Mitch Modell is trying to save his shirts.
The New York-based, fourth-generation sports store owner on Tuesday sent a Hail Mary letter to 19 building and mall owners stating he needed them to “dig deeper” to save all 140 Modell’s stores and prevent a bankruptcy by March 1.
Already, five stores that had liquidation sales in progress since Friday agreed to a workaround, saving 93 jobs.
The letter exclusively provided to me states, “I want to be able to give the same message to the remaining 348 associates who were told on Thursday that they lost their job, and I want to prevent having to soon inform 2,900 that their jobs are gone. These people are counting on me; some have been with me for 40 years.”
Owned by the family since 1889, Modell’s is ready for outside equity, and Mitch hired BRG’s restructuring arm to find him a minority investor, and the law firm Cole Schotz “to advise us in case all plans fail,” he said. “My hope is that we do sell a minority interest.”
One plan being considered to boost sales is to open mini-shops within other stores, and another is to have smaller stores of 12,000 to 15,000 square feet. But he was quick to note that big stores with small rents and good business can be just as lucrative as small stores with large rents — but that low volumes will “kill you” and tie up merchandise.
Modell blames the 131-year-old private family company’s mounting financial crisis on “lousy” local sport teams that plague jersey sales, a shorter holiday selling season and the warm winter which jettisoned jacket, boot and glove sales.
But, he says, don’t blame it on the web. “It’s our extended aisle,” he observes. “It’s our No. 1 store, if the internet was a store.”
Eight shops on the current chopping block are in Manhattan and Brooklyn. These include 150 and 280 Broadway; the large Upper West Side store at 795 Columbus and the smaller one at 348 Amsterdam; in Harlem, on East 125th St.; and three in Brooklyn, at Fulton II, Brooklyn Junction and Eastern Parkway.
The letter to store owners asks them to agree to lower and defer rents for just 90 days while he gets the company back on track: “I’m all in on this, both financially and strategically. I will do whatever it takes to save these stores and protect the communities that we have serve[d] and loved for generation[s].”
Modell says the owners of the 23,000-square-foot, “too big a store” at 795 Columbus within Columbus Square agreed to reduce the rent a year ago, “but not enough to move the needle.” Winick Realty Group is listing the store for rent. Winick did not return a call for comment, but there are offers, sources said.
As for a Harlem location owned by Joseph Sitt, Modell says, “The rent is way too high. We told him work with us or we have to close the store.” Sitt did not respond to a request for comment. The better-performing West Harlem store by the Magic Johnson theaters will pick up the volume, Modell says.
The smaller Amsterdam store’s lease ends in November, and he also tried to restructure at 280 Broadway “to no avail.”
Stores doing well include the flagships on West 42nd Street and at East 86th Street.
Modell also blames his situation on high costs of operation. “If you think every five years there’s a 5 percent rent bump, it’s 2.5 percent you have to pick up in sales just to be neutral,” Modell explains. “Then there are higher property taxes, higher labor costs and it all adds up to higher occupancy costs. That’s why we are trying to restructure the deals.”
Asset-disposal king Albert Nassi’s Tiger Capital Group, has already run liquidation sales. “They did a phenomenal job of liquidating stores,” Modell says. “The [financial] results are spectacular.”
“If we get 90-day compliance from the vendor and factory community, we have a path to success,” he says. The letter provides a deadline of Feb. 27 at 10 a.m.
One real estate source expressed doubt that Modell will file for bankruptcy, as he owns some of the smaller shopping centers outside the city that host his stores and recently opened a large New Jersey distribution center.
But sources said that about Barneys, too. Stay tuned.