Mervyns Plans to Shutter 62 Stores, Cut 4,800 Jobs

Retailer Mervyns plans to close nearly a quarter of its stores and lay off 4,800 employees in an attempt to cut the chain’s losses.

The Hayward, Calif.-based company said Wednesday that it would close 62 stores in eight states, with the bulk of the cutbacks concentrated in Texas and Michigan. The streamlining also would close stores in Colorado, Oklahoma, Louisiana, California, Oregon and Utah, as well as two distribution centers in Texas and Utah. The closures will be completed by February.

All the affected stores, which generated just 17% of Mervyns’ sales, were losing money, Mervyns said.

“This was life and death for them,” said George Whalin, president of Retail Management Consultants in San Marcos, Calif. “They had to make some moves to make this thing profitable.”

Mervyns, started as a San Francisco Bay Area department store chain after World War II, has been steadily losing market share to more nimble competitors for years. Frustrated with the chain’s meager returns, Target Corp. sold Mervyns last year for $1.65 billion to a group of investors that includes Sun Capital Partners Inc., Cerberus Capital Management and Lubert-Adler and Klaff Partners.

About 1,200 full-time employees and 3,600 part-time workers will be laid off because of the closures, the company said.

Vanessa Castagna, executive chairwoman of Mervyns’ board of directors, said most of the laid-off employees would receive severance packages.

Castagna did not have information on what would happen to the stores after they closed.

Closing the unprofitable stores will free up more money for advertising, renovating other stores and scouting for new locations, Castagna said.

After the shake-up, Mervyns will be left with 193 stores in 10 states. The chain still hopes to open several new stores next year, Castagna said.

“This is about defining markets where we can be important,” she said. “We’re more competitive now than ever before.”

In Texas, Mervyns will close 28 of its 40 stores. The purge also will close 15 stores in Michigan, 10 in Colorado, three in Oklahoma, three in Louisiana and one each in Utah, Oregon and California.

Mervyns has long held some of the best retail real estate in California, Whalin said. The company can make itself more competitive with further investment in those properties, he said.

“They’ve got locations that Wal-Mart would die for,” Whalin said. “They’re in visible locations in communities where people spend money. There’s no reason this thing can’t be turned around.”