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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
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WOOLWORTH CORPORATION
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(Name of Registrant as Specified In Its Charter)
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WOOLWORTH BUILDING
WOOLWORTH LOGO 233 BROADWAY
NEW YORK, NEW YORK
10279-0003
May 20, 1996
Dear Fellow Shareholder:
We would like to briefly review with you the progress our new management team
has made in implementing the strategic plan and corporate-wide initiatives that
we developed in 1995 to build value for shareholders. Our recently released
first quarter results, a copy of which is enclosed, show that our plan is paying
off, and we believe it is critical to aggressively continue our turn-around
strategy, without distraction. Accordingly, we seek your support for our efforts
to build shareholder value and ask you to vote AGAINST the shareholder proposal
to spin off our Athletic businesses by signing and returning the enclosed white
card.
Our multi-faceted turn-around strategy has focused on building better
merchandise assortments, improving the quality and levels of inventory, lowering
our expense structure, disposing of non-strategic assets and businesses, and
strengthening the Company's balance sheet and financial health. Our rebuilt
management team has been moving with a real sense of urgency and our 1996 first
quarter results already show considerable achievement in all of these areas:
- WE BETTERED OUR 1995 FIRST QUARTER PERFORMANCE BY $96 MILLION, reporting a
1996 first quarter loss before taxes of $37 million, compared to last year's
first quarter loss before taxes of $133 million.
- WE IMPROVED RESULTS OF OPERATIONS BY $82 MILLION, before gains on sales of
real estate and losses of disposed operations. Our businesses produced an
operating profit of $13 million for the first quarter of 1996, compared to an
operating loss of $69 million in the comparable 1995 period. The Specialty and
General Merchandise segments both made substantial contributions to that
achievement, with Specialty improving by $56 million and General Merchandise
improving by $26 million.
- WE LOWERED INVENTORIES COMPANY-WIDE BY $367 MILLION (AT COST), OR 20%. In
addition to this significant reduction, we improved the quality of our
inventories so that they are now considerably newer and fresher than last
year.
- WE CUT SELLING, GENERAL AND ADMINISTRATIVE EXPENSES BY $54 MILLION, and are on
track in the Company's ongoing program to reduce 1996 expenses by over $100
million. This is in addition to expense reductions of $100 million that we
completed in 1995.
- WE REDUCED DEBT BY $680 MILLION, OR 44%, from last year's levels, and lowered
interest expense as well, dropping 38% from 1995 levels.
- WE ANNOUNCED THE DISPOSITION OF THE 20-STORE RX PLACE DRUG MART CHAIN, AND
BEGAN STORE LIQUIDATIONS. We expect to continue with the orderly disposition
of non-strategic businesses throughout 1996.
- WE CLOSED 97 UNDERPERFORMING STORES as part of our ongoing program to either
improve underperforming stores or close them.
This significantly improved first quarter performance is a clear sign our
turn-around strategy is working. We have every expectation that by continuing to
aggressively implement our plan, improvements will continue in the near- and
long-term.
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In contrast, we believe the spinoff proposal has little merit. It is costly,
high-risk and ignores the realities of what it takes to operate our businesses
and build lasting shareholder value.
For example, the spinoff proposal:
- Relies solely on financial engineering without addressing operational issues.
- Presents an unacceptably high level of risk to the non-Athletic entity in
terms of negative reactions of vendors and lessors, and does not recognize the
difficulty in accessing financial markets.
- Does not address the issues of allocating the Company's existing debt and
other liabilities between the two entities.
- Necessitates administrative replication for the second entity, with the
resulting duplication of costs.
- Would deflect management time, attention and resources from the turn-around
strategy for an extended period of time.
The Board of Directors and management take the concerns of shareholders very
seriously, and have devoted substantial time and expense to studying the spinoff
proposal and several alternative restructuring strategies. After careful
consideration, including consulting with the Company's outside financial
advisors, the conclusion was that neither the spinoff proposal nor any other
major structural change to the Company is advisable at this time.
Our strategic plan and the corporate-wide initiatives represent a thorough and
carefully thought-out approach to rebuilding our Company into a world-class
retailer. We have taken aggressive action to implement our plan, and our
progress is evident from the achievements of the first quarter. While we have
worked very hard to achieve those results, we recognize that there is still much
hard work to be done.
The accomplishments of the first quarter show the progress that we are making,
but we need your support to continue to deliver to you the benefits of our
turn-around. Please vote AGAINST the spinoff proposal, proposal #6. If you have
not already voted, please sign, date and return the enclosed white proxy card in
the postage-paid envelope provided.
If you have any questions, please call Georgeson & Company Inc., which is
assisting us, toll free at 1-800-223-2064.
Thank you for your ongoing support.
