Jamesway Corp., the struggling discount department store operator based in Secaucus, N.J., filed for bankruptcy protection yesterday, succumbing to increasing competition that made many of its stores seem dowdy.
The company said it would continue to operate its 108 stores using a $75 million line of credit supplied by CIT Group/Business Credit. The company had $336 million in assets and $277 million in liabilities.
Jamesway's bankruptcy was yet another example of how difficult it is for a regional discounter to survive when giant national chains like Wal-Mart, Kmart and Target set up shop on its turf. In the year that ended Jan. 30, the company reported a $47 million loss, and an $8 million loss in the first quarter, which ended May 1.
The company rarely made significant investments to improve its stores, and its standing expenses for such things as salaries, utilities and housekeeping were at least 5 percent higher than its national competitors'. When its bigger rivals started opening stores nearby over the last 18 months, the company was ill-prepared.
Jamesway has six stores in Maryland. They are in Pasadena, Hanover, Mount Airy, Abingdon, Cambridge and Denton.
Over the past few months, there have been increasing signs that the company would have to file for protection under Chapter 11 of the federal bankruptcy code. Its lenders have waived loan requirements several times in the past year. A flurry of management changes has resulted in the installation of two top executives who have successfully weathered the bankruptcy process. And the company recently hired Weil, Gotshal & Manges, a law firm with a noted bankruptcy practice.
But it was suppliers, who have all but cut off the flow of goods to Jamesway by requiring cash on delivery or refusing to ship at all, that forced the issue. About $43 million of its $47 million loss last year was because vendors refused to ship the company goods in the fourth quarter. With the important back-to-school selling season approaching, Jamesway had to file for bankruptcy protection to receive merchandise.
"As far as the company's customers are concerned, we expect to be able to provide them with a complete selection of goods and services," Joseph R. Ettore, who was recently named president, chief executive and chief operating officer, said.
Mr. Ettore returned to Jamesway, where he worked from 1982 until 1989, from Stuarts Department Stores Inc., a similar retailer based in Franklin, Mass., that emerged from bankruptcy protection last September. Howard R. Curd, a longtime Jamesway board member who was appointed chairman earlier this month, also has experience managing companies in Chapter 11.
Analysts believe Mr. Ettore will use the same strategy he employed at Stuarts to resuscitate Jamesway. Stuarts, which has 20 stores in New England, got back on its feet by returning to its roots as a neighborhood discounter for low-income, working-class shoppers, while larger discount store operators were pursuing slightly more affluent customers.