Merry-Go- Round has final ride Apparel retailer calls it quits, ending Maryland institution

'A member of the family'

Reorganization fails to prevent liquidation amid $200 million loss

February 03, 1996|By Alec Matthew Klein | Alec Matthew Klein,SUN STAFF

The wild ride at Merry-Go-Round Enterprises Inc. finally came to an end yesterday as the Maryland retail institution and former Wall Street darling said it will go out of business.

After a two-year struggle to emerge from bankruptcy protection, the chain of apparel stores lost about $200 million and had nowhere to turn to anymore: The retailer was spurned by lenders, vendors and, ultimately, shoppers.

Earlier this week, company officials had dismissed as "rumors" the prospect of liquidation reported in The Sun. But yesterday, after a delay in trading shares on the New York Stock Exchange, Merry-Go-Round announced that it had pulled the plug, closing the books on a company that began in 1968 with a single Atlanta boutique and rose to fashion stardom through the early 1990s with about 1,500 stores nationwide.

"It's like losing a member of the family; it's depressing," said co-founder Leonard "Boogie" Weinglass, reached at his home in Aspen, Colo. "Nothing, I guess, lasts forever."

Merry-Go-Round has been dying a slow death since filing for Chapter 11 bankruptcy reorganization in January 1994. A series of cutbacks meant to save the chain had left it with an estimated 536 stores, 6,000 store employees and 630 at its Joppa headquarters.

Even at a time when many retailers are going bankrupt, few have seen any like Merry-Go-Round's, which operated the chains of ++ Cignal, Dejaiz/Attivo, Chess King and the flagship Merry-Go-Round.

"I can't recall any retail chain in the United States in the last 15 to 20 years that's closed down 1,500 stores," said Mark A. Millman, president of Millman Search Group Inc., a retail consulting firm in Lutherville. "This has got to be one of the largest retail bankruptcies. I think it sends a message to all specialty retailers out there to be careful. No one would have ever thought that Merry-Go-Round would close up."

Merry-Go-Round will begin immediately the task of closing its stores, laying off employees and selling its headquarters, assets and leases.

Company executives could not be reached for comment yesterday, but sources said that employees, regardless of their years of service, will receive 60 days of pay. Stunned, many said they had expected more from a company they had helped build.

"You get feelings of betrayal," an employee said. "The big thing here all along's been 'family.' Then these guys sell you out -- that's the word everyone's using."

For many employees, rage was directed at Chief Executive Officer Richard P. Crystal, who spent the morning at headquarters protected by armed security guards, employees said. Mr. Crystal left the office shortly afterward and was not seen at headquarters the rest of the day.

In the case of liquidation, Mr. Crystal's contract provides him with about $2 million, according to the company's proxy statement. In addition, Mr. Crystal received a signing bonus worth an estimated $550,000 when he was hired in July as the retailer's fourth chief executive in two years.

"It's a travesty," an employee said.

Mr. Crystal could not be reached for comment, but in a prepared statement, the company said: "The decision to liquidate results from the inability to obtain adequate trade support and financing. This decision comes after several months of negotiations with the company's lenders and the examination of all other options."

Others, however, said that Merry-Go-Round's death spiral wasn't simple.

Mr. Weinglass, the company's co-founder, blamed it in part on the death of his business partner, Harold Goldsmith, in an airplane crash Feb. 13, 1991. "I don't really think we go into bankruptcy if it wasn't for that plane crash," he said. "I miss him."

As recently as 1991, Merry-Go-Round was a success as it zeroed in on fashion trends that sold. But then, the retailer banked heavily on the appeal of "hip-hop" clothing when the mood of adolescents was swinging toward the "grunge" look. The company was left with millions of dollars worth of merchandise that wouldn't sell, and a cash crisis was ignited.

Industry analysts said that Merry-Go-Round's decline was exacerbated in 1993 by the $46.2 million acquisition of Chess King, which focused on moderately priced young men's clothing.

Since then, negative numbers snowballed: The company's financial struggle has cost more than $11 million in fees charged by attorneys, consultants and others who were hired to lift the company out of Chapter 11 bankruptcy pro

tection. Moreover, sales in stores open at least a year, a benchmark measurement, have not registered a gain since December 1992. And the stock, trading as high as $21 in May 1991, ended at 12.5 cents.

Shareholders may not even get that much.

"I don't anticipate shareholders will get anything," said Stephen Selbst, attorney for Merry-Go-Round's equity committee in bankruptcy court. "Obviously, we're disappointed."

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.