================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997
(No Fee Required)
Commission File Number 1-12381
----------
Linens 'n Things, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-3463939
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 Brighton Road
Clifton, New Jersey 07015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 778-1300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, $0.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _X_
The aggregate market value of voting stock held by non-affiliates of the
Registrant on March 17, 1998, based on the closing sale price on the New York
Stock Exchange on such date, was approximately $994 million.
The number of outstanding shares of the Registrant's common stock, $0.01 par
value, as of March 17, 1998 was 19,430,519.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1997 are incorporated by reference into Part II, and portions
of the Registrant's Proxy Statement for the 1998 Annual Meeting of Shareholders
are incorporated by reference into Part III.
================================================================================
<PAGE>
Table of Contents
Form 10-K
Item No. Name of Item Page
- ------- ------------ ----
PART I
Item 1. Business......................................................... 3
Item 2. Properties....................................................... 12
Item 3. Legal Proceedings................................................ 12
Item 4. Submission of Matters to a Vote of
Security Holders............................................. 12
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.............................. 13
Item 6. Selected Financial Data.......................................... 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................................... 13
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk........................................... 13
Item 8. Financial Statements and Supplementary
Data......................................................... 13
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure................................................... 13
PART III
Item 10. Directors and Executive Officers of
the Registrant............................................... 14
Item 11. Executive Compensation........................................... 14
Item 12. Security Ownership of Certain Beneficial
Owners and Management........................................ 14
Item 13. Certain Relationships and Related
Transactions................................................. 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.......................................... 15
2
<PAGE>
PART I
Item 1. Business
General
Linens 'n Things, Inc. and its subsidiaries ("Linens 'n Things" or the
"Company") is one of the leading, national large format retailers of home
textiles, housewares and home accessories operating 176 stores in 37 states as
of December 31, 1997. As of December 31, 1997, the Company operated 153
superstores averaging approximately 35,000 gross square feet in size and 23
smaller traditional stores averaging approximately 10,000 gross square feet in
size. The Company's newest stores range between 38,000 and 42,000 gross square
feet in size and are located in strip malls or power center locations. The
Company's business strategy is to offer a broad assortment of high quality,
brand name merchandise at everyday low prices, provide efficient customer
service and maintain low operating costs.
Linens 'n Things' extensive selection of over 25,000 Stock Keeping Units
("SKUs") in its superstores is driven by the Company's commitment to offering a
broad and deep assortment of high quality, brand name "linens" (e.g., bedding,
towels and pillows) and "things" (e.g., housewares and home accessories)
merchandise. Brand names sold by the Company include Wamsutta, Martex, Waverly,
Laura Ashley, Royal Velvet, Croscill, Braun, Krups, Calphalon and Henckels. The
Company also sells an increasing amount of merchandise under its own private
label (approximately 10% of sales) which is designed to supplement the Company's
offering of brand name products by offering high quality merchandise at value
prices. The Company's merchandise offering is coupled with a "won't be
undersold" everyday low pricing strategy with price points substantially below
regular department store prices and comparable with or below department store
sale prices.
From its founding in 1975 through the late 1980's, the Company operated a
chain of traditional stores ranging between 7,500 and 10,000 gross square feet
in size. Beginning in 1990, the Company introduced its superstore format which
has evolved from 20,000 gross square feet in size to its current size ranging
from 38,000 to 42,000 gross square feet with the largest store at 50,000 gross
square feet. This superstore format offers a broad merchandise assortment in a
more visually appealing, customer friendly format. The Company's introduction of
superstores has resulted in the closing or relocation of 118 of the Company's
traditional stores through December 31, 1997. As a result of superstore openings
and traditional store closings, the Company's gross square footage more than
tripled from 1.6 million to 5.5 million over the last five years although its
store base only increased 22% from 144 to 176 during this period.
As part of this strategy, the Company instituted centralized management
and operating programs and invested significant capital in its distribution and
management information systems infrastructure in order to control operating
expenses as the Company grows. In addition, as part of its strategic initiative
to capitalize on customer demand for one-stop shopping destinations, the Company
has balanced its merchandise mix from being driven primarily by the "linens"
side of its business to a fuller assortment of "linens" and "things." The
Company estimates that the "things" side of its business has increased from less
than 10% of net sales in 1991 to approximately 40% in 1997.
The Company was a wholly-owned subsidiary of CVS Corporation ("CVS"),
formerly Melville Corporation, until November 26, 1996 when CVS completed an
initial public offering ("IPO") of 13,000,000 shares of the Company's common
stock. Subsequent to the IPO, CVS owned approximately 32.5% of the Company's
common stock, having retained 6,267,758 shares. During 1997, CVS sold
substantially all of its remaining shares of the Company's common stock in a
public offering. At December 31, 1997, CVS holds no shares of the Company's
common stock.
Executive Officers and Certain Key Personnel
The following table sets forth information regarding the executive
officers of the Company:
Name Age Position
----- --- -------
Norman Axelrod. ......... 45 Chairman, Chief Executive Officer and
President
Hugh J. Scullin ......... 48 Senior Vice President, Store Operations
Brian D. Silva .......... 41 Senior Vice President, Human Resources and
Corporate Secretary
Steven B. Silverstein ... 38 Senior Vice President, General Merchandise
Manager
William T. Giles ........ 38 Chief Financial Officer
3
<PAGE>
Mr. Axelrod has been Chief Executive Officer and President of the Company
since 1988 and was elected to the additional position of Chairman of the Board
of Directors of the Company effective as of January, 1997. Prior to joining
Linens 'n Things, Mr. Axelrod held various management positions at
Bloomingdale's between 1976 to 1988 including: Buyer, Divisional Merchandise
Manager, Vice President/Merchandise Manager and Senior Vice President/General
Merchandise Manager. Mr. Axelrod earned his B.S. from Lehigh University and his
M.B.A. from New York University.
