Chain Reaction : At Holiday Season Peak, Some Stores Tell of Plans to Close
The store-closing signs that promised 70% off women’s apparel at the Fashion Bug store in the Garden Grove Promenade drew in Margie Erickson for a look around.
But Erickson ended her quick visit by doing what shoppers increasingly have been doing at junior women’s apparel stores: She walked out without making a purchase.
“It’s a nice store and everything, but they just don’t have anything for me,” said Erickson, 57, a longtime Garden Grove resident. “I think there are just too many of these [junior women’s] stores and not enough younger shoppers to go around.”
Judging from the ongoing wave of store closings washing through the bitterly competitive specialty retailing industry, Erickson is right. More than 2,000 store closings have been announced in recent weeks by nearly half a dozen chains, including Anaheim-based Clothestime Inc., which sells women’s apparel, and Charming Shoppes Inc., which operates the Fashion Bug stores.
Several retailers, including Clothestime, have taken the unusual step of filing for bankruptcy protection during the all-important holiday season.
“The interesting thing is that you’re seeing a rash of [retail] bankruptcies before the Christmas shopping season ends,” said Ira Kalish, a retail industry expert with Management Horizons, a Los Angeles-based consulting firm.
Typically, Kalish said, troubled chains postpone bankruptcy filings and store closings until February or March so they can squeeze every drop of revenue from the holiday season.
But increasingly nervous lenders and vendors are quicker to pull credit lines on struggling chains. In recent weeks, several retail chain operators, including Edison Bros. Stores Inc. of St. Louis; Petrie Retail Inc. of Secaucus, N.J.; and Sycamore Stores of Indianapolis have joined Clothestime in Bankruptcy Court. Most of the chains have announced plans to close stores, including some in California, and hold related store-closing sales.
Industry analysts say relatively healthy companies, not just chains in Bankruptcy Court, will also be closing underperforming stores to cut costs.
For example, Charming Shoppes will close 290 stores, including the Fashion Bug in Garden Grove, by Jan. 31, eliminating 2,500 jobs. Executives say the majority of the Bensalem, Pa., chain’s 1,423 stores are healthy, but that they cannot carry underperforming locations given new competitive realities.
The closings and bankruptcies are part of an ongoing wave of changes that are reshaping the entire retail industry. Big retailers such as Sears, Roebuck & Co. and J.C. Penney Co. are using low prices and familiar name brands to lure customers away from smaller chains such as Clothestime and Fashion Bug. And, as Erickson said, there is a glut of stores offering the same items.
Retailers say the bankruptcy filings will put further stress on their industry by spawning a series of store-closing and going-out-of-business sales that will flood the already saturated market with more deeply discounted merchandise.
Hardest hit have been chains such as Clothestime, which prospered during the 1980s by selling relatively inexpensive private-label clothing to young women. The retailer has struggled for the last two years, losing $18 million, as its customers flocked to major discounters that offer familiar names at relatively inexpensive prices.
The big discounters, including Wal-Mart, “are simply undercutting Clothestime on price,” said Kurt Barnard, publisher of New York-based Barnard’s Weekly Marketing Report. “You have to wonder how long they can last.”
Natalie Gibson, a Rancho Santa Margarita resident who shopped last week at one of Clothestime’s two stores in Tustin Marketplace, said the chain no longer stands out in the crowded junior women’s market. “Almost all of the chains carry the exact same things,” Gibson said.
Clothestime, which had grown quickly to more than 500 locations in recent years, now plans to close 137 stores. Last Friday, Bankruptcy Judge John J. Wilson approved the company’s plan to close the stores.
The closing plans will feature hefty price discounts in merchandise as chains scramble to unload costly inventories. At Chess King, a men’s store in Buena Park Mall run by Merry-Go-Round, signs in the window shout out, “Everything must go.” At Lingerie Time’s Tustin Marketplace location, the “entire store” is up for sale.
Clothestime will use deep discounts to sell $18-million worth of merchandise during a sale slated to run through Jan. 31. Secaucus, N.J.-based Jamesway Corp., which is closing 90 stores in the Northeast, plans to unload $250 million worth of goods.
Although the sales are a dream for consumers, they are a nightmare for competitors who fear they will have to drop prices further to remain competitive.
“When they’re offering 70% off, anyone who goes in will most likely pick something up--and that’s money that might have been spent at a competitor,” said Tony Cherbak, a Costa Mesa-based retail industry analyst with Deloitte & Touche, the accounting firm.
The bankruptcies and store closures also create headaches for image-conscious shopping center owners, who fret that bankruptcy sales cast a pall over nearby businesses that don’t have problems.
Losing a nationally known chain such as Clothestime is a disappointing step backward for store owners in Brookhurst Fashion Plaza, which finally filled the gaping hole created several years ago when a Millers Outpost store closed.
“These big stores mean more traffic for us,” said Moses Kahng, who owns the Mail Today service center in the Brookhurst Plaza in Westminster. “I see people go and buy gifts at Clothestime and then they send them from here. You don’t like to see them close.”
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Scaling Back
Lackluster sales and stiff competition from discounters are forcing retail chains to close underperforming stores and, in some cases, go out of business entirely. Retailers that have announced store closings during the last six months, with number of store closings: * Clothestime Inc.: 137 of 550 Clothestime and Lingerie Time locations, through U.S. Bankruptcy Court
* Edison Brothers Stores Inc.: 462 of 2,600 shoe and apparel stores, through U.S. Bankruptcy Court; operates J. Riggings, Jeans West, Oaktree, Repp Ltd., 5-7-9 Shops, Webster and Zeidler & Zeidler apparel stores, as well as the Bakers, Leeds and Wild Pair shoe stores
* Charming Shoppes Inc.: 290 of 1,423 Fashion Bug stores
* Merry-Go-Round Enterprises Inc.: 375 of 575 stores, through U.S. Bankruptcy Court; will close all Chess King stores and some Merry-Go-Round, Cignal and Dejaiz locations
* Sycamore Stores Inc.: 126 stores through U.S. Bankruptcy Court
* Petrie Retail Inc.: About 300 of 1,600 stores, through U.S. Bankruptcy Court; operates Petrie’s, Marianne, Stuarts, Jean Nicole and G&G; chains
* Melville Corp.: About 300 stores nationwide; operates Marshalls, CVS and Kay-Bee chains; has sold Marshalls to TJX Cos., a competitor that owns the T.J. Maxx discount chain
* Caldor Corp.: Filed for bankruptcy but has yet to say how many stores likely will close; has 166 stores in 10 East Coast states
* Jamesway Corp.: 90 stores through U.S. Bankruptcy Court before the holiday season ends and will then go out of business
* J. Baker Inc.: Will sell or close 357 Fayva Shoe stores during coming year
Source: Individual stores; Researched by GREG JOHNSON / Los Angeles Times
