Mr. Ettore: Ames is the largest regional discount department store in the country today. We have 447 stores in 19 states and the District of Columbia. We go as far west as Illinois in our Chicago stores and as far south as North Carolina. And, of course, heavy concentration throughout the Mid-Atlantic and then into the Northeast and the New England states. We compete with just about anybody that you might want to think of, whether it be the national discounters like Wal-Mart, Kmart, Target, etc., any regional retailer that's out there and any specialty retailer. It's pretty obvious that competition is everywhere. Wherever we're located we have plenty of competition. As far as the history of Ames, Ames was founded in 1958 by the Gilman Brothers, in the early stages of discount retailing. They built the company over a period of years by opening stores in small towns and then as time went on they acquired some other businesses, some other companies and expanded that way. They went public sometime in the early 60s. As time went on the competitive landscape changed. These changes along with an awful acquisition forced the company to file for Chapter 11 bankruptcy protection in 1989, emerging from bankruptcy in 1990. I joined the company in June 1994 with directions from the Board of Directors to develop a strategy to determine just whom we wanted to be in this ever changing discount world. Over a period of time, as we looked at all our competitors and the onslaught of the national chains moving into our part of the country, our idea was to come up with a strategy that would allow us to coexist with them, rather than try to compete head-to-head. We knew that over the long haul head-to-head competition was not going to work. As, for example, it did not work for many so-called strong regionals like Caldor, Bradlees and Venture and many others that have failed by trying to go head-to-head against the national chains. We've developed our co- existence strategy over a period of time and we believe we have come up with a very nice concept. Our stores are convenient and easy to shop, which is one of the strengths of our company. Our stores are about half the size of an average Wal-Mart or Kmart. We cater to time-starved customers. It's a working class customer, so it's important that they are able to get in, find what they want and get out with convenience and speed more in mind than anything else. We do a couple of things that we call merchandise exclusives that further differentiate us from the national chains. We're very, very good at what we call Special Buys, which is an opportunistic buying program for apparel to take advantage of closeouts, over runs, or cancellations from other companies that we put out at very, very advantageous prices. We sign it very dramatically in the stores. It moves very quickly. It's a real highlight to our customers. Our customer focus is women between the ages of 18 and 54, who represent roughly 75% of the customers who shop our stores. What she likes about Special Buys is that she walks in and sees something different almost every week in our store. Another highlight, certainly a highlight and a real strong point of the company, is a program called 55 Gold. We started this in the fall of 1994 and very simply if a customer is 55 or older he/she can sign up and get a free membership card that entitles that customer to 10% off his/her entire purchase, even sale goods, on a Tuesday. Tuesday has grown to be our best day of the week. We do about 21% of our sales on Tuesdays. We believe and see that senior citizens or older customers have been pushed aside by a lot of retailers. As you probably know, many of the national chains don't have a special senior citizen discount. Some of them are really not even looking to draw that customer into the store. That's our secondary core customer, but growing very rapidly. Today we have over 3.5 million people signed up in that program and we look for the program to keep gaining momentum and to be a strong part of the company's future customers. We're also very good at what we call micro marketing. We pay special attention to the special needs of individual stores. Examples include our stores in resort areas, either on the beach or in the mountains. Our customers can be guaranteed that if they are on vacation, they will find what they want in those resort stores, even if it's Labor Day Weekend. Also, we do a good job of tailoring our merchandising to cater to the needs in ethnic areas. Not that other retailers don't do this, but our feeling has always been that we're much better at it. Then we cap it all off with something we're proud of. We call it our A+ Customer Service Program. Although every retailer has a customer service program, we get very good grades from our customers on this. We have a formalized training program for our associates, we make it a lot of fun, we make our associates want to be helpful to our customers and this has turned out to be a real positive for us. Generally, that's kind of an overview of our current strategy along with our history. As far as myself, I've been in discount retailing my whole career. I started in 1961. I have worked in stores, as an assistant buyer and worked my way up to executive positions. I've been with companies like King's Department Stores and Jamesway Corporation, and Stuarts Department Stores. At these companies I have been COO or CEO. Then, as I said earlier, I was asked to join Ames by the Board of Directors in June 1994 and have certainly enjoyed what we've accomplished. We do have our work cut out for us right now, as the retail environment has taken a dramatic change over the last year. We've certainly felt it, but we still think we have a lot of positive things to offer and look forward to the future.
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