Mr. Scullin joined Linens 'n Things in 1989 as Vice President, Store
Operations. Mr. Scullin has been Senior Vice President, Store Operations since
1994. From 1978 to 1987, Mr. Scullin held various management positions with The
Gap, Inc., including Zone Vice President at both The Gap and Banana Republic
from 1984 to 1987. From 1987 to 1989, Mr. Scullin was Vice President of Stores
with Alcott and Andrews. Mr. Scullin graduated from St. Joseph's University with
a B.S. in Marketing Management.
Mr. Silva joined Linens 'n Things in 1995 as Vice President, Human
Resources and was promoted to Senior Vice President, Human Resources and
Corporate Secretary in 1997. Mr. Silva was Assistant Vice President, Human
Resources at The Guardian, an insurance and financial services company, from
1986 to 1995. He holds an M.A. in Organizational Development from Columbia
University and an M.S. in Human Resources Management from New York Institute of
Technology. Mr. Silva received his B.A. from St. John's University.
Mr. Silverstein joined Linens 'n Things in 1992 as Vice President, General
Merchandise Manager. Prior to joining Linens 'n Things, Mr. Silverstein was
Merchandise Vice President of Home Textiles at Bloomingdale's from 1985 to 1992.
Mr. Silverstein has been Senior Vice President, General Merchandise Manager
since 1993. He received his B.A. from Cornell University and his M.B.A. from
Wharton Business School.
Mr. Giles joined Linens 'n Things in 1991 as Assistant Controller, was
promoted to Vice President, Finance and Controller in 1994 and was promoted to
Chief Financial Officer in 1997. From 1981 to 1990, Mr. Giles was with Price
Waterhouse LLP. From 1990 to 1991, Mr. Giles held the position of Director of
Financial Reporting with Melville Corporation. Mr. Giles is a certified public
accountant and member of the American Institute of Certified Public Accountants.
He graduated from Alfred University with a B.A. in Accounting and Management.
The following table sets forth information regarding certain other key
managers of the Company:
Name Age Position
----- --- -------
Matthew J. Meaney ....... 51 Vice President, Management Information
Systems
Dominick J. Trapasso .... 44 Vice President, Logistics
Mr. Meaney joined Linens 'n Things in 1991 as Vice President, Management
Information Systems. From 1985 to 1991, Mr. Meaney was Vice President of
Management Information Systems for Laura Ashley, Inc. Mr. Meaney received a B.S.
in Economics from St. Peter's College and an M.B.A. in Finance from Seton Hall
University.
Mr. Trapasso has been Vice President, Logistics since joining Linens 'n
Things in 1993. From 1979 to 1986, he was employed with John Wanamaker as
Director, Warehouse, Distribution. From 1986 to 1993, he was Senior Vice
President, Distribution and Transportation at Charming Shoppes, Inc. Mr.
Trapasso received his B.A. from New York University.
Business Strategy
The Company's business strategy is to offer a broad assortment of high
quality, brand name products at everyday low prices, provide efficient customer
service and maintain low operating costs. Key elements of the Company's business
strategy are as follows:
Offer a Broad Assortment of Quality Name Brands at Everyday Low Prices.
Linens 'n Things' merchandising strategy is to offer the largest breadth of
selection in high quality, brand name fashion home textiles, housewares and home
accessories at everyday low prices. The Company offers over 25,000 SKUs in its
superstores across six departments, including bath, home accessories,
housewares, storage, top of the bed and window treatments. The Company is one of
the largest retailers of brand names, including Wamsutta, Martex,
4
<PAGE>
Waverly, Laura Ashley, Royal Velvet, Croscill, Braun, Krups, Calphalon and
Henckels. The Company also sells an increasing amount of merchandise under its
own private label which is designed to supplement the Company's offering of
brand name products by offering high quality merchandise at value prices. The
Company believes its prices are typically well below the non-sale prices offered
by department stores and are comparable to or slightly below the sale prices
offered by such stores. In addition, the Company maintains a "won't be
undersold" approach which guarantees its customers prices as low as those
offered by any of its competitors.
Merchandise and sample brands offered in each major department are
highlighted below:
Department Items Sold Sample Brands
----------- ---------- -------------
Bath Towels, shower curtains, Fieldcrest, Martex,
waste baskets, hampers, Royal Velvet and
bathroom rugs and wall Springmaid
hardware
Home Accessories Decorative pillows, napkins, Dakotah, Waverly and
tablecloths, placemats, Laura Ashley
lamps, gifts, picture frames
and framed art
Housewares Cookware, cutlery, kitchen Braun, Krups,
gadgets, small electric Calphalon, Henckels,
appliances (such as blenders Mikasa, Circulon,
and coffee grinders), Farberware, Black &
dinnerware, flatware and Decker, Kitchen Aid,
glassware Copco and
International Silver
Storage Closet-related items (such as Rubbermaid and
hangers, organizers and shoe Closetmaid
racks)
Top of the Bed Sheets, comforters, comforter Wamsutta, Laura
covers, bedspreads, bed Ashley, Revman,
pillows, blankets and Croscill, Fieldcrest,
mattress pads Springmaid, Royal
Sateen and Beautyrest
Window Treatment Curtains, valances and window Croscill, Graber,
hardware Bali, Waverly and
Laura Ashley
Provide Efficient Customer Service and Shopping Convenience. To enhance
customer satisfaction and loyalty, Linens 'n Things strives to provide prompt,
knowledgeable sales assistance and enthusiastic customer service. Linens 'n
Things emphasizes competitive wages, training and personnel development in order
to attract and retain well-qualified, highly motivated employees committed to
providing efficient customer service. Linens 'n Things also endeavors to provide
more knowledgeable sales associates by providing training through various
programs which include management training, daily sales associate meetings and
in-store product seminars. In addition, the Company has taken initiatives to
enhance the speed of its customer service, including installing satellite
transmission for credit card authorizations and upgrading its current
point-of-sale ("POS") system. The customer's experience is also enhanced by the
availability of sales associates who, since the transfer of inventory and
receiving responsibilities from the stores to the distribution center, have
redirected their focus from the backroom to the selling floor. During the fourth
quarter of 1997, the Company introduced its gift registry service in all its
stores nationwide to also better serve its customers. The Company's superstore
format is designed to save the customer time by having inventory visible and
accessible on the selling floor for immediate purchase. The Company believes its
knowledgeable sales staff and efficient customer service, together with the
Company's liberal return policy, create a positive shopping experience which
engenders customer loyalty.
