Signaling more uncertainty at Merry-Go-Round Enterprises Inc., the Joppa-based fashion retailer is behind in payments for its spring merchandise, and Fidelity Investments, the company's largest creditor, has been meeting with the retailer lately to discuss their options, according to sources.
In addition, New York and California retailers have expressed an interest in buying a piece of the business and the Merry-Go-Round board of directors is expected to meet tomorrow -- the last day of a standstill before the company is to submit a plan of reorganization under Chapter 11 bankruptcy reorganization.
"Obviously, this is a decision on the fate of the company," said Mark A. Millman, president of Millman Search Group Inc., a leading retail consulting firm in Lutherville. "In my estimation, it appears it's going to go one of two ways: Either they're going to downsize to somewhere in the 300-store range or, after three years of continuing losses and decreasing comp-store sales, they'll wave the white flag and call it a day."
Merry-Go-Round is considering all options, according to an official involved in the bankruptcy proceedings. "Nothing is set in concrete," the official said. "The company needs liquidity, and by that I mean more cash. Without that liquidity, it's unclear what the future is. Liquidation is a possibility at this point, if they don't get new funding."
In the face of mounting industry speculation, the company declined yesterday to say whether it is considering another round of cutbacks or more draconian measures.
"Merry-Go-Round, as a policy, has never commented on market rumors," said spokesman Michael W. Kempner.
No one has been able to stop Merry-Go-Round's decline, including Richard P. Crystal, who was named in July the chain's fourth chief executive officer in two years. Some have blamed the plummet on unnecessary acquisitions. Others have cited the chain's inability to stay ahead of the fashion curve. Either way, sales in stores open at least a year, also known as comp-store sales, have not increased in more than three years. And the retailer, which boasted more than 1,200 stores in late 1994, has axed nearly 60 percent of them since then, leaving it with 536 stores.
"The industry is just hearing that the figures they're putting out are not particularly exciting, let's put it that way," said Michael Castle, a New York vendor of Merry-Go-Round. "It's just unfortunate. The garment retail industry is tough right now."