Mervyns

Mervyns LLC

Former type	Private
Industry	Retail
Fate	Bankruptcy ; Former buildings rebranded as Kohl's or Forever 21
Founded	July 29, 1949 in San Lorenzo, California (as department store); August 1, 2010 (as online retailer)
Founder(s)	Mervin G. Morris
Defunct	December 31, 2008 (as department store)
Headquarters	Hayward, California, United States
Area served	Southwestern United States
Key people	John Goodman (CEO, 2008)
Services	Sale of clothing, footwear, bedding, furniture, jewelry, beauty products, electronics, and housewares.
Owner(s)	Formerly Sun Capital Partners (2004-2008), Target Corporation (1978-2004) Currently: The Morris Family
Website	http://www.mervyns.com/

Mervyns was an American middle scale department store chain based in Hayward, California. It carried national brands of clothing, footwear, bedding, furniture, jewelry, beauty products, electronics, and housewares. Many of the company's stores were in shopping malls. Based on 2005 revenue, Mervyns was the eighty-third largest retailer in the United States.^[1]

In December 2006, Mervyns had 189 stores in 10 states.^[2] Mervyns closed all of their locations in Oregon and Washington by February 2007, reducing its store count to 177 stores in 7 states. The company said it closed underperforming locations that did not contribute to the company's success. In July 2008, Mervyns announced it filed for Chapter 11 bankruptcy protection.^[3] Three months later (October 17, 2008), the company announced that it would liquidate its assets through a Chapter 7 filing.^[4][5] On October 31, 2008, Mervyn's began the process of liquidating its entire inventory in an effort to repay its creditors, and by December 31, 2008, all remaining locations were closed. Then, on February 11, 2009, the Morris family announced that they had bought back intellectual property as well as naming rights to the company, their hope being to relaunch as an internet-based enterprise.^[6]

History

Beginnings

Mervin G. Morris founded the first Mervyns store in San Lorenzo, California on July 29, 1949. The store was supposed to be named Mervin's, but the architect suggested that a spelling with a "Y" instead of an "I" would be more visually appealing. Mervyn's was located in the midst of San Lorenzo Village, a planned residential community nestled between the cities of Hayward and San Leandro, composed of two- and three-bedroom tract homes built between 1944 and the 1950s. Mervyn's carved a niche for itself by having a relatively no-frills shopping environment that reduced overhead, enabling the store to price merchandise lower than competing department stores in the area. Mervyn's also offered basics, such as jeans, t-shirts, underwear and similar garments, as well as household linens, that were deemed "seconds" by the manufacturers, with their flaws minor and undetectable by most, at significantly reduced prices. During the 1950s and 1960s, this made Mervyn's popular with the young families comprising the majority of San Lorenzo's population. This marketing strategy was later abandoned before Mervyn's expanded beyond its original single location, but Mervyn's remained popular as a lower-priced alternative to national department store chains.

The second Mervyn's store opened about 15 miles (24 km) south as an anchor tenant of the Fremont Hub Shopping Center, one of two regional malls in Fremont, California in 1962.

Final version of Mervyns' original logo that was used from early 1962 until late 1989

Mervyns' logo used from 1989 to 2008.

Target years, expansion

In mid-1975, Mervyn's operated stores in the following locations, all in California: Alameda, Antioch, Campbell, Citrus Heights, Cupertino, Daly City, Dublin, Fremont, Merced, Millbrae, Modesto, Mountain View, Napa, Oakland, Petaluma, Sacramento-Point West and Florin, Salinas, East San Jose and South San Jose, San Lorenzo, San Pablo, Vallejo and Visalia.^[7] In October 1975, the chain expanded to southern California, opening stores in Fullerton and Huntington Beach.

In 1978, by which time the company had grown to a chain of more than 50 stores in three states,^[8] Mervyn's was acquired by the Dayton Hudson Corporation (now Target Corporation). Mervyns kept its separate identity as a Dayton Hudson subsidiary.