Maintain Low Operating Costs. A cornerstone of the Company's business
strategy is its commitment to maintaining low operating costs. In addition to
savings realized through sales volume efficiencies, operational efficiencies are
expected to be achieved through the streamlining of the Company's centralized
merchandising structure, the use of integrated management information systems
and the utilization of the distribution center. The Company believes that its
significant investment in the technology of its management information systems
and in its distribution center will allow the Company to grow without requiring
significant additional capital contributions to its infrastructure through
approximately 1999. See discussion under "Forward-Looking Statements" included
as part of this Form 10-K.
5
<PAGE>
Growth Strategy
New Superstore Expansion. The Company's expansion strategy is to increase
market share in existing markets and to penetrate new markets in which the
Company believes it can become a leading operator of home furnishings
superstores. Management believes that the new markets will be primarily located
in the western region of the United States in trading areas of 200,000 persons
within a ten-mile radius and with demographic characteristics that match the
Company's target profile. See discussion under "Forward-Looking Statements"
included as part of this Form 10-K. The Company believes that it is
well-positioned to take advantage of the continued market share gain by the
superstore chains in the home furnishings sector.
The following table sets forth information concerning the Company's
expansion program during the most recent five years:
Square Footage Store Count
-------------------- ---------------------
Year Openings Closings Begin Year End Year Begin Year End Year
---- -------- -------- ---------- -------- ---------- --------
1993 20 21 1,633 2,078 144 143
1994 29 27 2,078 2,865 143 145
1995 28 18 2,865 3,691 145 155
1996 36 22 3,691 4,727 155 169
1997 25 18 4,727 5,493 169 176
Linens 'n Things focuses on opening new superstores in areas where it
believes it can become a leading retailer of home-related products. The
Company's goal is to enter two to three new markets a year through its expansion
efforts. Markets for new superstores are selected on the basis of demographic
factors, such as income, population and number of households. The Company's
stores are located predominantly in power strip centers and, to a lesser extent,
in malls and as stand-alone stores.
The Company believes that its current management infrastructure and
management information systems, together with its distribution center, are
capable of supporting planned expansion through approximately 1999. See
discussion under "Forward-Looking Statements" included as part of this Form
10-K.
Increase Productivity of Existing Store Base. The Company is committed to
increasing its net sales per square foot, inventory turnover ratio and return on
invested capital. The Company believes the following initiatives will best
position it to achieve these goals:
Enhance Merchandise Mix and Presentation. The Company continues to
explore opportunities to increase sales in its "things" merchandise
without sacrificing market share or customer image in the "linens" side of
the business. The Company's long-term goal is to increase the sales of the
"things" merchandise to approximately 50% of net sales as part of its
strategic initiative to capitalize on customer demand for one-stop
shopping. The Company expects this shift to positively impact net sales
per square foot, the average net sale per customer and inventory turnover
since "things" merchandise tends to be more impulse driven merchandise as
compared to the "linens" portion of the business. See discussion under
"Forward-Looking Statements" included as part of this Form 10-K. In
addition, most "things" merchandise has a higher margin than "linens"
merchandise. The Company plans to introduce new products which it expects
will increase sales and generate additional customer traffic.
In addition, the Company intends to continue improving its
merchandising presentation techniques, space planning and store layout to
further improve the productivity of its existing and future superstore
locations. The Company periodically restyles its stores to incorporate new
offerings and realign its store space with its growth segments. The
Company expects that the addition of in-store customer services, such as a
gift registry service, will further improve its store productivity. See
discussion under "Forward-Looking Statements" included as part of this
Form 10-K.
Increase Operating Efficiencies. As part of its strategy to increase
operating efficiencies, the Company has invested significant capital in
building a centralized infrastructure, including a distribution center and
a management information system, which it believes will allow it to
maintain low operating costs as it pursues its superstore expansion
strategy. See discussion under "Forward-Looking Statements" included as
part of this Form 10-K. In July 1995, the Company began full operation of
its 275,000 square
6
<PAGE>
foot distribution center in Greensboro, North Carolina. By the end of
1997, approximately 85% of merchandise was being received at the
distribution center, as compared with approximately 80% and 20% of
merchandise received at the Company's distribution center in 1996 and
1995, respectively. Management believes that the increased utilization of
the distribution center has resulted in lower average freight costs, more
efficient scheduling of inventory shipments to the stores, improved
inventory turnover, better in-stock positions and improved information
flow. The Company believes that the transfer of inventory receiving
responsibilities from the stores to the distribution center allows the
store sales associates to redirect their focus to the sales floor, thereby
increasing the level of customer service. The warehouse portion of the
distribution center provides the Company flexibility to manage safety
stock and take advantage of opportunistic purchases. The Company's ability
to effectively manage its inventory is also enhanced by a centralized
merchandising management team and its management information systems which
allows the Company to more accurately monitor and better balance inventory
levels and improve in-stock positions in its stores.
Continue Conversion of Store Base to Superstore Format. As of
December 31, 1997, the Company operated 153 superstores, representing
approximately 87% of its total stores, and 23 traditional stores. The
Company currently plans to close or relocate approximately 12 of the 23
traditional stores by the end of 1998. Although the remaining traditional
stores are currently profitable, the Company's long-term plans include
closing most of the remaining traditional stores as opportunities arise.
See discussion under "Forward-Looking Statements" included as part of this
Form 10-K.
Industry
According to U.S. Department of Commerce data, total industry sales of
products sold in the Company's stores, which primarily includes home textiles,
housewares and decorative furnishings categories, were estimated to be over $62
billion in 1997. The market for home furnishings is fragmented and highly
competitive. Specialty superstores are the fastest growing channel of
distribution in this market. In 1997, the Company estimates that the three
largest specialty superstore retailers of fashion home textiles (including the
Company) had aggregate sales representing less than 5% of the industry's total
unit sales.
