Mervyn’s was a Western mid-tier department chain that sold affordable apparel and home goods to the American middle class for almost six decades, and at the end of December 2008 it finished liquidating every store. Mervin G. Morris opened the first one in San Lorenzo, California, on July 29, 1949, and built the format that defined the chain: a clean, value-priced department store pitched a notch below the upscale floors and a notch above the discounters, with the seasonal “Big Brand Sale” circulars and the “open, open, open” jingle that a generation of Californians can still hum. By its physical high-water mark at the end of 1996 it ran roughly 300 stores across 16 states, mostly in the West, and it had spent the previous two decades as a quiet, dependable subsidiary of the company that owned Target.
What killed Mervyn’s was not a shift in shopping habits, though those were real enough. It was a financial structure. Target Corporation, having decided the chain no longer fit its strategy, sold Mervyn’s in 2004 to a consortium of Cerberus Capital Management, Sun Capital Partners, and the real-estate firm Lubert-Adler. The buyers promptly did the thing that makes this a case study rather than a footnote: they split the company in two, separating the valuable real estate into one entity and the store operations into another. The operating company, which had owned much of its property outright, now had to pay rent to occupy buildings it had effectively just sold — and the rent, by the creditors’ later account, was set high enough to help finance the buyout itself.
A store chain that walks into a recession carrying a brand-new rent bill it never used to owe has a short runway. Mervyn’s filed for Chapter 11 on July 29, 2008 — its fifty-ninth birthday to the day — and when no rescue materialized the case converted to a Chapter 7 liquidation that October. Going-out-of-business sales ran through the holidays; the last stores went dark at the end of the year. Roughly 18,000 employees lost their jobs, and the suppliers left holding unpaid invoices went to court alleging the buyout had been engineered to fail. In 2012 the financiers and several banks paid Mervyn’s creditors $166 million to settle, admitting no wrongdoing. The chain that had owned its own real estate was, in the end, liquidated for not being able to afford it.
Filene’s Basement was the original American bargain hunter’s cathedral, and on November 2, 2011 its owner, Syms Corp, filed for bankruptcy and announced it would liquidate every store. Edward Filene opened the “Automatic Bargain Basement” beneath his family’s Boston department store in 1908 — it took customers the following year — as a place to clear overstock and odd lots from the floors above. What began as a clearance pit became an institution: it invented the “automatic markdown,” ran the chaotic annual “Running of the Brides,” and trained generations of New Englanders to dig through unsorted bins for a buried Armani at a fraction of its tag. By the time it died it ran on the order of three dozen stores; the liquidation closed all of them, the last on December 29, 2011, and put roughly 2,450 Syms and Filene’s Basement employees out of work.
The genuinely strange part is the order of deaths. The Filene’s department store — the grand parent, founded by William Filene in 1881, with the flagship at Boston’s Downtown Crossing — was converted to the Macy’s nameplate in September 2006 when Federated absorbed the May Department Stores Company. The Basement, spun off and sold to Value City (later Retail Ventures) in 2000, simply kept going, outliving the prestige store it was built to serve by five years. That it then failed too is the second irony: a chain built on the proposition that there is always a market for cheap brand-name goods was killed, in part, by an excess of competitors making the same promise.
By 2011 the Basement belonged to Syms, the no-frills off-price chain run by Marcy Syms, whose father Sy had built it on the slogan “an educated consumer is our best customer.” Syms had bought Filene’s Basement out of an earlier bankruptcy in 2009 for $62.4 million and never made it pay. Caught between the debt that purchase implied and a recovering economy that sent shoppers back to full-price department stores and toward better-run off-price giants like T.J. Maxx and Nordstrom Rack, the combined company chose liquidation over reorganization. Marcy Syms blamed “increased competition from department stores that are offering the same brands at similar discounts.” The pioneer of off-price had been overtaken by the format it pioneered.
What was lost was less a balance sheet than a ritual: the store you entered without knowing what you would find, where the price fell the longer a garment hung, where a wedding party could strip a rack of gowns in ninety seconds. It was retail as treasure hunt, and the treasure hunt did not survive the spreadsheet.