In 1986, Mervyn's made major expansions into the southeastern United States, with Atlanta being the site of a particularly strong expansion campaign. Mervyns, which had not previously had a retail presence in Georgia, competed for mall space with J.C. Penney and received top anchor spots at several area malls, such as the Town Center Mall, Shannon Mall, North DeKalb Mall, Gwinnett Place Mall and North Point Mall.

The foray into Atlanta was a failure, and Mervyns withdrew from Atlanta by 1997.^[9] Its former locations were acquired by other department stores.

Mervyn's also ventured into Florida during this time. This also ended in failure, with Mervyn's closing all of its Florida stores in 1998.

Mervyn's California

Mervyn's California logo that was used from 1996 until early 2001.

Remains of a Mervyn's California logo in Capitola, California.

From 1996 to 2001, the stores were rebranded as Mervyn's California, in an effort to identify with its West Coast roots. A media campaign was launched to publicize the rebranding, with TV commercials and catalogs featuring former San Francisco 49ers' quarterback Joe Montana.

The rebranding had little effect on the company's revenues, and the "California" was dropped from the name in 2001, reverting to the original name. There were also issues with owners of Mervyn's stores outside California with the branding.

Presidents during the Mervyn's California period included Paul Sauser, Bart Butzer and Diane Neal.

The size and layout is close replica of a Kohl's store with the exception of having cash registers within each department (a few stores had central checkouts like Kohl's) The average store had 80-130 employees. There was a Store Team Leader (1), Executive Team Leader (2-4), Department Leaders (7-10), benefited team members (full time employees not part of the leadership team), and part time employees. All employees had credit goals (selling the Mervyn's credit card) part time employees were expected 1 per every 8 hours, and the leadership team was expected 1 per every 40 hours.

Sale from Target

In July 2004, Target Corporation sold Mervyn's to a group of investors that included private investment firm and turnaround specialist Sun Capital Partners, Inc, Cerberus Capital Management, and real estate investment company Lubert-Adler Management Inc. Rick Leto was named the new president and chief merchandising officer in January 2005. On the store level they saw few changes except to "de-target" the entire building. All bullseye logos got covered with Mervyn's stickers. The labor intensive markdown process was changed to a direct knock off of Kohl's process. The common Target language got a makeover as well as the job titles were changed to a much more traditional retail lingo; Store team leaders (STL) became Store Manager, Executive Team Leaders (ETL) became Assistant Manager, Department Leaders (DL) became Department Managers and then changes again to Department Supervisors.

In June 2006, Mervyns implemented the MARS (Mervyns Advanced Retail Systems) systems, which replaced the old Target-based cash register systems. The new program streamlined cash register functions, in addition to integrating store merchandise distribution, logistics, and personnel management functions. The majority of these system came from JDA Software Inc. in Scottsdale, Arizona. JDA was sucessful in converting all current "Target" systems" to Mervyns systems in under 12 months.

Store closures prior to bankruptcy

A typical 1980s Mervyn's exterior storefront, this one being in Boise, Idaho.

One of the first acts of the new owners was to cease store operations in certain states, with stores in Minnesota being the first to close.^[10] Locations in Minnesota were much larger than the normal store of about 80,000 sq ft (7,400 m²); a few had restaurants. The size of these stores, and their proximity to Target Corporation, made the new owners think them unnecessary.

Further store closures were announced in September 2005, as Mervyn's announced that it would begin to focus exclusively on its Western and Southwestern U.S. markets, and that 62 stores in the Midwest and South would be closed. Prior to the formal announcement, store employees saw weekly shipments shrink and delivery schedules went from 3 days per week to one. Mervyn's stores in Michigan, Oklahoma, and Louisiana were the first to close, in February 2006. 28 stores in Texas, as well as one store in Salt Lake City, Utah, were also closed.^[11]

In 2007, an additional 18 stores were closed. Of the stores closed, 17 were in Oregon and Washington, and one in Grand Junction, Colorado, which was the last remaining Mervyns store in that state.^[12]