The Company competes with many different types of retailers that sell many
or most of the items sold by the Company, including department stores, mass
merchandisers, specialty retail stores and other retailers. Linens 'n Things
generally classifies its competition within one of the following categories:
Department Stores: This category includes national and regional department
stores such as J.C. Penney Company Inc., Sears, Roebuck and Co., Dillard
Department Stores, Inc., and the department store chains operated by Federated
Department Stores, Inc. and The May Department Store Company. These retailers
offer brand-name merchandise as well as their own private label furnishings in a
high service environment. Department stores also offer certain designer
merchandise, such as Ralph Lauren, which is not generally distributed through
the specialty and mass merchandise distribution channels. In general, the
department stores offer a more limited selection of merchandise than the
Company. The prices offered by department stores during off-sale periods are
significantly higher than those of the Company and during on-sale periods are
comparable to or slightly higher than those of the Company.
Mass Merchandisers: This category includes companies such as Wal-Mart
Stores, Inc., the Target Stores division of Dayton Hudson Corporation and Kmart
Corporation. Fashion home furnishings represent only a small portion of the
total merchandise sales in these stores and reflect a significantly more limited
selection with fewer high quality name brands and lower quality merchandise at
lower price points than specialty stores or department stores. In addition,
these mass merchandisers typically have more limited customer service staffing
than the Company.
Specialty Stores/Retailers: This category includes large format home
furnishings retailers most similar to Linens 'n Things, including Bed Bath &
Beyond Inc., Home Place and Strouds, Inc. and smaller niche retailers such as
Crate & Barrel, Lechters, Inc. and Williams-Sonoma, Inc. The Company estimates
that large format stores range in size from approximately 30,000 to 50,000 gross
square feet and offer a home furnishings merchandise selection of approximately
20,000 to 30,000 SKUs. The Company believes that these retailers have similar
pricing on comparable brand name merchandise and that they compete by attempting
to develop loyal
7
<PAGE>
customers and increase customer traffic by providing a single outlet to satisfy
all the customer's household needs. The niche retailers are typically smaller in
size than the large format superstores and offer a highly focused and broad
assortment within a specific niche. The prices offered by niche retailers are
often higher than the large format superstores and most do not maintain an
everyday low price strategy.
Other Retailers: This category includes mail order retailers, such as
Spiegel Inc. and Domestications, off-price retailers, such as the T.J. Maxx and
Marshall's divisions of the TJX Companies, Inc. and local "mom and pop" retail
stores. Both mail order retailers and smaller local retailers generally offer a
more limited selection of brand name merchandise at prices which tend to be
higher than those of the Company. Off-price retailers typically offer close-out
or out of season brand name merchandise at competitive prices.
Merchandising
The Company offers quality home textiles, housewares and home accessories
at everyday low prices. The Company's strategy consists of a commitment to offer
a breadth and depth of selection and to create merchandise presentation that
makes it easy to shop in a visually pleasing environment. The stores feature a
"racetrack" layout, enabling the customer to visualize and purchase fully
coordinated and accessorized ensembles. Seasonal merchandise is featured at the
front of every store to create variety and excitement and to capitalize on key
selling seasons including back-to-school and holiday events.
The Company's extensive merchandise offering of over 25,000 SKUs enables
its customers to select from a wide assortment of styles, brands, colors and
designs within each of the Company's major product lines. The Company is
committed to maintaining a consistent in-stock inventory position. This
presentation of merchandise enhances the customer's impression of a dominant
assortment of merchandise in an easy-to-shop environment. The Company's broad
and deep merchandise offering is coupled with everyday low prices that are
substantially below regular department store prices and comparable with or
slightly below department store sale prices. The Company has adopted a "won't be
undersold" approach and believes that the uniform application of its everyday
low price policy is essential to maintaining the integrity of this policy. This
is an important factor in establishing its reputation as a price leader and in
helping to build customer loyalty. In addition, the Company offers, on a regular
basis, "special" purchases which it obtains primarily through opportunistic
purchasing to enhance its high value perception among its customers.
Customer Service
Linens 'n Things treats every customer as a guest. The Company's
philosophy supports enhancing the guest's entire shopping experience and
believes that all elements of service differentiate it from the competition. To
facilitate the ease of shopping, the assisted self-service culture is
complemented by trained department specialists, zoned floor coverage, product
information displays and videos, self-demonstrations and in-store product
seminars. This philosophy is designed to encourage guest loyalty as well as
continually develop knowledgeable Company associates. The entire store team is
hired and trained to be highly visible in order to assist guests with their
selections. The ability to assist guests has been augmented by the transfer of
inventory receiving responsibilities from the stores, allowing sales associates
to focus on the sales floor. Sophisticated management systems which provide
efficient customer service and liberal return procedures are geared toward
making each guest's final impression of visiting a store a convenient, efficient
and pleasant experience.
Advertising
Advertising programs are focused on building and strengthening the Linens
'n Things superstore concept and image. Because of the Company's commitment to
everyday low prices, advertising vehicles are aggressively used in positioning
the Company among new and existing customers by communicating price, value and
breadth and depth of selection, with a "won't be undersold" approach. The
Company focuses its advertising programs during key selling seasons such as
back-to-school and holidays.
The Company primarily uses full color inserts in newspapers to reach its
customers. In addition, the Company periodically advertises on television and
radio during peak seasonal periods or for promotional events. Grand opening
promotional events are used to support new stores, with more emphasis placed on
those located in new markets.
8
<PAGE>
Purchasing and Suppliers
The merchandising mix for each store is selected by the central buying
staff in consultation with district store managers. The Company purchases its
merchandise from approximately 1,000 suppliers. Springs Industries, Inc.,
through its various operating companies, supplied approximately 11% of the
Company's total purchases in 1997. In 1997, the Company purchased a significant
number of products from other key suppliers. Due to its breadth of selection,
the Company is often one of the largest customers for certain of its vendors.
