Mervyns, the low-end department-store chain that has been languishing for several years, could be the latest casualty of the fiercely competitive...
NEW YORK — Mervyns, the low-end department-store chain that has been languishing for several years, could be the latest casualty of the fiercely competitive retail climate.
The privately held company, which operates about 175 stores in seven states but primarily in California, is facing bare shelves and a cash crunch as vendors are delaying shipments and key lenders that provide finance and credit to apparel makers have stopped approving orders.
Between January 2006 and February 2007, Mervyns closed all of its stores in Washington state, including 10 in the Puget Sound area.
“We are advising clients to hold off shipments primarily due to lack of communications from management,” said Bob Carbonell, chief credit officer at Bernard Sands LLC, a credit-monitoring company.
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Carbonell, who said he’s working with several dozen clients that sell to the chain, noted that Mervyns had been consistently providing financial updates until about a week ago.
A person close to the company who spoke on condition of anonymity because of the sensitivity of the issue said GMAC Commercial Finance stopped approving orders of merchandise last week.
Squeezed by high-end department stores at the top and large discounters like Wal-Mart at the bottom, the 59-year-old Mervyns has been shuttering stores and leaving states such as Oregon as well as Washington since 2005, after a consortium of private equity players including Sun Capital Partners bought Mervyns from Target for $1.2 billion.
Asked about the possibility that the company would have to file for bankruptcy protection, Mervyns spokeswoman Meaghan Repko said, “The company does not comment on rumor or speculation.”
Sun Capital did not immediately return calls for comment. GMAC spokeswoman Kelly Rionda declined to comment.
The chain’s heavy concentration in California, which is among the states hardest hit by the housing crisis, has made a turnaround more difficult.
Consumers in those hard-hit regions are being forced to make choices, Carbonell said: “Do you go shopping at Mervyns or do you pay for gas and food?” He added, “Everybody is fighting for the same piece of the pie.”
In April, Mervyns appointed John Goodman, who had been president and general manager of the Dockers brand — a key supplier to Mervyns — as president and chief executive.
The company announced the next month that it had hired a real-estate advisory firm to sell five to 10 underperforming stores that also had high real-estate value. Mervyns said then that the move was expected to generate $25 million to $50 million in cash to pay for operations and new growth.
The financial struggles of Hayward, Calif.-based Mervyns are another worry for the nation’s malls, which have seen more vacancies amid store bankruptcies and closings.
On July 9, Steve & Barry’s, once a growing force in low-priced fashion, filed for Chapter 11 bankruptcy protection. At the time, company officials said no decision had been made about possible store closures.
It joins home-furnishings chain Linen ‘n Things, catalog retailer Lillian Vernon and specialty retailer Sharper Image in filing for bankruptcy protection this year. Sharper Image, which is now being liquidated, is selling its remaining assets to an investment group for $49 million.