Merry-Go-Round eyes stores to be closed

May 26, 1994|By Jay Hancock | Jay Hancock,Sun Staff Writer

Merry-Go-Round Enterprises Inc. is starting to identify and shut down poorly performing stores but won't be finished with the process for several months, the company's president said yesterday.

The Joppa-based fashion retailer, which entered Chapter 11 bankruptcy proceedings in January, is negotiating with landlords on lease adjustments and so far has identified more than a dozen stores that it wants to close, said Michael Sullivan, Merry-Go-Round's president.

"By the end of August we'll have a real good handle" on lease revisions, but probably not before then, Mr. Sullivan said. "The slowest process is getting the documentation."

About 10 of the stores Merry-Go-Round has marked for closing now are in malls owned by Columbia-based Rouse Co. Included is a Club International store at Owings Mills Town Center in Baltimore County, which is scheduled to close next week.

Rouse Co. officials declined to comment on their relationship with Merry-Go-Round.

Because it is operating under bankruptcy court supervision, Merry-Go-Round can break its store leases with far less penalty than it otherwise would incur.

But retail analysts have criticized the company, whose sales continue to plunge, for not shutting its money-losing stores more quickly. Some analysts have speculated that Merry-Go-Round will have to close hundreds of its 1,400 teens' and young adults' apparel stores.

"They've still got a long way to go," said Peter Chapman, who runs Bankruptcy Creditors Service Inc., a Princeton, N.J., information service. "They're going to be closing a lot more." Mr. Chapman also is a Merry-Go-Round creditor, having purchased thousands of dollars' worth of receivables from vendors.

Mr. Sullivan declined to speculate on how many stores eventually will be closed.

"We're still a couple of months away from that," he said.

Business at Merry-Go-Round, which reported that its store-for-store sales fell 35 percent last month, "is still a struggle," Mr. Sullivan added.

Store inventories continue to be 30 or 35 percent lower than they were a year ago, he said, and they won't improve much until midsummer, when new seasonal lines arrive.

"It's difficult to play catch-up, and you don't want to buy inventory for the sake of buying inventory, because when you do that, you're buying a lot of future markdowns," he said.

The recent lease rejections are on top of the closing of 80 stores under normal lease expirations that Merry-Go-Round announced last year. As of April 30, approximately 50 of those stores, many operating under the Chess King name, had been closed, a company spokesman said.

Merry-Go-Round also operates stores under the names D.J.'s, Dejaiz, Toofers and Attivo.

The company has 171 landlords, according to bankruptcy filings. Among the biggest are firms associated with developer Edward J. DeBartolo, 94 stores; Rouse, 93 stores; JMB Property, 87 stores; and Melvin Simon & Associates, 79 stores.

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