The Company believes that this buying power and its ability to make centralized
purchases generally allow it to acquire products at favorable terms. In 1997,
approximately 95% of the Company's merchandise was purchased in the United
States.
Distribution
The Company operates a 275,000 square foot distribution center in
Greensboro, North Carolina. The Company began full operation of the distribution
center in 1995. The utilization of the centralized distribution center has
resulted in lower average freight expense, more timely control of inventory
shipments to stores, improved inventory turnover, better in-stock positions and
improved information flow. In addition, transferring inventory receiving
responsibilities from the stores to the distribution center allows the sales
associates to direct their focus to the sales floor, thereby increasing the
level of customer service. The Company believes strong distribution support for
its stores is a critical element to its growth strategy and is central to its
ability to maintain a low cost operating structure.
The Company manages the distribution process centrally from its corporate
headquarters. Purchase orders issued by Linens 'n Things are electronically
transmitted to the majority of its suppliers. By the end of 1997, the Company
received approximately 85% of its total inventory through the distribution
center. The balance of the Company's merchandise is directly shipped to
individual stores. The Company plans to continue efforts to ship as much
merchandise through the distribution center as possible to ensure all benefits
of the Company's logistics strategy are fully leveraged. Continued growth will
also facilitate new uses of Electronic Data Interchange technologies between
Linens 'n Things and its suppliers to exploit the most productive and beneficial
use of its assets and resources.
As of December 31, 1997, the distribution center was fully functional.
Management estimates that the distribution center can support the Company's
growth through the end of 1999. As the Company continues to open more
superstores, another distribution center may be desirable to support the further
growth of the Company. In order to realize greater efficiency, the Company uses
third party delivery services to ship its merchandise from the distribution
center to its stores. See discussion under "Forward-Looking Statements" included
as part of this Form 10-K.
Management Information Systems
Over the last several years, the Company has made significant investments
in technology to improve customer service, gain efficiencies and reduce
operating costs. Linens 'n Things has installed a customized IBM AS/400
management information system, which integrates all major aspects of the
Company's business, including sales, distribution, purchasing, inventory
control, merchandise planning and replenishment and financial systems. The
Company utilizes POS terminals with price look-up capabilities for both
inventory and sales transactions on a SKU basis, which the Company has recently
upgraded. Information obtained daily by the system results in automatic
inventory replenishment in response to specific requirements of each superstore.
The Company believes its management information systems have fully
integrated the Company's stores, distribution and home office. The Company
continually evaluates and upgrades its management information systems on a
regular basis to enhance the quantity, quality and timeliness of information
available to management.
The Company has conducted a comprehensive review of its computer systems
to identify the systems that could be affected by the "Year 2000" issue and has
developed an implementation plan to resolve the issue. The Year 2000 problem is
the result of computer programs being written using two digits rather than four
to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
9
<PAGE>
miscalculations. The Company presently believes that, with modifications to
existing software and conversions to new software for certain applications, the
Year 2000 problem will not pose significant operational problems for the
Company's computer systems. However, if such modifications and conversions are
not completed timely, the Year 2000 problem may have a material impact on the
operations of the Company. Also, there can be no assurance that the systems of
other companies on which the Company's systems rely also will be timely
converted or that any such failure to convert by another company would not have
an adverse effect on the Company's systems or operations. See discussion under
"Forward-Looking Statements" included as part of this Form 10-K.
Store Management and Operations
In general, each superstore is staffed with one General Manager, two to
four Merchandise Managers and one Receiving Manager. The General Manager reports
to a District Manager who in turn reports to one of three Zone Vice Presidents.
Each Zone Vice President reports to the Senior Vice President, Store Operations.
The Company places a strong emphasis on its people, their development and
opportunity for advancement, particularly at the store level. The Company's
commitment to maintaining a high internal promotion rate is best exemplified
through the practice of opening each new store with a seasoned management crew,
who participate in training at an existing store immediately prior to the new
opening. As a result, the vast majority of General Managers opening a new store
have significant experience at the Company. Additionally, the structured
management training program requires each new associate to learn all facets of
the business within the framework of a fully operational store. This program
includes, among other things, product knowledge, merchandise presentation,
business and sales perspective, employee relations and manpower planning,
complemented at the associate level through daily in-store product seminars and
structured register training materials and proficiencies. The Company believes
that its policy of promoting from within the Company, as well as the
opportunities for advancement generated by its ongoing store expansion program,
serve as incentives to attract and retain quality individuals which, the Company
believes, results in lower turnover.
Linens 'n Things' stores are open seven days a week, generally from 10:00
a.m. to 9:00 p.m. Monday through Saturday and 11:00 a.m. to 6:00 p.m. on Sunday,
unless affected by local laws.
Inflation and Seasonality
The Company does not believe that its operating results have been
materially affected by inflation during the preceding three years. There can be
no assurance, however, that the Company's operating results will not be affected
by inflation in the future.
The Company's business is subject to substantial seasonal variations.
Historically, the Company has realized a significant portion of its net sales
and substantially all of its net income for the year during the third and fourth
quarters. The Company's quarterly results of operations may also fluctuate
significantly as a result of a variety of other factors, including the timing of
new store openings. The Company believes this is the general pattern associated
with its segment of the retail industry and expects this pattern will continue
in the future. Consequently, comparisons between quarters are not necessarily
meaningful and the results for any quarter are not necessarily indicative of
future results.
Employees
As of December 31,1997, the Company employed approximately 7,700 people of
whom approximately 3,300 were full-time employees and 4,400 were part-time
employees. None of the Company's employees are represented by unions, and the
Company believes that it has a good relationship with its employees.
Competition
The Company believes that it will continue to face competition from
retailers in all four of the categories referred to in "Business-Industry." The
home textiles industry is becoming increasingly competitive as several specialty
retailers are in the process of expanding into new markets. In addition, as the
Company expands into new markets, it will face new competitors. The visibility
of the Company may encourage additional competitors or existing competitors to
imitate the Company's format and methods. If any of the Company's major
competitors seek to gain or retain market share by reducing prices, the Company
may be required to reduce its prices in order to remain competitive.
