Wearied by an intense bankruptcy process and largely unsuccessful in his attempts to fix the national retailer he founded, Leonard "Boogie" Weinglass will leave day-to-day management at Merry-Go-Round Enterprises Inc. this month, officials said yesterday.
Mr. Weinglass, who parachuted back into daily operations a year ago after sales began plummeting at the fashion retailer, is expected to resign as chief executive officer by mid-November and rejoin his family at his home in Aspen, Colo., said Merry-Go-Round spokesman Michael W. Kempner.
But Mr. Weinglass will stay on as a "very active" chairman of the board, helping to pick merchandise and plot strategy, Mr. Kempner added.
His decision to resign as CEO was voluntary, according to several people close to the company. But it still is seen as a chance to inject new talent, they said.
Merry-Go-Round hasn't named a replacement CEO. "They're going to make a decision over the next few weeks," Mr. Kempner said. "By the time Boogie leaves day-to-day operations, there'll be an announcement."
People close to the company said creditors -- particularly Boston-based Fidelity Investments -- are pressing Merry-Go-Round to hire a "crisis management" CEO who would be charged with quickly halting the retailer's large financial losses. A crisis management approach could involve more layoffs and many more store closings for the retailer, sources said.
Merry-Go-Round is also considering hiring an executive search firm to find a chief executive, sources said. Or it could reappoint Chief Operating Officer Michael D. Sullivan, who stepped down as CEO when Mr. Weinglass returned last year.
In his year back in Maryland, Mr. Weinglass has improved results in Merry-Go-Round's women's merchandise, sold in its Cignal and Merry-Go-Round chains. And he hired two top merchants -- Frank Tworecke and Lou Spagna -- to help share executive duties.
But the company, which entered bankruptcy proceedings in January, continues to struggle, as evidenced by interviews and newly available documents.
Merry-Go-Round had an operating loss of $4.1 million and a net loss of $5.7 million for the month of September, according to a recent filing in U.S. Bankruptcy Court in Baltimore. In August, the company made its first profit this year, at $1.39 million. For February through September, Merry-Go-Round had a net loss of $67.2 million, and its net worth has declined from $198 million in January to $124.5 million on Oct. 1.
The company's October sales results, to be announced today, will be another disappointment, according to a person who has seen the figures. At least two of Merry-Go-Round's units recorded declines of more than 10 percent for the month in established stores compared with a year ago, the person said.
Continuing losses aside, Mr. Weinglass is stepping back at a critical time. The important holiday buying season approaches. And Merry-Go-Round managers, who have already closed more than 200 stores this year, have more hard choices ahead.
Two weeks ago they presented creditors and shareholders with an in-depth plan for cutting operating costs. Merry-Go-Round has declined to comment on the plan, but people who have seen it said that, if carried out, it would lead to additional layoffs at the company.
The retailer may also have to close many more stores to become profitable. Its 300-plus store Dejaiz chain for young men, in particular, is still a heavy drag on results.
Merry-Go-Round has agreed to keep the 1,230 stores it now operates open through Christmas. But next year, "I think a lot more stores are going to close," said Howard Davidowitz, a prominent New York apparel consultant. "The business continues to be absolutely wrecked."
Mr. Weinglass and Mr. Sullivan did not return phone calls yesterday.
By several accounts, Mr. Weinglass' decision to return to Aspen, his wife, Pepper, his three children and his 22-acre "Merry-Go-Ranch" is voluntary. Investors are unhappy about the continuing losses and erosion of Merry-Go-Round's net worth. But Mr. Weinglass is still seen by important creditors and sharehold ers as a fashion talent who has helped the company.
"Boogie wasn't a problem that we were trying to move out of the way," said Hubert M. Stiles Jr., who manages a big piece of Merry-Go-Round stock for T. Rowe Price Associates Inc. "I'm sorry to see him go."
Mr. Weinglass, a pony-tailed, streetwise Baltimore native who gained fame by co-founding Merry-Go-Round in the late 1960s and building it into a coast-to-coast operation, has always said his term as CEO was temporary. Friends said that he longs for Colorado and that operating Merry-Go-Round these days turned out to be much more difficult than he expected.
Although he has sustained more than $70 million in paper losses as Merry-Go-Round's stock has fallen close to $1 per share, Mr. Weinglass reaped millions of dollars in previous sales of Merry-Go-Round stock.
Alan Millstein, editor of Fashion Network Report, an industry newsletter, ridiculed Mr. Weinglass, as one of the company's biggest shareholders, for returning to Aspen while losses continue.
"He must have heard the snow report," Mr. Millstein said. "I wonder how the sales people down in the trenches feel when the general leaves."