Just how low can Filene’s Basement go?

Under Syms ownership, sales and identity fade

June 18, 2011|By Jenn Abelson, Globe Staff

After two bankruptcies and the loss of its Downtown Crossing flagship store, Filene’s Basement thought it had finally found a savior in Syms.

The New Jersey discounter scooped up the historic Boston bargain retail chain at an auction in June 2009, giving it another chance to stay alive. Syms’ vision was impressive: New stores featuring both merchants under one roof, a larger buying team with more clout, and promises to return Filene’s Basement to its birthplace in Downtown Crossing.

Two years later, however, Syms appears to be bringing down the Basement, according to some retail analysts and longtime customers. Facing massive losses, angry shareholders, and alienated shoppers, Syms has confirmed that it is now seeking strategic alternatives. That could include selling the business — putting the future of Filene’s Basement, the oldest off-price retailer in the United States, on the line once again.

“We originally were very enthusiastic when Syms purchased Filene’s out of bankruptcy,’’ said Andrew L. Sole, managing member of Esopus Creek Value Series Fund, which has a minority stake in Syms. “We believed the company could convert numerous underperforming Syms stores into more successful Filene’s branded stores, driving additional traffic and sales. Unfortunately, management and the board have not executed well, as evidenced by the sizable losses.’’

Syms last month reported a $17.8 million first-quarter net loss, or $12.1 million excluding one-time charges related to its purchase of Filene’s Basement, compared with a $7.4 million deficit during the same period in 2010. And sales at stores open at least a year, a key measure of a merchant’s health, fell 7 percent.

Syms spokeswoman Davia Temin declined to comment on what might happen to Filene’s Basement. But she said the retailer — founded in 1908 as a place to sell excess merchandise from the Filene’s department store upstairs in Downtown Crossing — has benefited from the new ownership. For example, Temin said, Syms kept open a Massachusetts distribution center that others might have closed, saved jobs, and has continued operating Filene’s Basement stores.

But the marriage between the two companies has been rocky. Retail analysts attribute Syms’ poor performance partly to the co-branding strategy pushed by chief executive Marcy Syms, whose father opened the chain’s first store in New York City in 1959. The new concept, with stores featuring Syms and Filene’s Basement signs together, was intended to blend the former’s extensive suit and tailored offerings with the latter’s designer clothes and accessories.