10
<PAGE>
The Company believes that the ability to compete successfully in its
markets is determined by several factors, including price, breadth and quality
of product selection, in-stock availability of merchandise, effective
merchandise presentation, customer service and superior store locations. The
Company believes that it is well positioned to compete on the basis of these
factors. Nevertheless, there can be no assurance that any or all of the factors
that enable the Company to compete favorably will not be adopted by companies
having greater financial and other resources than the Company.
Trade Names and Service Marks
The Company uses the "Linens 'n Things" name as a trade name and as a
service mark in connection with retail services. The Company has registered the
"Linens 'n Things" logo as a service mark with the United States Patent and
Trademark Office. Management believes that the name Linens 'n Things is an
important element of the Company's business.
Forward-Looking Statements
This Form 10-K contains forward-looking statements within the meaning of
The Private Securities Litigation Reform Act of 1995. The statements are made a
number of times throughout the document and may be identified by forward-looking
terminology as "expect," "believe," "may," "will," "intend" or similar
statements or variations of such terms. Such forward-looking statements involve
certain risks and uncertainties including levels of sales, store traffic,
acceptance of product offerings and fashions, competitive pressures from other
superstore retailers and from department stores which carry other products
including certain designer products not carried by the Company's stores,
availability of suitable future store locations and schedule of store expansion
plans. These and other important factors that may cause actual results to differ
materially from such forward-looking statements are included in the "Risk
Factors" section of the Company's Registration Statement on Form S-1 as filed
with the Securities and Exchange Commission on May 29, 1997, and may be
contained in subsequent reports filed with the Securities and Exchange
Commission. You are urged to consider such factors. The Company assumes no
obligation for updating any such forward-looking statements.
11
<PAGE>
Item 2. Properties
As of December 31, 1997 the Company operated 176 retail stores in 37
states. The Company currently leases all of its existing stores and expects that
its policy of leasing rather than owning will continue as it expands. The
Company's leases provide for original lease terms that generally range from 10
to 20 years and certain of the leases provide for renewal options that range
from 5 to 15 years at increased rents. Certain of the leases provide for
scheduled rent increases and certain of the leases provide for contingent rent
(based upon store sales exceeding stipulated amounts). Prior to the Company's
IPO in November 1996, CVS acted as guarantor on substantially all of the
Company's store leases. Following the IPO, although CVS will continue to
guarantee the Company's certain store leases where CVS had guaranteed such
leases in the past (including extensions and renewals relating to certain
leases), CVS will no longer enter into commitments to guarantee future leases on
behalf of the Company. Following the IPO, CVS no longer charges the Company a
fee to guarantee these certain leases.
The Company owns its 275,000 square foot distribution center in
Greensboro, North Carolina. The Company leases its 76,000 square foot corporate
office in Clifton, New Jersey.
The table below sets forth the number of stores located in each state as
of December 31, 1997:
State Number of Stores State Number of Stores
----- --------------- ----- ---------------
Arizona 5 Nebraska 1
Arkansas 1 Nevada 2
California 20 New Hampshire 1
Colorado 4 New Jersey 11
Connecticut 8 New Mexico 1
Florida 14 New York 8
Georgia 7 North Carolina 7
Idaho 1 Ohio 3
Illinois 12 Oklahoma 1
Indiana 2 Oregon 2
Kansas 1 Pennsylvania 5
Louisiana 1 Rhode Island 1
Maine 1 Tennessee 5
Maryland 3 Texas 14
Massachusetts 6 Utah 1
Michigan 3 Vermont 1
Minnesota 5 Virginia 12
Missouri 2 Washington 3
Wisconsin 1
Item 3. Legal Proceedings
There are no material legal proceedings against the Company. The Company
is involved in various claims and legal actions arising in the ordinary course
of business. In the opinion of management, the ultimate disposition of these
matters will not have a material adverse effect on the Company's consolidated
financial position, results of operations or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter ended December 31, 1997.
12
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Linens 'n Things' common stock is listed on the New York Stock Exchange.
Its trading symbol is LIN. At December 31, 1997 there were approximately 4,125
beneficial holders. The high and low trading price of the Company's common
stock, beginning November 26, 1996, the date of the IPO, through December 31,
1997 is as follows:
High Low
---- ----
For the Year Ended December 31, 1997
First Quarter ............................. $26 $17 1/2
Second Quarter ............................ 29 1/4 18 1/4
Third Quarter ............................. 36 1/4 26
Fourth Quarter ............................ 44 1/2 30 9/16
For the Year Ended December 31, 1996
Fourth Quarter (from November 26, 1996) ... $19 3/4 $15 1/2
The Company paid no dividends on its common stock in 1997 and 1996.
Management of the Company currently intends to retain its earnings to finance
the growth and development of its business and does not currently anticipate
paying cash dividends in the foreseeable future. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, the future earnings, operations, capital
requirements and financial condition of the Company, satisfying all requirements
under its bank financing agreement and such other factors as the Company's Board
of Directors may consider relevant. In addition, the revolving credit facility
currently prohibits the payment of cash dividends by the Company.
Item 6. Selected Financial Data
The information required by this Item is incorporated by reference to the
Five-Year Financial Summary appearing on page 13 of the Company's 1997 Annual
Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item is incorporated by reference to
pages 14 through 17 of the Company's 1997 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The financial statements and financial information required by this Item
are incorporated by reference to pages 18 through 28 and page 30 of the
Company's 1997 Annual Report to Shareholders. These financial statements are
indexed under Item 14(a)(1). See also the financial statement schedule that is
included herein and is indexed under Item 14(a)(2).
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
There were no disagreements between the Company and its independent public
accountants on matters of accounting principles or practices.
13
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item concerning the Company's directors
is incorporated by reference to the Company's Proxy Statement to be mailed to
shareholders for the Company's 1998 Annual Meeting of Shareholders, under the
heading "Election of One Director."
The information required by this Item concerning the Company's executive
officers is incorporated by reference to Part I, Item 1, "Business - Executive
Officers and Certain Key Personnel."
