LOS ANGELES — The Mervyns department store chain said on Wednesday that it would close about 25 percent of its stores by February 2006 to streamline operations and focus on its high-growth West and Southwest markets.
San Francisco-based Mervyns, which Target Corp. sold for $1.2 billion last year to a group of investors led by Cerberus Capital Management, said it would cut 62 under-performing stores and trim 4,800 jobs — 1,200 full-time and 3,600 part-time.
Mervyns executives said that the company is completely pulling out of Michigan and Oklahoma, and is closing stores in Colorado, Louisiana and Texas and will also shut units in Southern California, Oregon and Utah as well as two distribution centers in Texas and Utah.
The chain intends to increase its investment in existing stores in California, Washington, Oregon, Idaho, Nevada, Utah, Arizona, New Mexico, Colorado and Texas. Mervyns operates 255 locations in 13 states. The stores average about 60,000 square feet and are located primarily in regional malls, community shopping centers and freestanding locations.
“It’s not unusual for stores that have been struggling to maintain profitability to eventually take a look at stores and operations and rationalize what’s there,” said Richard Giss, a partner in the consumer business practice of Deloitte in Los Angeles. “There’s such a premium put on growth that often the desire to grow takes on more weight than the desire to move cautiously.”
The retailer said that its efforts to revive the company include refurbishing existing stores and launching new units next year, as well as a new prototype.
“This is all about restructuring to enable our future success,” Vanessa Castagna, executive chairwoman of Mervyns’ board, said in an interview. “We’ve done a lot of not just soul-searching … but talking to people and looking at the shape of the business, and the reality is that the market has been ignored for years and a lot of markets are not profitable and successful.”
Castagna, who characterized the changes as part of a turnaround effort, said the company in the last six months revamped the product and merchandising and marketing strategies and has seen positive comp-store increases for the past three consecutive months. The company reported a 4 percent increase in August.
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“This has not happened in years,” Castagna said of the same-store sales boosts. “But we’ve gotten much more promotional and customers are responding with their pocketbooks.”