Bankruptcy

Signs of financial distress and possible bankruptcy surfaced on July 21, 2008, when the Associated Press reported that Mervyn's had stopped updating its financial status^[13] and that the department store's vendors ceased shipping some products, hurting the store's back-to-school season sales efforts. In addition, financing requests were denied by lenders. This raised the possibility of the company having to file for Chapter 11 bankruptcy, or going out of business altogether.^[14] The company made no official comments at the time, but on July 29, 2008, Mervyn's announced that it had filed for Chapter 11 bankruptcy protection.^[3] The chapter 11 case was converted to chapter 7 liquidation on October 17, 2008. At the time of this announcement 3 stores had just held grand openings only a few months prior to being told they would soon close.

Lawsuit with private equity investors

When Sun Capital Partners, Cerberus Capital Management, and Lubert-Adler bought Mervyns, the new owners changed the structure of the company, dividing it into separate real estate and retail businesses. In essence, the Mervyns real estate arm charged retailer Mervyns huge rents for its department store space.

In September 2008, Mervyns sued the private equity firms involved in the leveraged buyout of the chain, alleging that the deal had stripped the retailer of its real estate assets, forcing it into bankruptcy. Mervyns said in the suit that Cerberus Capital Management and its partners had used the increased rent to finance the buyout.^[15]

Store closures due to bankruptcy

Although the company initially vowed to keep all locations open during the reorganization efforts, the company announced in August 2008 the closure of 26 underperforming stores.^[16] The company hired an outside company to assist in the liquidation of assets from the stores affected.^[16] The closures also marked a complete retreat by Mervyns from the Idaho market, whose sole store in Boise was one of the ones marked for closure. In Texas, a complete retreat was slated from San Antonio, where all three remaining stores were marked for closure,^[17] in addition to the closure of the sole stores in Lubbock, Midland, and Odessa.

After these closures, Mervyns was left with about 150 stores: 16 in Arizona, 121 in California, three each in Nevada and New Mexico, seven in Texas and six in Utah.^[16][18]

Mervyn's bankruptcy prompted the company to liquidate remaining store merchandise through dramatic clearance sales in late 2008.

As of May 2010 Kohl's had acquired more than 80 of the shuttered Mervyn's locations. With the downturn in the restate market, Kohl's has taken over these locations sometimes at half the rent Mervyn's was paying.

Liquidation

Although the company attempted to undergo reorganization under bankruptcy, Mervyn's ultimately succumbed to the ongoing US recession and announced that it would liquidate its assets through Chapter 7 of the United States Bankruptcy Code,^[19] stating it "is the best course of action to maximize value for all of the company’s creditors, employees and other stakeholders."^[20] The bankruptcy called for the company to liquidate and close its remaining stores.^[4] The announcement came amidst an offer by fashion retailer Forever 21 to purchase 149 of the remaining Mervyns stores for an undisclosed amount. The original negotiations failed, and Mervyn's liquidated all 149 stores under the bankruptcy action. Several months later, department store retailer Kohl's and Forever 21 prevailed in a joint bid at bankruptcy auction to take over the leases of 46 Mervyns stores; Kohl's has assumed 31 stores, while Forever 21 has assumed 15 stores.^[21] Kohls has indicated it might take over more former Mervyns locations in the future.

Mervyns former headquarters, Hayward, not in use (2011)

Future

In a KPIX-TV interview on February 11, 2009, Mervin Morris' son Jeff revealed that the family had bought the Mervyns name and intellectual property, including the company's customer list^[6] as part of an effort to relaunch the company. Morris did not say when the website would launch or how much it would cost, only that decisions will be up to his sons.

On February 18, 2009, the Mervyns website (Mervyns.com) was replaced with a single-page site that allows visitors to sign-up for a mailing list to receive updates about the future of Mervyns.

For a brief period in July 2011, Mervyns.com redirected to a Yesmail Enterprise login page. The site has since been restored to the Mervyns mailing list sign-up page, as described above.

