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Times changed, Mervyns didn't, founder says

Merv Morris of Atherton expresses 'great sadness' for employees

Mervyns founder Merv Morris of Atherton expressed "great sadness for the several thousand employees" impacted by the anticipated closure of Mervyns chain of department stores.

In a telephone interview Monday with the Palo Alto Weekly, Mr. Morris also expressed gratitude "for all the good" that came with the stores -- known from the time they were founded for their charitable giving to organizations benefiting children and families in communities where they were located.

Problems that led to the long retrenchment and eventual demise of the chain "started many years ago" and are complex, Mr. Morris said.

When Mr. Morris retired in 1979, he sold the chain to Dayton-Hudson, which in turn sold the stores to a private equity group and concentrated its attention on its lower-end Target stores.

Mr. Morris said there was a lack of understanding of how to run a higher-end or traditional department store during changing times.

"It was a combination of things," Mr. Morris said of the chain's demise. "Economic times changed and, frankly, Mervyns didn't change."

"It did endure for 59 years, which is pretty good for a business these days," Mr. Morris said. He and his wife, Roslyn, have resided in Atherton since the mid-1950s.

Hayward-based Mervyns announced on Oct. 17 that it will shut down its remaining stores following the December holidays. Mervyns had filed for bankruptcy protection in July and announced plans to close 26 stores.

Now its other 149 stores will be closed.

The company has stores in seven states, including one on Showers Drive in Mountain View.

At the time of the bankruptcy filing, the chain reportedly had about 18,000 employees, although estimates have ranged down to 16,000 current employees. There was no immediate estimate of how many local employees will be affected.

Mervyns will bring in an outside liquidator to sell its remain stock, according to the Web site, MarketWatch.com.

"We are disappointed with this outcome, but the company's declining liquidity position and the extremely challenging retail environment, together with the fact that we have exhausted all other possibilities, requires that we take this action," John Goodman, Mervyns' chief executive officer, said in a statement.

"Although we took a number of steps to improve our financial performance, we were unable to return the company to profitability. We appreciate the hard work and loyalty of our store associates, whose continued assistance we will rely upon during our going out of business sales," Mr. Goodman said.

"Consumers know Mervyns for our style, quality and great value and we are confident that the deep discounts available through going out of business sales will drive significant traffic in our stores," Mr. Goodman said.

A major complication in the end was a lawsuit filed in early September relating to Mervyns Chapter 11 bankruptcy reorganization in July.

The lawsuit, filed in Chicago, alleges that the chain's real estate assets (locations and below-market-rate leases) were used partly to service the debt from a $1.2 billion leveraged buyout of the chain in 2004.

The Chicago Tribune reported Sept. 5 that the suit alleges that Mervyns real estate was transferred to newly formed companies that imposed a nearly 90 percent hike in rents, which contributed to the bankruptcy filing. The Tribune reported that in the fiscal year ending Feb. 2 Mervyns lost $64 million on $2.5 billion in sales.

"By separating Mervyns real estate assets from its retail operations, the private-equity players made sure that any residual value or upside in the real estate assets were reserved for themselves and not for Mervyns," the suit alleges. It was filed by Mervyns Holdings LLC and Mervyns LLC against its former private-equity owners and others.

"The 2004 transaction is a transaction that ultimately led to Mervyns bankruptcy and is a fraudulent transfer that cannot withstand scrutiny," the suit alleges, according to the Tribune report.

Those named in the lawsuit include Mervyns Klaff Equity LLC and Lubert-Adler and Klaff Partners LP, a joint venture of Chicago-based Klaff Realty LP and Philadelphia-based Lubert-Adler Management Inc.

"Filing a suit of this nature requires a pretty vivid imagination and a lawyer who is having a quiet week," Hersch Klaff told the Tribune, the paper reported. Klaff is spearheading a bid for the Chicago Cubs, currently owned by the Tribune Company along with Wrigley Field.

Target Corp., a previous owner of the Mervyns chain, is also named as a defendant. A spokeswoman said Target "emphatically disagrees" with the lawsuit's claims and said the sale was an arms-length transaction with a competitive-bidding process, the Tribune reported.

-- Jay Thorwaldson and Don Kazak

Comments

Posted by Ex Mervyns Manager, a resident of another community
on Oct 21, 2008 at 3:26 pm

As a previous manager at a Mervyn's store, I cannot begin to tell you how horribly run the company was. All I did was manual labor. They run through managers there like candy. They treat their employees like scum and work us to death. Mervyn's lied about what the manager job duties were when they hired me. Soon I found myself working 6-8 hours without a break stocking shelves and ringing customers all day. It was rediculous. I'm glad they're going down. I feel sorry for all the employees there who will lose their jobs. If only the company had not run itself into the ground, maybe they could have endured these economic times.

The bottom line is this: You cannot deceive your employees time and time again and expect to get away with it. Mervyn's got sued in 2001 for treating their managers like slave labor. They never changed. Without a happy management work force, a company can't function.


Posted by Ex Mervyns Manager, a resident of Portola Valley: Westridge
on Oct 21, 2008 at 3:26 pm

As a previous manager at a Mervyn's store, I cannot begin to tell you how horribly run the company was. All I did was manual labor. They run through managers there like candy. They treat their employees like scum and work us to death. Mervyn's lied about what the manager job duties were when they hired me. Soon I found myself working 6-8 hours without a break stocking shelves and ringing customers all day. It was rediculous. I'm glad they're going down. I feel sorry for all the employees there who will lose their jobs. If only the company had not run itself into the ground, maybe they could have endured these economic times.

The bottom line is this: You cannot deceive your employees time and time again and expect to get away with it. Mervyn's got sued in 2001 for treating their managers like slave labor. They never changed. Without a happy management work force, a company can't function.


Posted by Evelyn, a resident of Woodside: Woodside Hills
on Oct 21, 2008 at 3:31 pm

I could see that Mervyn's was really falling apart every time I'd go shopping there. There never was enough employees to help me. They didn't treat the customers very well and I had nothing but problems with my credit card from there.


Posted by jamie, a resident of Atherton: Lloyden Park
on Oct 21, 2008 at 3:34 pm

I was getting of getting hassled for a credit card everytime I bought something!


Posted by Former employee, a resident of another community
on Jun 15, 2009 at 9:12 pm

I was an employee of Mervyns for 17 years and am beyond mortified what happened. What happened should never have happened. I was in management and have no complaints about the way that I was treated. I was in Human Resources and have seen many managers come and go. Yes I agree with the above ex manager that there was a lot to do but what he didn't tell you was that if you properly trained your supervisors and staff you yourself would not have to being doing all of the work. It sounds like he was not cut out for hard work. Yes at times the work load was tremendous but it just made you more marketable for other work. I have found that the training that we received made you a much more well rounded employee. My heart goes out to all those people who tried to get us to a point that we were not sinking. It is easy for a person from the outside to speculate but it was a true fight. Customers would come in and say how sad they were but my question is where were those people when we needed to have them come in and support us in the form of sales.


Posted by Angela k., a resident of another community
on Oct 6, 2013 at 11:29 am

I loved Mervyns! That was the only dept. Store I shopped...I was very sad to hear it was closing. I'm very disappointed in having to shop at the remaining stores. The only one that even comes close is kholes and that one falls short of Mervyns. I truly wish they would re open!


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