Fila to close more U.S. outlet stores

THE BALTIMORE SUN

Athletic footwear and apparel designer Fila Holding SpA will continue closing unprofitable outlet stores in the United States this year in a corparatewide restructuring, the Italian company said yesterday.

Fila, based in Biella, Italy, expects to take a one-time charge in 2000 of about 14 billion lire, or $6.8 million, to return the retail division to profitability. It also expects its loss for the year to widen.

Because of the restructuring, which includes accelerating plans to pull out of unprofitable markets in Uruguay, the Philippines, South Africa and East Africa. Fila expects to report a net loss of $62 million to $67 million, the company said. File reported a 1999 loss of $63 million.

The company will report fourth-quarter and full-year financial results Feb. 26.

Fila USA Inc. based in Sparks, closed seven outlet stores in January, leaving about 30 nationwide. None are in Maryland. The closed stores are in Virginia, Florida. California and Arizona.

The U.S. division is negotiating leases with landlords and cannot disclose the number of additional stores likely to close this year, said Tom O'Riordan, chief operating officer of Fila USA.

But the closings are part, of the division's strategy of whittling down the number of outlets, making it consistent with the overall size of the business, said Jon Epstein chief executive officer of Fila USA. He said the company had 50 outlets when he took over in 1998.

"One of the things that was out of kilter was the fact that we had so many retail outlet stores," Epstein said

"Because we're managing inventory more efficiently we don't buy unless we've sold [merchandise] in advance - now we have to make products to fill the outlet stores. They were originally designed to take care of excess inventory."

Epstein wants to continue operating outlet stores, but is focusing on increasing Fila's market share by selling foot-wear and apparel to department stores and specialty retailers such as Foot Locker, the biggest U.S. customer.

"We want to be a provider of high-quality product to the retail trade that can sell at higher prices" without compromising the strength of the brand by making merchandise to sell at a discount Epstein said.

Fila, which has had difficulty competing with dominant rivals such as Nike Inc, and adidas, is trying to differentiate itself by capitalizing on its Italian roots and elevating its brand by endorsing athletes such as tennis star Jennifer Capriati, winner of the Australian Open last week.

As part of the strategy to elevate the brand, Fila plans to launch a retail chain - its first non-outlet stores - primarily in Europe.

Forty "Fila Sport.Life" stores will open over five years, including five flagship locations opening in Milan and London this year, and in Paris, Rome and Berlin by the beginning of 2003.

The flagship stores will be designed to link the emotions of sport to products through the use of space, images, light and special effects.

Another 35, smaller Fila stores will open in major cities in France, Germany, Italy and the United Kingdom.

Those stores are not planned for the United States at this point, but the idea is being considered, Epstein said.

One analyst who follows the company, but asked not to be named, called Flla's restructuring appropriate and expected the new retail chain to be successful.

But, the analyst added. "the company has been in a period of restructuring fore long time now.

"I've seen a number of restructurings and am looking forward to a time when the company is back into making positive earnings."

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