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Renovations Cause Coop FY '95 Losses

By Rita Lin
Staff reporter

Despite efforts to return to profitability through restructured operations, the Harvard Cooperative Society posted an operating loss of about $530,000 after its $45.9 million in sales for this past fiscal year ending in June.

The Coop announced its intention to change its marketing and managing strategy and embark on a store renovation program a little over a year ago. The changes represent the Coop's new approach to cutting losses and providing better services to its members and customers.

On the managing level, the Coop commissioned Barnes & Noble Bookstores as its manger of operations. The renovation of the store's interior and the reorganization of and elimination of some of its departments changed the appearance of the store and some of its services.

This year's loss represents an improvement over the loss of $1.2 million sustained during the previous fiscal year. The major part of this year's loss stemmed from the $6.7 million one-time cost for the restructuring effort.

Departments discontinued

The loss was specifically attributed to the reorganization effort, "mainly the discontinuance and downsizing of certain lines of business," Coop manager Allan Powell said. The operating and restructuring charges were close to the amount expected, he said.

The fashion and clothing and computer hardware departments were discontinued at the Coop, while the electronics department was greatly downsized. The decisions for these changes were based on the sales volume in the past years.

"The Coop was no longer able to compete in the competitive market in electronics and computer hardware with so many specialized stores around the area," Powell said.

The new space available as a result of the discontinuance has been reallocated to the departments of books, prints, insignia, stationery, and school supplies.

Although the discontinuance of certain lines of business and the downsizing of other classifications resulted in 11.2 percent drop in sales last year, the first quarter sales result showed that sales so far have been above expectations. "We are happy with our decision to reorganize," Powell said.

With the reorganization, the Coop is in a better position to compete, especially with Barnes & Noble "running our day-to-day operation," Powell said.

Barnes & Noble was chosen by the Coop over other companies because it is a company whose core business focus is books, a focus viewed as more important to customers.

Barnes & Noble has an excellent record of managing over 300 college stores nationwide, Powell said. "The Coop is confident that it will soon return to profitability," he said.

Rebate likely to be reinstated

In addition to its goal of returning to profitability, the Coop also hopes to reinstate the patronage rebate to its customers. The percentage of the rebate is calculated from the proportion of total Coop sales that come from members.

In the early 1980s, the rebate was as high as 9.5 percent. But by the fiscal year ending 1990, the rate had plummeted to 5.5 percent. In 1994, the rebate stopped completely because of the poor sales volume. Powell said that he is optimistic about the possibility of a rebate this year.

The Coop has completed renovations of its store in Kendall Square, and the renovation of another store will be completed this month. The Coop is also planning to renovate its flagship store in Harvard Square, but there are still real estate details to be worked out, Powell said.