Sincerely,
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/s/ ROGER N. FARAH /s/ DALE W. HILPERT
Roger N. Farah Dale W. Hilpert
Chairman of the Board and President and
Chief Executive Officer Chief Operating Officer
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WOOLWORTH BUILDING
WOOLWORTH LOGO 233 BROADWAY
NEW YORK, NEW YORK
10279-0003
REPORT TO SHAREHOLDERS: 1996 FIRST QUARTER RESULTS
Woolworth Corporation recently reported its results for the first quarter and 13
weeks ended April 27, 1996. The Company bettered its 1995 first quarter
performance by $96 million, reporting a 1996 first quarter loss before taxes of
$37 million. Improvements reflected in the Company's first quarter 1996 results
flow from the implementation of programs that are part of the Company's
strategic plan, which comprises a series of initiatives structured to benefit
overall performance and build value for shareholders. These programs focus on
continuing to: improve the quality and levels of merchandise inventories; lower
the expense structure; eliminate non-strategic assets and businesses, and
strengthen the Company's balance sheet and financial health.
Operating results (representing income/loss before corporate expense, interest
expense and taxes) also improved significantly, and were $79 million better than
the 1995 first quarter loss. Of this amount, the Company's specialty operations
improved $56 million, and general merchandise operations improved by $26
million.
Despite unseasonably cooler weather throughout North America and 156 fewer
stores than the prior year, sales for the 1996 first quarter were $1,820
million, an increase of 1.4 percent from $1,794 million for 1995 first quarter.
Excluding the effect of foreign currency fluctuations and sales from disposed
operations, sales increased 1.4 percent.
The Company's inventory improvement efforts, begun in 1995, have resulted in a
reduction of inventories of $367 million (at cost), or 20 percent from 1995
first quarter levels. The gross margin rate improved 1.6 percentage points as
compared to last year. In addition, the quality of inventories has also
improved, and merchandise is newer and fresher.
For the first quarter of 1996, the Company reduced S,G&A expenses by $54
million, to 27.0 percent of sales, compared to 30.4 percent of sales in the
first quarter of 1995. The Company remains on track in its program to continue
the substantial reduction of 1996 expenses.
During the first quarter of 1996, the Company announced the closing of its
20-store Rx Place Drug Mart chain, with the liquidation in these stores having
begun during the first quarter as well. The first quarter loss from disposed
operations of $13 million relates primarily to the closing of this chain. The
Company expects to continue the orderly disposition of non-strategic businesses
throughout 1996.
The financial strength of the Company continues to improve significantly,
providing the flexibility to support healthy growth. The Company's total debt
has been reduced by $680 million, or 44 percent, from 1995 first quarter levels.
Interest expense declined as well, dropping $12 million, or 38 percent from 1995
first quarter levels.
At the end of the first quarter of 1996, the Company operated 8,108 stores,
compared to 8,264 stores at the end of the 1995 first quarter, adjusted for 1995
dispositions. During the first quarter of 1996, the Company opened 33 stores,
closed 97 stores and disposed of 6 stores. For the comparable period in 1995,
the Company opened 63 stores, closed 73 stores and disposed of 24 stores.
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WOOLWORTH CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(in millions, except per share amounts)
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<CAPTION>
13 weeks ended
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April 27, April 29,
1996 1995
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<S> <C> <C>
Sales $ 1,820 $ 1,794
Cost and Expenses:
Cost of Sales 1,295 1,305
Selling, general and administrative 492 546
Depreciation and amortization 50 59
Interest expense 20 32
Other income -- (15)
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1,857 1,927
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Income (loss) before taxes (37) (133)
Income taxes (15) (53)
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Net income (loss) $ (22) $ (80)
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Net income (loss) per share $ (0.17) $ (0.60)
Weighted-average number of common shares outstanding 133.1 132.5
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SUPPLEMENTAL INFORMATION (unaudited)
(in millions)
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<CAPTION>
13 weeks ended
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SALES April 27, April 29,
By Segment: 1996 1995
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Specialty:
Athletic Group $ 840 $ 784
Specialty Footwear 153 161
Other Specialty 94 106
Northern Group 66 55
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Specialty total 1,153 1,106
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General Merchandise:
Germany 370 361
United States 244 264
Other 46 52
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General Merchandise total 660 677
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Disposed Operations 7 11
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$ 1,820 $ 1,794
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OPERATING RESULTS (before corporate expense, interest and income taxes)
By Segment:
Specialty $ 34 $ (22)(a)
General Merchandise (21) (47)(a)
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Total 13 (69)
Net gain on sales of real estate -- 15
Disposed Operations (13) (25)
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$ -- $ (79)
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(a) Specialty and General Merchandise operating results include charges related
to the inventory improvement program of $16 and $22 million, respectively.
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CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)
(in millions)
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<CAPTION>
13 weeks ended
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April 27, April 29,
1996 1995
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 46 $ 76
Merchandise inventories 1,497 1,864
Other current assets 232 392
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1,775 2,332
Owned and leased property and equipment, net 1,182 1,558
Deferred charges and other assets 650 682
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$ 3,607 $ 4,572
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 247 $ 966
Accounts payable and accrued liabilities 728 814
Current portion of long-term debt and obligations under capital leases 19 25
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994 1,805
Long-term debt and obligations under capital leases 616 571
Deferred taxes and other liabilities 797 831
SHAREHOLDERS' EQUITY 1,200 1,365
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$ 3,607 $ 4,572
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