The Central New Jersey Home News from New Brunswick, New Jersey • 15

4 Reader upset Sears has discontinued its catalog 'sales, a YOUR MONEY C2 STRICTLY PERSONNEL C2 SECTION MONDAY January 3, 1994 8 Ujtsm mm. TCDtt TrniTrr tttsi rni rni www iiiiiliiiWiJLrjiLNJ tlmtfmJ i i mm. i a i a LiJLJ By JEFF SOUEGEL Home News Business Writer Herman 's new CEO Alfred F. Fasola below, has gotten the troubled chain into shape by concentrating on a core marketing area in the Northeast. Herman's Sporting Goods the motto is "We Are Sports." But with the 77-year-old Car-teret-based retail sporting kxxIs chain expected to the arena of New Jersey Republican politics during the campaigns of Raymond Ba-teman and Thomas Kean.

Fasola served for a time as Gov. Kean's director of the state Office of Management and Budget. Herman's presented a challenge to any potential buyer. Upon purchasing the chain, Taggart-Fasola declared assets of 1223.7 million against liabilities of $225.7 million, including an accumulated $130 million debt. According to Fasola, Herman's downfall began during its seven years as a U.S.

subsidiary under two British companies. Before that, Herman's was a profitable 88-store chain owned by New York's W.R. Grace which sold the company for $400 million in 1986. By the time Taggart-Fasola purchased the company from London-based Isosceles PLC company for $45 million, it was overextended and debt-ridden. Three days after the deal, Fa-spla's organization placed Herman's under Chapter 1 1 bankruptcy protection.

"There was basically only one way to salvage and reconstruct Herman's, and that was to go in with the understanding of using a strategic buyout," Fasola said. One reason was that it froze the company's huge debt. Another is that it enabled Herman's to receive $40 million in debtor-in-possession financing from Chemical Bank. "We don't believe it would have been possible to get that through commercial financing," Fasola remarked. A final reason is that it made it easier for Herman's to get out of existing leases.

"We knew it had a tremendous amount of bad leases because of the failed strategy of the previous owners when they tried to become the first completely nationwide retail sporting goods chain," Fasola continued. "They built an infrastructure for 400 stores and they only got to 253 before their money ran out Sports, buying patterns and attitudes differ from region to region, and Herman's tried to push an East Coast format across the country. In addition, Herman's added to its cost by overpaying for its real estate. "Then when you don't fill in your stores properly where you can dominate a market, you never get advertising efficiency," Fasola said. Fasola, who agreed to become Herman's CEO for at least three years, immediately slashed all 130 stores west of Pittsburgh and made arrangements to pay off major suppliers by Christmas from the proceeds of their going-out-of-business sales.

Then a computerized data bank revealed the 100 or so remaining sites with good leases, steady customer traffic and where Herman's has a dominate presence. Future growth is pinpointed to downtown Boston, Manhattan, Philadelphia, Baltimore, Washington, D.C. and regional malls. See HERMAN'S, pageC2 emerge from bankruptcy in the spring, a secondary credo could be "Smaller Is Better." After taking over the troubled chain in March, Chief Executive Officer Alfred F. Fasola Jr.

reversed the expansionist mood of his predecessors by shuttering all stores west of Pittsburgh and concentrating on core Northeast markets. This core region will be refined even further when 28 of the remaining 125 stores will be closed by spring, as Herman's positions itself in the competitive sporting-goods market. None of New Jersey's 23 stores is slated for closing. "We can't fight a two-front war," Fasola said. "We had to decide where to fight." That place is along the Boston to Washing- ton, D.C.

corridor. "We feel we can be the dominant sporting goods retailer in the Northeast," Fasola added. "This doesn't include Pittsburgh and certain places in western New York." Upon emerging from bankruptcy sometime in March or April, Herman's will implement a strategy that bucks the industry's trend toward superstores. New stores planned for the next three years will fill out the chain to 130 to 135 stores. Both new and existing outlets will have a consumer-oriented format and brighter, more visual layouts without expanding current average store size.

"We may experiment with some power centers with a format, but we believe we can offer consumers better attributes with 10,000 square feet of selling space," Fasola said. The retail sporting goods industry is polarizing, with megastores and smaller specialty stores doing well while midsized stores in the 10,000 square-foot range struggle, said Andrew F. Gaffney, editor of Sporting Goods Business, a monthly trade magazine. But Gaffney said Herman's can make it by not expanding. "I think they can succeed if they do a good job with their new strategy, which so far looks to be the case," he said.

Herman's new strategy eschews a layout based simply on shoes, soft goods and hard goods in favor of a format based on eight business groups: great outdoors, skiing, team sports, shoes, golf, tennis, exercise and apparel. These groups will be cross-merchandised. Nobody home? No problem A Manalapan Township company has devised a different kind of home-video delivery system. Lock Box Video places the videos it delivers in a box that attaches to a subscriber's doorknob. After viewing them, the customer puts the videos back in the box for the video truck driver, who takes the box away.

The box can only be opened with a key possessed by the truck driver and the customer, said Christopher J. Viola, president of the company. A patent on the device is pending, he said. Unlike conventional delivery systems, this one allows videos to be delivered when customers are not home, Viola said. I "We have a broad spectrum of customers," he said.

