2 Pivotal Stores to Reopen After Quake : Recovery: The Gap and Banana Republic outlets in Sherman Oaks will be back, but other businesses plan to leave.

Good news has been in short supply among the merchants along Ventura Boulevard in recent months. Even when it does pop up, just as much--or more--bad news usually follows.

Such was the story Friday, when executives from The Gap and Banana Republic stores shuttered by the Northridge earthquake quietly announced that the two shops will reopen before the end of summer.

Small merchants along the strip near Van Nuys Boulevard consider the two stores critical to attracting shoppers to the once-popular area, which is still trying to recover from the one-two punch of recession and earthquake.

“It’s a vote of confidence,” said commercial real estate broker and Sherman Oaks resident Jeff Brain. “For the community, it’s a morale booster to see them stay.”

But before they could start planning for better days ahead, merchants and residents learned that two other popular quake-damaged businesses--Johnny Rockets hamburger stand and The Sharper Image boutique--will not come back to the neighborhood.

Ray Cabana, president of the Johnny Rockets chain, said he was looking for larger quarters farther east along the boulevard toward Studio City. “I’m pretty sure we won’t go back into that same general area,” he said.

Even before January’s 6.8 quake, the area had been sliding into decline, the victim of a stubborn recession and the changing tastes of finicky shoppers.

It got even worse when many of the stores and more than 30% of the neighborhood’s apartments and condominiums were destroyed by the quake. The destruction in Sherman Oaks was second only to Northridge, the quake’s epicenter.

Slowly, most of the businesses have reopened, but the residential streets on either side of the boulevard remain lined with chain-link fences and empty red-tagged buildings.

Many of Michael Ourieff’s customers lived in those buildings. While he applauds the efforts of other businesses to get back to work, he wonders how much good it will do if surrounding neighborhoods remain ghost towns.

“Business-wise things are filling in a little bit,” said Ourieff, who owns Michael J’s Italian Kitchen. “But neighborhood-wise, the apartments are not coming back. I need that neighborhood business.”

Ourieff is looking for a new home for his restaurant at other spots along the boulevard, in neighborhoods that still have some life in them. “There are so many spots out there,” Ourieff said. “I’m sure we will have no problem.”

Yet Ourieff’s departure will surely have an effect on the area, slightly changing yet again the mysterious and delicate dynamics of what makes a neighborhood work. And no one is sure how those dynamics will play out.

“Sherman Oaks retail is at a turning point,” said Richard Close, president of the Sherman Oaks Homeowners Assn. “Is Ventura Boulevard going to be and remain the Melrose of the Valley? Or is it going to be just another street?”