The information required by this Item with respect to Section 16 reporting
is incorporated by reference to the Company's Proxy Statement for the Company's
1998 Annual Meeting of Shareholders, under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance."
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for the 1998 Annual Meeting of Shareholders, under the
headings "Director Compensation - Attendance; Committees" and "Executive
Compensation" other than information included therein under the subcaptions
"Report on Compensation of Executive Officers" and "Performance Graph" which are
not incorporated herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for the 1998 Annual Meeting of Shareholders, under the
heading "Beneficial Ownership of Common Stock."
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for the 1998 Annual Meeting of Shareholders, under the
heading "Certain Transactions with Related Parties."
14
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report.
1. Financial Statements:
The following Financial Statements of Linens 'n Things, Inc. are
incorporated by reference to the Company's 1997 Annual Report to Shareholders:
Pages in Annual Report
to Shareholders
---------------------
Consolidated Statements of Operations -
for the years ended December 31, 1997, 1996 and 1995 ..... 18
Consolidated Balance Sheets -
as of December 31, 1997 and 1996 ......................... 19
Consolidated Statements of Shareholders' Equity -
for the years ended December 31, 1997, 1996 and 1995 ..... 20
Consolidated Statements of Cash Flows -
for the years ended December 31, 1997, 1996 and 1995 ..... 21
Notes to Consolidated Financial Statements .................. 22 through 28
Independent Auditors' Report ................................ 30
2. Schedules:
The supplementary income statement schedule is included in this Report.
3. Exhibits:
The Exhibits on the accompanying Exhibit Index are filed as part of, or
incorporated by reference into, this Annual Report on Form 10-K.
15
<PAGE>
Schedule 1
Linens 'n Things, Inc. and Subsidiaries
Supplementary Income Statement Information
(in thousands)
Year Ended Year Ended Year Ended
Item December 31, 1997 December 31, 1996 December 31, 1995
---- ---------------- ---------------- ----------------
Advertising Costs $25,161 $19,743 $16,950
======= ======= =======
16
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- ----------
3.1 Certificate of Incorporation of the Registrant (1)
3.2 Amended and Restated Certificate of Incorporation (1)
3.3 By-Laws of the Registrant (1)
4 Specimen Certificate of Common Stock (1)
10.1 Transitional Services Agreement between the Registrant and
CVS Corporation (1)
10.2 Stockholder Agreement between the Registrant and CVS
Corporation (1)
10.3 Tax Disaffiliation Agreement between the Registrant and CVS
Corporation (1)
10.4 Subordinated Note between Registrant and CVS (1)
10.5 Credit Facility (1)
10.6 Employment Agreement with Norman Axelrod * (1)
10.7 Employment Agreement with James M. Tomaszewski * (1)
10.8 Employment Agreement with Steven B. Silverstein * (1)
10.9 Employment Agreement with Hugh J. Scullin * (1)
10.10 1996 Incentive Compensation Plan * (1)
10.11 1996 Non-Employee Director Stock Plan * (1)
11 Computation of Net Income (Loss) Per Common Share (2)
12 Computation of Ratio of Earnings to Fixed Charges (2)
21 List of Subsidiaries (3)
23a Consent of KPMG Peat Marwick LLP (2)
27 Financial Data Schedule (filed electronically with SEC only) (2)
27a Restated December 31, 1996 Financial Data Schedule (filed
electronically with SEC only) (2)
- ----------
(1) Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1 (No. 333-12267), which Registration
Statement became effective on November 26, 1996.
(2) Filed with this Form 10-K.
(3) Incorporated by reference to Exhibit 21 to the Company's 1996 Annual
Report on Form 10-K.
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed by the Company during the last
quarter of 1997.
With the exception of the information incorporated by reference to the
Annual Report to Shareholders in Items 6, 7, and 8 of Part II and Item 14
of Part IV of this Form 10-K, the Annual Report to Shareholders is not
deemed filed as part of this Form 10-K.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Linens 'n Things, Inc.
(Registrant)
By: /S/ NORMAN AXELROD
-----------------------------------
Norman Axelrod
Chairman, Chief Executive Officer
and President
Dated: March 18, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on its behalf of the Registrant in the capacities
and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ NORMAN AXELROD Chairman, Chief Executive March 18, 1998
- ------------------------------ Officer and President
Norman Axelrod
/s/ PHILIP E. BEEKMAN Director March 18, 1998
- ------------------------------
Philip E. Beekman
/s/ HAROLD F. COMPTON Director March 18, 1998
- ------------------------------
Harold F. Compton
/s/ CHARLES C. CONAWAY Director March 18, 1998
- ------------------------------
Charles C. Conaway
/s/ STANLEY P. GOLDSTEIN Director March 18, 1998
- ------------------------------
Stanley P. Goldstein
/s/ WILLIAM T. GILES Chief Financial Officer March 18, 1998
- ------------------------------ (Principal Financial Officer)
William T. Giles
18
EXHIBIT 11
Linens 'n Things, Inc. and Subsidiaries
Computation of Net Income (Loss) Per Common Share
(in thousands except per share data)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BASIC
Weighted-average number of shares outstanding......... 19,289 19,268 19,268 19,268 19,268
======== ======== ========= ======== ========
Net income (loss) before cumulative effect
of change in accounting principle................... $ 25,790 $ 15,039 $ (34) $ 17,198 $ 11,719
Cumulative effect of change in accounting