"Families where two parents work and don't have time to bother (with trips to the video store), housewives who don't want to load their kids in the car. And we have single renters also." Viola said the business, which opened Thanksgiving weekend, offers over 1,000 titles and has several hundred subscribers, who receive a publication listing everything available. It delivers to addresses in Manalapan and Marlboro townships and hopes to expand to other parts of western Monmouth County by the spring, he said. Viola said he started the business with his partner, company vice president Fred Scala, because they "always were interested in the video business but we wanted to offer more (than the chain stores.) We decided to do delivery and pickups without the customer being home, and (the box) was the only -way to do it efficient enough)' Clean that desk! You are awakened in the morning by your screaming kids. You burn breakfast.

It takes forever to get from your home in Ocean Township to your job in Point Pleasant Beach because you hit every red light on Route 35 and you get stuck at a drawbridge opening. And when you arrive, you find the mess of the guy who works next to you has spilled over onto your work space. On Jan. 10, you might be able to at least remedy the last part of this morning from hell. That day, believe it or not, is National Clean Off Your Desk Day.

It should provide an impetus for all workers to better organize themselves, said Stephanie Culp, an author of books on organization and time management. "A streamlined desk is the sign of an organized, competent, productive person," she said. "Whether your desk is in your home or in a corner office in a major corporation, organization is critical to productivity, less stress, and potential financial success. Getting and staying organized translates into daily peace of mind, not an empty mind." Internal service disappoints execs Many senior executives believe that their companies' internal service functions are hampering their ability to compete effectively, a New Jersey consulting firm found. Wm.

Schiemann Associates, Somerville, and Quality magazine polled 841 executives, who expressed disappointment with the internal service perfor-' mance of departments such as human resources. Only 24 percent gave a favorable rating to the service provided by their human resource departments. Most other departments, such as management information systems, marketing salescustomer service, and administrationpurchasing, also were evaluated harshly, garnering approval ratings of less than 35 percent. 0 All stores will install brighter lights to accentuate colorful apparel. Old fixtures of gray pegboard will be replaced by icons, mannequins and floor-to-ceiling outriggers that demarcate different departments.

"Because the consumer is time starved, we want to get them in with a logical sense of order," Fasola said. "We want to make the merchandise really pop." Herman's is the latest turnaround venture by East Brunswick's Taggart-Fasola Group, whose recent successes included Purolator Courier Corp. of Basking Ridge and Circle Express trucking (now called Internet Inc.) in Indiana. Fasola, 44, is president of Taggart-Fasola. The group's chairman, William F.

Taggart, is the founder of Taggart Driving School. Their relationship was forged in Productivity story will be bestseller in 1994 and others believe that this time productivity gains are structural, not cyclical. In Wall Street lingo, this means that many cyclical companies, whose prospects ebb and flow with the business cycle, are becoming growth companies, which manage to rack up profit gains apart from the business cycle. Typically, Wall Street labels consumer products companies, food companies and drug companies as "growth" companies and basic-industry companies, such as steel, paper and autos, as "cyclical" companies. Money managers often debate when the time is right to dump cyclical stocks and buy growth stocks and vice versa.

This debate is going on right now. But the distinction has blurred, payroll cuts of recent years, productivity improvement has a long way to go in many companies. The productivity story is especially compelling in the Midwest. Industrial companies in what used to be called the Rust Belt are among the brightest performers, thanks to new technologies, progressive management styles and closer relationships with their industrial customers. Alexander Paris, president of Barrington Research Associates and a stock picker with a good long-term track record, says the Rust Belt is turning into the Rose Bowl.

In Paris' view, the upsurge in labor productivity is more than the temporary pattern after a recession, when skittish companies are slow to hire more workers to meet post-recession demand. He especially in small and medium-size companies that often are quicker to innovate than corporate giants. You don't have to go from Pepsico to Bethlehem Steel and back, Paris says. In between are many industrial companies, such as machine-tool and auto-parts companies, where the advances in computerization and Japanese management techniques are having a genuinely positive impact on stock prices. With the bullish outlook for consumer demand in durable goods, especially autos, these companies will leverage their productivity gains into bottom-line profit gains, according to Paris' view.

And the so-called re-engineering of the manufacturing sector, following the Japanese model, Is still in its infancy here, he added. That said, there are many ques-; tions to ask when you hear the productivity story. Productivity improvement is a political as well as an eco-; nomic process inside corporations. Corporate downsizing has' become an addictive drug to many CEOs because the benefit to the bottom line is instant and lopping off heads requires little imagination or skill. The most effective steps in productivity improvement go well beyond installing a machine or computer to replace a human being.

Productivity gains involve granting more workplace power to rank-and-file employees. That's something American corporate chieftains like to talk See 1994, page C2 By BUI BARNHART Chicago Tribune A prediction for 1994: "Productivity" will be a much-used, not to say abused, word in business and investing. Productivity, in the most popular definition, measures the output of goods and services companies produce per unit of labor costs. Increased productivity accounted for virtually all of America's gross domestic product growth this year. A great many stocks have been sold and will be sold on the notion that companies today are vastly more productive than just a few years ago and, therefore, even minor increases in their sales will generate substantial increases in profits.

It also will be said that despite the wrenching 1 I.