banking firm.
Davidowitz said Syms, a relatively small player in the off-price clothing segment when compared with T.J. Maxx and California-based Ross Stores Inc., had a unique opportunity to pair with Vornado on the deal.
“I think Syms saw this as an opportunity to grow, but I think they”™re looking at a bunch of issues,” Davidowitz said. “Filene”™s Basement opened a number of more upscale stores in an economy where people are down trading. What Filene”™s tried to do is differentiate themselves with higher-end merchandise, more designers and open stores in higher-end neighborhoods. The issue of course is the customer is trading down. That”™s why they collapsed.”
Davidowitz said this will be an opportunity for Syms to expand its customer base.
“I think the primary difference between Syms and Filene”™s is that Syms mainly is a men”™s business and Filene”™s Basement is mainly a women”™s business,” Davidowitz said. “Syms is looking to expand their shopper base, because 70 percent of their customers are men and 70 percent of Filene”™s customers are women. Syms saw an opportunity where there are real synergies and an overlap of suppliers. This would make them stronger with those suppliers.”
Davidowitz gives the deal a 50-50 shot at being a success.
“Three years from now it either works or Syms is in real trouble,” Davidowitz said. “If this doesn”™t work, Syms could be in bankruptcy court. This is a high-risk move, but you could understand why they did it.”
Syms Corp. was unavailable for comment at press time.
