Mervyns will shut down remaining stores

by Russ Wiles - Oct. 18, 2008 12:00 AM
The Arizona Republic

Retailer Mervyns LLC said it will close its remaining stores and wind down its business by selling off inventory at discounts as the holiday season approaches.

The action affects the 16 Mervyns stores in Arizona that were not among the four being shut in an initial round of closings that started in August.

Until recently, Mervyns operated 20 stores in Arizona, the second-highest store total next to 128 in California.

The chain precounted 175 stores and 20,000 associates in seven Western states.

The company, based in Hayward, Calif., referred callers to a press release in which management cited the tough economy. Retail sales fell 1.2 percent in September, the weakest showing in more than three years. California's economy has been very soft.

"We are disappointed with this outcome but the company's declining liquidity position and the extremely challenging retail environment, together with the fact that we have exhausted all other possibilities, requires that we take this action," said John Goodman, Mervyns' chief executive officer.

Mervyns plans to pursue the liquidation under the Chapter 11 bankruptcy code, which typically allows companies to retain more control over the selling of assets. The company said it intends to retain an outside professional services firm to assist in the liquidation sales of inventory.

Founded in 1949, Mervyns filed for bankruptcy protection in July, squeezed as it was between deep-discount competitors and upper-end department stores.

Mervyns was bought by private investors from Target Corp. in a $1.2 billion leveraged deal in 2004. Mervyns later sued the investors, including Cerberus Capital Management and Sun Capital Management, claiming they forced it into the Chapter 11 filing by stripping away its real estate, then charging high rent.

The announcement represents yet another blow to the nation's malls, which are grappling with increasing vacancy rates in a deteriorating economic environment.

On Tuesday, specialty retailer Linens n Things, which filed for bankruptcy protection in May, announced it will begin liquidation sales at its stores as early as this week.