Rex May Divest Stores

By Alan Wolf -- TWICE, 6/5/2008

UPDATE! Dayton, Ohio — Rex Stores, the multiregional white- and brown-goods chain, may be divested as the company considers strategic alternatives for its retail operation.

The company, which has made significant investments in the alternative-fuel industry, said it has launched a “strategic alternative review process” and expects to evaluate a broad range of options, including “opportunities to monetize its real estate portfolio.”

In a conference call, chairman/CEO Stuart Rose described Rex’s separate retail, real estate and ethanol production businesses as “an awkward combination,” and said the company is hiring an outside firm to analyze its operations.

“We want to maximize value for our shareholders and do what’s best for our employees,” he told analysts. “We want to separate the businesses if possible.”

Rose said options include selling its retail business, its real estate interests, or a combination of both.

He described the retail chain as profitable when service contracts are included in the mix. Excluding extended warranties, retail segment earnings fell more than 52 percent to $900,000 during the first fiscal quarter, ended April 30, as the company cut margins on premium products to maintain traffic.

According to the latest TWICE Top 100 Retailers Report, Rex’s CE sales fell 9.3 percent last year to $141 million as the company began shutting stores and exiting markets in advance of a real estate sale and leaseback deal with Coventry Real Estate Investments.

Rex presently owns 39 stores (plus 10 shuttered locations) and leases 72. It maintains three distribution centers in Cheyenne, Wyo.; Dayton, Ohio; and Pennsacola, Fla.

The company said there is no assurance that any transaction will occur as a result of the strategic review process.