Foreclosures Ensnare Mervyns Departmental Stores

August 11th, 2008 | Tags: Foreclosures

Foreclosures have now ensnared Mervyns departmental store chain to file for bankruptcy in Southland. It was the sub-prime crisis setting off the chain of foreclosures that started to snow ball into a major crisis fueled by high food and fuel prices. Now it is the turn of the local retailers to feel the foreclosure heat.

On 29th July the announcement came from the discount department chain of stores, Mervyns, based in California, that it was filing for the Chapter 11 protection of bankruptcy. This is interpreted as just another bad sign of the deep malaise in the economy. California is one of the worst foreclosure hit regions.

Most of the Mervyn stores are in California. It has become the proverbial canary testing the poison in the mine. By doing so it has died! Economy experts say that there are worse foreclosure days ahead. For now the company the keeping open its 175 shops but the indications are not good. Foreclosures seem to have sapped its roots.

It is a known fact that when the economy stumbles the buyers will avoid mid-discount shops and look around in regular discount stores and also flock to outlets that offer off-prices. Another reason for Mervyn’s woes is the competition from the Kohl’s chain of shops few years previously. There is an ongoing debate the mid level market in California has crossed saturation point.

When a chain of shops exit a big hole is left behind in the mall or local shopping complex. It is a curse for the city that cannot be readily fought with redevelopment tools. There are other retail chains that have also recently sought bankruptcy protection – Linens’n Things, Shoe Pavilion as well as Steve & Barry. Amongst the empty eating joints are Red Brick Pizza, Macaroni Grill, Juice It Up and Ohana’s Hawaiian Grill.

Two other cities trying to cope with foreclosure related shutdowns are Baldwin Park and Temple City. Albertson supermarkets in Baldwin Park and Alpha Beta in Temple City have downed shutters. From there the rot is spreading. Storefronts are empty and service shops have deteriorated in work standards.

What has happened to Mervyns does not bode well for the malls in California. The hustle and bustle in malls is fast vanishing. This depression translates into less money for tax kitties for the cities. How they will face up to this foreclosure-generated challenge is something to be seen.