NEW YORK — Crowley Milner & Co., the Detroit-based department store chain, just reported its first annual profit since 1989. The turnaround has been reflected in a dramatic rise in the stock.
The earnings resulted from an improvement in sales and a sharp decline in expenses. The company got a boost from financing provided by Schottenstein Stores of Columbus, Ohio, which also made a killing on Crowley’s stock.
Last August, the stock was 6 1/8. After news of a third-quarter profit was released last November, Crowley stock rose 140 percent in three days to 18 3/8. Last week, after disclosing a profit of $2.76 million, or $4.54 a share, in the fourth quarter, the company declared a 2-for-1 stock split, payable May 25. On Friday, the stock, traded on the American Stock Exchange, closed at 22.
Schottenstein, the principal shareholder in Value City Department Stores and American Eagle, first got involved in Crowley last May, when it began financing the company’s operations. It increased Crowley’s short-term revolving credit to $8 million from $3 million previously. The loan is secured by virtually all Crowley’s assets. The new financing allowed Crowley to concentrate on returning to profitability, according to Dennis Callahan, who joined Crowley as president and chief executive officer in November 1992.
For the year, the company recorded a profit of $513,717, or 89 cents a share, rebounding from a loss of $4 million. Sales increased 0.6 percent to $106.9 million from $106.3 million, with same-store sales up 3.2 percent. Sales in the fourth quarter increased 4.6 percent, to $35.1 million from $33.6 million, with same-store sales up 8.7 percent.
Schottenstein took on the Crowley financing after arguments with bankers over the value of Crowley’s assets, according to Callahan. He said the banks asked Schottenstein why, if he thought the firm was worth so much, he didn’t finance it.
“So he did,” Callahan said. “They came in to help me. They really have been a tremendous partner. Bankers really don’t give retailers much of a break these days.”
As part of the loan agreement, Schottenstein received options to buy 99,000 shares at $1 each. The options may be exercised from May 1994 to May 1997. Also, in June, Schottenstein acquired a 25 percent stake, or 127,000 Crowley shares, from Boston-based Fidelity Group for about $320,000, or about $2.50 a share.
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With the financing completed, Callahan said he was better able to revive store operations by instituting an everyday-low-pricing strategy and adding new merchandise such as maternity clothes and luggage.
He also said the company cut expenses by $3.2 million, with half of the cuts coming from payroll deductions from repetitive back office areas. He said the selling-floor payroll was not cut.
Callahan noted that a big part of the firm’s turnaround was the closing of its Wildwood store.