References

1. ^ Top 100 Retailers: The Nation's Retail Power Players (PDF), Stores, July 2006.
2. ^ Mervyns.com Store Locator
3. ^ ^{a b} Maestri, Nicole (July 29, 2008). "Mervyns says files for Chapter 11 bankruptcy". Reuters. http://www.reuters.com/article/pressReleasesMolt/idUSWNAB327320080729. Retrieved July 29, 2008. 
4. ^ ^{a b} "Mervyns Stores Plan To Liquidate, Cease Operations". KPIX-TV (CBS 5). October 17, 2008. http://cbs5.com/business/mervyns.chapter.7.2.842505.html. Retrieved 2008-10-22. ^{[dead link]}
5. ^ Sale Motion filed with the United States Bankruptcy Court, District of Delaware
6. ^ ^{a b} "Morris Family Retakes Mervyn's Name, May Make Comeback". 2009-02-11. http://cbs5.com/investigates/mervyns.name.comeback.2.933168.html. 
7. ^ Advertisement, Los Angeles Times (Orange County edition), Sept. 7, 1975, p.OC16.
8. ^ Emily Thornton, How Private Equity Strangled Mervyns, Business Week, November 26, 2008
9. ^ Parisian to open in Mervyns spot at North Point, Atlanta Business Chronicle, April 4, 1997
10. ^ "Target selling Marshall Field's, closing Minnesota Mervyns stores". Houston Business Journal. June 10, 2004. http://www.bizjournals.com/houston/stories/2004/06/07/daily32.html. Retrieved October 9, 2006. 
11. ^ Zaragoza, Sandra (September 7, 2005). "Mervyns to close 62 stores, exit Houston market". Houston Business Journal. http://www.bizjournals.com/houston/stories/2005/09/05/daily23.html. Retrieved October 9, 2006. 
12. ^ "Mervyns prepares to close GJ store". The Daily Sentinel. December 27, 2007. http://www.gjsentinel.com/news/content/news/stories/2007/12/27/122807_1a_Mervyns.html. Retrieved December 30, 2007. ^{[dead link]}
13. ^ "Mervyns face financial squeeze". The Associated Press (via The Arizona Republic). July 21, 2008. http://www.azcentral.com/business/articles/2008/07/21/20080721biz-mervynswoes21-ON.html. Retrieved July 21, 2008. 
14. ^ "Mervyn's may be forced to file for Chapter 11: report". CBS MarketWatch. July 21, 2008. http://www.marketwatch.com/news/story/story.aspx?guid=%7B87ADA08B%2D332A%2D48A1%2DB162%2D9AAFBB707DF6%7D&siteid=rss. Retrieved July 21, 2008. 
15. ^ "Mervyns says files for Chapter 11 bankruptcy". San Diego Union Tribune. October 8, 2008. http://www.signonsandiego.com/news/business/20081018-9999-1b18mervyns.html. Retrieved October 8, 2008. 
16. ^ ^{a b c} "Mervyns announces select store closure as part of reorganization". Mervyns, LLC. 2008-08-13. http://www.mervyns.com/aboutMervyns.aspx?id=1828. Retrieved 2008-08-18. ^{[dead link]}
17. ^ "Mervyn's department stores exiting San Antonio". Bizjournals.com. 2008-08-14. http://www.bizjournals.com/sanantonio/stories/2008/08/11/daily33.html. Retrieved 2008-08-28. 
18. ^ "Mervyns Company Backgrounder". Mervyns, LLC. 2008-02-01. Archived from the original on 2008-08-02. http://web.archive.org/web/20080802202324/http://www.mervyns.com/aboutMervyns.aspx?id=1352. Retrieved 2008-08-28. 
19. ^ Sale Motion filed with the US Bankruptcy Court, District of Delaware
20. ^ 10/30/2008 Mervyns Press Release (www.mervyns.com/AboutDetail.aspx?id=1958)/
21. ^ Kohl's and Forever 21 Take Over 46 Mervyns (http://www.costar.com/News/Article.aspx?id=62F086D74194C67F19A6EC48345DE87E)

External links

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