PHAR-MOR Official: Shelves will be restocked
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- Shelves at Phar-Mor stores, which have been nearly empty of produce and bread and light on other items, should be filling up again soon, a company official said.
Phar-Mor's credit problems prevented it from keeping shelves full in recent weeks, but its filing for bankruptcy protection Monday should clear the way for better relations with suppliers, said John Ficarro, Phar-Mor senior vice president.
One supplier that had stopped delivering because of credit issues with Phar-Mor made a produce delivery Monday night without any request from Phar-Mor, Ficarro said.
He said he couldn't comment on specific areas of the store, which have been low on supplies because company officials are in the process of working with more than 1,300 suppliers.
"It's going to get better immediately," he said.
At Boardman store: At the company's Boardman store Tuesday, bread and produce shelves were nearly empty, and the stock in the beverage aisle was down significantly. There were a few holes on other shelves.
Ficarro said suppliers should be more confident in dealing with the Youngstown-based discount drugstore chain because of a financing plan approved Monday by Judge William Bodoh of U.S. Bankruptcy Court in Youngstown.
Phar-Mor has $135 million in financing from Fleet Retail Finance in order to continue normal business operations.
Ficarro said the financing plan includes paying suppliers in full for bills filed after Monday. Judge Bodoh will rule later on how much will be paid for claims filed before the bankruptcy filing.
Ficarro said he thinks suppliers will continue to work with Phar-Mor because it's in their best interest that the chain be successful.
He said Phar-Mor's credit problems began in April when McKesson Drug Co. of Dallas reduced the company's credit terms by several days. Phar-Mor had to start paying its bills earlier, which hurt its cash flow, he said.
McKesson supplies all of Phar-Mor's pharmaceuticals and is Phar-Mor's biggest supplier; Phar-Mor spends $360 million a year with McKesson.
Word of McKesson's decision eventually leaked to other suppliers, who also asked for quicker payments, Ficarro said. Some suppliers in the past few weeks demanded cash for deliveries, he said.
Phar-Mor's cash flow became damaged even more as was its ability to borrow, he said.
What caused this: Phar-Mor has put blame for its bankruptcy filing on these changed credit terms, increased competition, changing consumer buying habits, high-cost debt and geographic diversity of its stores.
Phar-Mor, which has annual sales of about $1.3 billion, has lost money in four consecutive fiscal years.
As suppliers wait for word on their unpaid bills, shareholders also are waiting to find out if their stock will be worth anything when bankruptcy court proceedings are complete.
Ficarro said it's unlikely that shareholders will receive any value after the company reorganizes. Shareholders will receive money only if unsecured creditors are paid in full, which doesn't happen in most cases, he said. The stock was at 56 cents a share when trading was halted before markets opened Monday.
Company officials will decide later whether to reorganize as a public or private company, Ficarro said.
Phar-Mor intends to close and sell 65 of its 139 stores but continue operating the remaining 74 under its current merchandising format.