WOOLWORTH WALKING DOWN A NEW PATH;FOOTWEAR DASHES PAST RETAILER'S DIME STORE ORIGINS

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Woolworth Corp. wants to get back into the retail ball game.

The struggling retailer is relying on a newly recruited outside management lineup and the strength of its specialty stores to boost sagging revenues.

In December 1993, Woolworth brought in former Macy's president and merchandising guru Roger Farah as chairman-CEO, and in April, named as president-chief operating officer Dale Hilpert, former chairman-CEO of May Department Stores Co.'s Payless ShoeSource division.

Woolworth's strategy now is to concentrate on its most prized possession-the footwear business, which includes stores like Foot Locker, Kinney and Champs Sports-instead of focusing on its core Woolworth stores.

"Although the company maintains that the Woolworth variety stores are part of the future, I think they are only part of the future where they can hold onto leases in inner-city locations, like the New York City boroughs," said Burt Flickinger III, a retail management consultant.

"Otherwise, I think you will see Woolworth variety stores fading into the sunset, with Dollar General Stores being the next successful evolution of variety stores."

Although it closed more than 550 underperforming Woolworth stores in 1993, the retailer has not completely abandoned its core variety format, a division that is ingrained deep in the company's 116-year heritage.

The retailer is searching for a president-CEO of its F.W. Woolworth Co. stores to replace Edgar Swain, who retired May 1.

"Over time, the percentage of business contri-buted from the base Woolworth enterprise will continue to decline as the emphasis on specialty retailing becomes the dominant strategic focus at Woolworth," said Jeffrey Hill, managing director at Meridian Consulting Group, Westport, Conn.

Currently, the retailer's footwear, specialty stores and other miscellaneous formats contribute about 60% of worldwide sales, while the core Woolworth stores are responsible for the rest, according to an analyst.

In 1994, Woolworth returned to profitability, earning $47 million compared with a net loss in 1993 of $495 million. Revenues decreased 13.5% to $8.3 billion, reflecting the sale of Woolco stores in Canada to Wal-Mart Stores and the elimination of sales as a result of store closings.

"Woolworth has the potential to succeed with a specialty strategy and it would be ill-advised to return to focusing on their base business," Mr. Hill said.

Analysts said if Woolworth returned to the base business strategy, it wouldn't be able to compete on the same scale with bigger retailers like Kmart Corp. and Wal-Mart Stores.

Woolworth is currently evaluating all business operations to ascertain which of them are most central to the company's future and hold the greatest potential to achieve long-term growth and profitability.

The company, which owns more than 30 retail formats, plans to divest itself of businesses that don't fit into the corporate strategy. Woolworth's annual report identifies the Rx Place deep-discount drugstore chain and the Little Folk/Kids Mart children's wear stores as formats it plans to sell.

Chairman-CEO Farah recognizes the importance of the footwear business. He helped reorganize the footwear business into two divisions-Specialty Footwear and Athletic Footwear & Apparel.

Besides those two divisions and the Woolworth stores division, the company's specialty store formats each operate as separate units.

Mr. Farah recruited Carol Greer, former vice chairman-merchandising for the Broadway Stores, to be president-chief operating officer of the Specialty Footwear division that includes Kinney, Footquarters, Colorado outdoor apparel stores and Basic shoe stores.

The Athletic Footwear & Apparel division consists of all Foot Locker formats, Champs Sports, Athletic X-Press and Going to the Game! and is headed by William DeVries as president-chief operating officer.

Of all its retail formats, Woolworth spends most of its advertising budget on its Foot Locker stores, about $20 million according to Competitive Media Reporting.

Foot Locker relies heavily on marketing partners like Nike, Reebok, Fila and the NBA. Sports marketing, co-op advertising efforts, grassroots activities as well as traditional advertising have made Foot Locker stores a marketing success.

Last September, Foot Locker teamed up with Fila and its spokesman, Detroit Pistons rookie Grant Hill, in a school backboard program.

The program has supplied backboards for playgrounds in cities like New York, Detroit, Washington, Philadelphia and Boston. The backboards read "Winners never quit/Brought to you by Fila and Foot Locker."

Foot Locker also will sponsor some U.S. track and field athletes in the Olympics.

Analysts feel the Foot Locker family of stores has the greatest potential.

Mr. Flickinger believes the continued thrust in the athletic shoe market with the success of Nike and Michael Jordan's return to the NBA will help Foot Locker.

"Their Foot Locker [group of stores] represents a tremendous opportunity for continued growth," said Meridian's Mr. Hill.

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CORPORATE CLOSE-UP

Headquarters: New York

1994 sales: $8.3 billion in revenue and $47 million in net income.

Leadership: Roger N. Farah, chairman-CEO; Dave Hilpert, president-chief operating officer; Carol Greer, president-CEO, specialty footwear

division; William DeVries, president-CEO, athletic footwear and apparel division; Frank Bonacci, VP-marketing & sales.

Measured ad spending: $37 million, according to Competitive Media

Reporting

Major specialty retail stores: Foot Locker, After Thoughts, Kinney shoes, Lady Foot Locker, Champs Sports, Northern Reflections and The San

Francisco Music Box Co.

Agencies: Barclay, Park & Church, New York (house agency for U.S.

Woolworth Division); Bates USA, New York (all Foot Locker brands, Champs Sports); Arnold Fortuna Lawner & Cabot, Boston (Kinney Shoe Division).

Recent successes: Returned to profitability in 1994 and has installed

new, talented leaders, including Roger Farah, former president of Macy's, and Dave Hilpert, former chairman-CEO of Payless ShoeSource. The company

has also reorganized its footwear division.

Challenges for 1995 and beyond: Provide more cash flow. The company also needs to divest itself of businesses that are underperforming and don't

fit into its current strategy. Must strengthen merchandising and inventory management, and continue to bring in new, quality management.

Source: Advertising Age and company reports

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