principle.......................................... -- -- 178 -- --
-------- -------- --------- -------- --------
Net income (loss) applicable to common shares......... $ 25,790 $ 15,039 $ (212) $ 17,198 $ 11,719
======== ======== ========= ======== ========
Per-share amounts
Net income (loss) before cumulative effect
of change in accounting principle.............. $ 1.34 $ 0.78 $ (0.00) $ 0.89 $ 0.61
Cumulative effect of change in accounting
principle...................................... -- -- 0.01 -- --
-------- -------- --------- -------- --------
Net income (loss) per share..................... $ 1.34 $ 0.78 $ (0.01) $ 0.89 $ 0.61
======== ======== ========= ======== ========
DILUTED
Weighted-average number of shares outstanding
and diluted common share equivalents............... 19,769 19,279 19,268 19,268 19,268
======== ======== ========= ======== ========
Net income (loss) before cumulative effect
of change in accounting principle.................. $ 25,790 $ 15,039 $ (34) $ 17,198 $ 11,719
Cumulative effect of change in accounting
principle.......................................... -- -- 178 -- --
-------- -------- --------- -------- --------
Net income (loss) applicable to common shares......... $ 25,790 $ 15,039 $ (212) $ 17,198 $ 11,719
======== ======== ========= ======== ========
Per-share amounts
Net income (loss) before cumulative effect
of change in accounting principle.............. $ 1.30 $ 0.78 $ (0.00) $ 0.89 $ 0.61
Cumulative effect of change in accounting
principle...................................... -- -- 0.01 -- --
-------- -------- --------- -------- --------
Net income (loss) per share..................... $ 1.30 $ 0.78 $ (0.01) $ 0.89 $ 0.61
======== ======== ========= ======== ========
</TABLE>
EXHIBIT 12
Linens 'n Things, Inc. and Subsidiaries
Computation of Ratio of
Earnings to Fixed Charges
(in thousands)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET EARNINGS
Net income (loss) $ 25,790 $ 15,039 $ (34) $ 17,198 $ 11,719
Income taxes 18,704 10,952 1,108 11,874 8,619
Interest expense, excluding capitalized interest 1,405 4,692 7,059 3,170 1,398
Portion of rents deemed representative
of interest factor (1/3) 23,271 17,774 12,946 9,504 7,104
-------- -------- -------- -------- --------
$ 69,170 $ 48,457 $ 21,079 $ 41,746 $ 28,840
======== ======== ======== ======== ========
FIXED CHARGES
Gross interest expense 1,574 4,692 7,059 3,170 1,398
Portion of rents deemed representative
of interest factor (1/3) 23,271 17,774 12,946 9,504 7,104
-------- -------- -------- -------- --------
$ 24,845 $ 22,466 $ 20,005 $ 12,674 $ 8,502
======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES 2.78 2.16 1.05 3.29 3.39
======== ======== ======== ======== ========
</TABLE>
EXHIBIT 23
Consent of Independent Auditors
The Board of Directors and Shareholders
Linens 'n Things, Inc.:
We consent to incorporation by reference in the Registration Statements
Numbers 333-26819 and 333-26827 on Form S-8 of Linens 'n Things, Inc. and
Subsidiaries of our report dated February 4, 1998, relating to the consolidated
balance sheets of Linens 'n Things, Inc. and Subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1997, which report appears in the December 31, 1997
annual report on Form 10-K of Linens 'n Things, Inc.
Our report refers to the adoption of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
effective October 1, 1995 and a change in the policy for accounting for the
costs of internally developed software effective January 1, 1995.
KPMG Peat Marwick LLP
New York, New York
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 39,882
<SECURITIES> 0
<RECEIVABLES> 13,764
<ALLOWANCES> 0
<INVENTORY> 223,188
<CURRENT-ASSETS> 289,892
<PP&E> 205,141
<DEPRECIATION> 50,661
<TOTAL-ASSETS> 472,099
<CURRENT-LIABILITIES> 166,517
<BONDS> 0
0
0
<COMMON> 193
<OTHER-SE> 279,842
<TOTAL-LIABILITY-AND-EQUITY> 472,099
<SALES> 874,224
<TOTAL-REVENUES> 874,224
<CGS> 527,924
<TOTAL-COSTS> 300,793
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,013
<INCOME-PRETAX> 44,494
<INCOME-TAX> 18,704
<INCOME-CONTINUING> 25,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,790
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-29-1997 JUN-28-1997 SEP-27-1997
<CASH> 3,048 3,148 15,719
<SECURITIES> 0 0 0
<RECEIVABLES> 15,738 12,776 16,737
<ALLOWANCES> 0 0 0
<INVENTORY> 202,166 208,376 225,716
<CURRENT-ASSETS> 230,737 233,364 267,346
<PP&E> 178,289 188,549 197,096
<DEPRECIATION> 40,427 44,338 47,325
<TOTAL-ASSETS> 396,879 405,479 444,644
<CURRENT-LIABILITIES> 117,036 124,229 164,359
<BONDS> 13,500 10,000 0
0 0 0
0 0 0
<COMMON> 193 193 193
<OTHER-SE> 249,886 254,388 262,564
<TOTAL-LIABILITY-AND-EQUITY> 396,879 405,479 444,644
<SALES> 179,911 365,634 590,873
<TOTAL-REVENUES> 179,911 365,634 590,873
<CGS> 111,596 224,800 360,792
<TOTAL-COSTS> 67,371 137,575 213,808
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 336 945 972
<INCOME-PRETAX> 608 2,314 15,301
<INCOME-TAX> 256 972 6,429
<INCOME-CONTINUING> 352 1,342 8,872
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 352 1,342 8,872
<EPS-PRIMARY> 0.02 0.07 0.46
<EPS-DILUTED> 0.02 0.07 0.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 26,914
<SECURITIES> 0
<RECEIVABLES> 17,384
<ALLOWANCES> 0
<INVENTORY> 202,134
<CURRENT-ASSETS> 256,792
<PP&E> 176,047
<DEPRECIATION> 37,539
<TOTAL-ASSETS> 423,957
<CURRENT-LIABILITIES> 145,736
<BONDS> 28,494
0
0
<COMMON> 193
<OTHER-SE> 49,345
<TOTAL-LIABILITY-AND-EQUITY> 423,957
<SALES> 696,107
<TOTAL-REVENUES> 696,107
<CGS> 426,196
<TOTAL-COSTS> 239,228
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,692
<INCOME-PRETAX> 25,991
<INCOME-TAX> 10,952
<INCOME-CONTINUING> 15,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,039
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
</TABLE>
