March 4, 2009--In the weeks leading up to PMA, it was announced that Ritz Camera Centers had filed for chapter 11. Chapter 11, under the U.S. Bankruptcy Code is simply a reorganization of the company.
Ritz Camera Centers, Inc., the largest photo specialty chain in the U.S. is headquartered out of Beltsville, MD and consists of the Ritz Camera stores, Wolf Camera, Kits Cameras, Inkley's, and The Camera Shops, as well as Boaters World stores. Ritz Interactive, which runs the RitzCamera.com website is a totally separate company.
Fred Lerner, president and CEO of Ritz Interactive said that for them, "It's business as usual."
We spoke with Ted Fox, PMA's executive director about the news as it came so close to the opening of the PMA convention and tradeshow here in Las Vegas, and would surely be a topic on everyone’s minds.
Noting that Ritz is simply going through a reorganization, Fox said, "Ritz isn't the first, they won't be the last," company to ever file for Chapter 11 protection. He, like many others we spoke to regarding the situation see it as an opportunity for the company to reorganize, streamline and come out of this stronger.
In these hard economic times, when consumers are not spending money, everyone from the mom and pop independent store to the small chains, and large corporations are concerned for their futures. "It's a much broader issue that most retailers are facing, there’s no foot traffic," Fox explained.
Americans, and likely many consumers around the world seem to be in the "cocooning" stage where they stay at home, spend little and make family a priority." Noting this, Fox says the photo industry could benefit once these consumers start spending again.
We saw such a turn in the industry following September, 11, 2001. Consumers went from spending little and cocooning, to spending more money on the things like photography--preservation services for their memories, which as Fox says, "Isn't going to go away."
The industry has long considered the Ritz chain a role model as they were often the leader in new technologies, store design, advertising, marketing and sales promotion. As a photo specialist, Ritz has been without peer and is respected throughout the industry by vendor and competitor alike.
With the Chapter 11 filing, might an independent reasonably ask, "If Ritz couldn't make it with all of its professional resources, how can I expect to be able to survive?"
Rich Tranchida, executive vice president of Ritz, said, "It's hard to say if this is a disaster for the independent. It's definitely a different market than it was. Nobody is immune, from the big guys to the little guys. Every channel, from drug, mass to the independent is faced with the same challenges."
Brent Bowyer, executive director of the IPI (Independent Photo Imagers) buying group concurred. "These are definitely uncharted waters we are in now and it's very easy for even the most astute, seasoned and experienced management team to get caught off guard, at least temporarily."
PMA's Fox suggests that the independent also should note that they are in a position of more flexibility than a large chain with hundreds of stores or more. The independent doesn't have to outlay the monies for large inventories, and needs only a small staff in comparison. Ritz's Tranchida explaining that "the cash cow of film processing" is gone for everybody. He noted, however, that Ritz was still processing roll film to the tune "of six figures" a month.
However, he also noted that unlike the mass and drug accounts, "the independent could be around forever. Much of every dollar he takes into his register goes into his paycheck."
He did not feel that the closing of the remaining Qualex labs on March 1 would necessarily have any impact on Ritz or the trade. It had been announced late last year that Eastman Kodak would be closing down its Qualex photofinishing operation this month. He said that most of the chains dealing with Qualex are mostly equipped to handle film with onsite equipment.
"Only if drug and mass decide to get rid of film processing will we see a fundamental change." Will Ritz get out of the business of processing film? "We'll be the last ones standing," Tranchida said.
Wegman's, the large supermarket chain that was the first of its kind to get into on-site processing in the early 1980s, recently abandoned its photo operations in all stores. Also, CVS is presently switching to the Kodak Apex digital system in about 1,400 stores as they replace traditional equipment--many of them the old Gretag systems which Kodak has been committed to keep in repair at some expense.
Currently, Ritz has about 900 operating locations, according to Tranchida, but he called this number "a moving target". At one point, following the acquisition of the Wolf chain, Ritz had some 1,200 stores. How many locations might you have by the end of the year, Rich? "We will do whatever the courts let us do. Once in Chapter 11, everything is left to the courts."
What are store personnel telling any customer who asks about the bankruptcy? "They are telling them that we are business as usual while we go through a restructuring."
Tranchida noted that vendors are supplying the chain with all necessary supplies and inventory. "Any good supplier realizes that he can still make money with us. Why wouldn't they ship?"
According to Reuters, among the largest unsecured creditors are Nikon Inc. with a $26.6 million claim, Canon USA Inc. with a $13.7 million claim. Other reports add Fuji Photo Film, owed $8.4 million. Contacting Fujifilm to confirm this number, we were told by Joe Vaughey, group VP, for sales and marketing of the Fujifilm USA, Inc. Imaging division, that "Fujifilm and Ritz camera have enjoyed a successful business relationship over the years, and while the bankruptcy announcement from Ritz Camera is unfortunate, Fujifilm remains committed to retail photo imaging and we are positive about the future of this category." We did not have the opportunity to ask Canon or Nikon for comments before going to press.
Tranchida said that the filing for Chapter 11 was in no way related to the PMA convention timing. However, don't plan on seeing too many Ritz personnel roaming the PMA aisles. Tranchida said that only he and David Ritz, president, will be here. Last year Ritz sent about 20 folks to the convention. "People will see we are here and moving forward; that we are going to be around. Our physical representation was necessary at PMA."
For legal reasons Tranchida was unable to comment on such matters as the significance of the declining Boaters World business, a Ritz company, on the Chapter 11 filing. The Boaters World business was hurt badly by the high gas prices this past summer which kept consumers from spending money on such luxury items as boating.
"We've got a lot of smart, good people in our industry, people who aren't just sitting back and watching without acting," Fox said. "A lot of the people in our industry are progressive, proactive entrepreneurs," he added.
One of those proactive retailers is Mike Woodland, co-owner of Dan's Camera City in Allentown, PA. Before joining Dan's Camera City, Woodland had worked for The Camera Shops and is still close to many working there. Strictly speaking as a one-store independent, Woodland said, "[The situation] may make some manufacturers rethink the value of dealing with independent owners." He also noted the difference between the mom and pop retailer and a chain with 1,000 or more stores. "Thanks to our flexibility, we're able to adapt better," Woodland said. "I'm in a stronger position this year coming to PMA than the last couple of years."
Woodland, as many others in the industry feel that Ritz has done a lot of good for the industry, and "it would be a shame to lose that."
"I hope people are going to be talking about what we can do to partner--to be a cohesive industry. We need to make it easier to make it simple. That will help us more than anything. I'm hoping that dealers are going to vendors and saying to them, 'I'm going to be here next year, so let's see what we can do together,' " Woodland said.
Mike Worswick, president of the PRO Group, added, "The most important thing that suppliers can do is to see that they provide their retail partners with sufficient gross margins to remain viable."
On another note, Tranchida was honored at the Opening Business Session yesterday morning when he was given the PMA Distinguished Service Award which is "given based on career commitment and invaluable contributions to the imaging industry."