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Liberty House’s
new focus
paying off

Despite net losses, the retailer
says it's turned itself around by
keying on lifestyle products

By Peter Wagner
Star-Bulletin



The bankruptcy bills continue to mount for Liberty House but the company's president says a shift in focus has helped boost sales for the Hawaii retail chain.

"We're doing better, no question," John Monahan said yesterday, citing tighter expense control, improved margins and better sales figures.

Efforts to refocus Liberty House away from tourists and toward local residents have paid off, he said. "Moving toward products that better reflect the lifestyles of our customers has been very successful."

Recent filings in U.S. Bankruptcy Court show Liberty House with a net loss of $1.36 million in April and a cumulative loss of $19.4 million since the Chapter 11 reorganization filing in March 1998.

But Monahan said the losses are largely attributed to legal and professional fees associated with Liberty House's restructuring, plus interest and fees on loans held only to reassure vendors of the company's ability to pay.

Monahan said the best measure of how the company's retail business is doing is its EBITDA -- earnings before interest, taxes, depreciation and amortization.

The recent court filings show Liberty House with EBITDA of $503,837 in April, up nearly 19 percent from $424,000 last April, and a cumulative EBITDA of $35.7 million since the company filed for reorganization in March 1998.

Liberty House last year tripled its EBITDA over 1998, Monahan said. "The good news is the company is generating positive EBITDA and continuing to grow."

Figures for May have not been filed yet, but Monahan said they show the highest monthly percentage increase since the bankruptcy was filed.

Although the company's department stores have been concentrating on increasing sales to residents, he noted that even the retailer's resort shops targeting tourists have seen a surge in "lifestyle" sportswear designed for local buyers.

"Our shift to lifestyle merchandise has played very well to tourists," he said. "It's been off the chart."

Pending resolution of a $35 million federal tax bill, Monahan said, Liberty House is ready to emerge from bankruptcy.

Parent company JMB Realty Corp. recently agreed to pay $4.2 million of an original $103 million IRS claim against affiliate Northbrook Corp., former Liberty House parent which paid consolidated tax returns for a group of companies including the Hawaii retail chain.

But while Liberty House expects its share of that tax bill to be about $500,000, another IRS tax claim totaling about $35 million for the years 1995 and 1996 remains.

Bearing the weight of recent rate increases by law firms and other consultants in the case, cumulative losses at Liberty House have mounted from $15.9 million in December to $19.4 million through April.

But, Monahan said, that drain on income would "go away" after the bankruptcy reorganization is complete.

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Liberty House