Mervyns files for bankruptcy

NEW YORK — Department store chain Mervyns LLC filed for bankruptcy protection on Tuesday, the latest in a series of merchants stumbling in the harsh retail environment and another blow to the nation's struggling malls.

The company, which had been languishing for several years, said that all of its 175 stores will remain open and business will continue as it reorganizes. Privately held Mervyns operates mainly in California, and has seen its sales drop further as the state is among the hardest hit by the real estate slump.

"Mervyns needs to reorganize its finances and operations due to the state of the economy and difficult operating environment for our industry," Chief Executive John Goodman said in a statement.

The chain, based in Hayward, Calif., has been shuttering stores and leaving states such as Oregon and Washington since 2005, after a consortium of private equity players, including Sun Capital Partners Inc., bought Mervyns from Target Corp. for $1.2 billion.

Mervyns, along with some affiliates, filed for Chapter 11 protection from its creditors in U.S. bankruptcy court for the District of Delaware. According to court documents, Mervyns listed liabilities and assets of $500 million to a $1 billion each, with Levi Strauss & Co. as its largest unsecured creditor.

Company spokesman James Golden said it was premature to discuss layoffs or store closings.

Tuesday's announcement follows a slew of bankruptcy filings from retailers in recent months and marks the latest challenge to the nation's malls, which are seeing increasing vacancy rates. Earlier this month, Steve & Barry's LLC, once a growing force in low-priced fashion, filed for Chapter 11. The list also includes home furnishings chain Linen 'n Things Inc., catalog retailer Lillian Vernon Corp. and specialty retailer Sharper Image Corp.

On Tuesday, the Bennigan's and Steak & Ale restaurants owned by Metromedia Restaurant Group, which operates in many mall locations, filed for Chapter 7 bankruptcy protection. Meanwhile regional department store chain Boscov's Inc., based in Reading, Pa., which operates about 50 stores, has seen vendors hold off shipping to the merchant as it heads into the important back-to-school period.

Mervyns' filing didn't come as a surprise to the industry, as a growing number of vendors were delaying shipments to the company's stores and key lenders that provide finance and credit to apparel makers stopped approving orders in recent weeks.