National Lumber Seeks Bankruptcy Protection : Retailing: The ailing home-improvement chain has fallen to competition from warehouse stores and a slowdown in local markets.

National Lumber & Supply Inc., the financially troubled operator of home improvement stores that has been a Southern California staple for nearly half a century, Tuesday filed for Chapter 11 bankruptcy protection.

In making the filing in federal bankruptcy court in Santa Ana, the Fountain Valley-based company said intense competition from warehouse retailers and a slowdown in local housing and home-repair markets cut into the company’s cash flow.

The chain, which had earlier announced that it was attempting to refinance its debt and streamline its operations, will continue operations while attempting to reorganize under court supervision and devise a plan to repay creditors.

The filing comes five days after National Lumber announced that it would close six of its 21 stores and lay off 165 workers in a cost-cutting move. Talks with lenders and creditors failed to result in a financial reprieve for the company.

Melvin Jaffee, president of the company, was unavailable for comment.

The company last week told suppliers that it was considering filing for bankruptcy. The company also asked the suppliers then to continue sending merchandise on a collect-on-delivery basis and not to press for payment of past debts immediately.

For the nine months ended Oct. 31, National Lumber listed assets of $38.4 million and liabilities of $38.8 million. Current figures, including lists of major creditors, were not available.

National Lumber said it believes that it has the financing to keep its remaining stores open while reorganizing under bankruptcy protection. The company said it has received a $4-million commitment for financing from Foothill Capital Corp.

The company said it also continues to negotiate with its current principal secured lender, Fidelcor Business Credit Corp., to increase its credit. National Lumber said its plans to reorganize could include attempts to secure new investment capital, close additional stores, sublet or assign valuable leases and change the company’s merchandise strategy.

For the nine months ended Oct. 31, the company lost $4.4 million on revenue of $107.8 million. The company said earlier that it expects to report a “significant loss” for the fourth quarter and fiscal year ended Jan. 31.

For the last fiscal year, the company reported a loss of $4.6 million on revenue of $152 million.

The chain was founded in 1942 by Sol Jaffee, and it has been controlled by his family ever since. Melvin Jaffee, son of Sol and president of the company since 1965, spearheaded the company’s expansion from a single store operation to one of the industry’s first full-service home improvement chains.

The regional chain struggled with losses for the past several years in the face of competition from national, efficient operators such as Atlanta-based Home Depot and Fullerton-based Home Club. With strong financial backing and the synergies of combined advertising and mass purchasing, the warehouse operators put the squeeze on independent hardware stores and regional chains such as National Lumber.

“Southern California has experienced a great deal of competition over the past few years, with national chains coming into the nation’s strongest retail market and taking market share from local companies,” said Sarah Stack, retail analyst with Bateman Eichler, Hill Richards in Los Angeles.