Bankrupt discount retailer Ames to close its remaining 327 stores

21,500 workers will lose jobs, including 1,255 in Md.

August 15, 2002|By Meredith Cohn | Meredith Cohn,SUN STAFF

Unable to turn business around in the past year, bankrupt Ames Department Stores Inc. announced yesterday that it plans to close all of its 327 stores - including 20 in Maryland - and put 21,500 people out of work.

The move, subject to approval in U.S. Bankruptcy Court, would bring an end to the Rocky Hill, Conn.-based regional discount retailer, founded in 1958 but now unable to compete with industry giants such as Wal-Mart Stores Inc. and Target Corp.

The chain intends to conduct "going out of business" sales for the next 10 weeks.

Ames has gone through four rounds of store closings in the past year, shuttering 125 stores, including those in Baltimore, Timonium, Essex and Salisbury.

The 20 remaining stores in Maryland have 1,255 full- and part-time workers. There are four Ames stores in Baltimore County and one each in Bel Air, Laurel and Pasadena.

Most Ames stores are in the Northeast, Mid-Atlantic and Midwest.

Kurt Barnard, a consultant and president of Barnard's Retail Trend Report in Upper Montclair, N.J., said other discount retailers have been doing well in a generally lackluster retail environment.

"Consumers are realizing today that it's chic to save and fashionable to hunt for bargains," he said. "Ames is a small regional discount department store chain, and it was not able to stand up to the pricing and market power of the national giants like Wal-Mart, Kmart, Target, Family Dollar."

Barnard said he had not expected Ames to emerge from bankruptcy and survive in such a competitive environment.

"It's sad, but not surprising," he said. "They've been though a couple of rounds of store closings. They just weren't able to sell enough merchandise."

Ames filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Manhattan, N.Y., on Aug. 20, 2001, when it had annual sales of about $4 billion and 452 stores. At the time, the company listed $2 billion in assets and $1.56 billion in liabilities.

It had previously filed for Chapter 11 bankruptcy protection in 1990, but the company was able to emerge two years later.

Company officials had also tried to rein in costs and restructure operations in an effort to emerge from bankruptcy again, but the retailer faced stiff competition and incurred heavy debt with its 1999 purchase of the 155-store Hills Stores Co. chain.

Ames reported that sales in the past year have been approximately $2.7 billion.

"This was a wrenching decision, but the right course to take," Ames Chairman and CEO Joseph R. Ettore said in a statement. "Continued softness in sales, combined with tightening terms and slower shipments from our suppliers, have reduced our funds availability below critical levels.

"To ensure the greatest possible value for our various shareholders -including our associates - Ames management has resolved to pursue an orderly liquidation of the company now, rather than continue along a path that would further diminish our resources and lead Ames to default on its lending agreements."

Bankruptcy Court Judge Robert E. Gerber is expected to approve the request today, said Tony Herrling, an Ames spokesman.

Ames said it plans to designate a liquidator to sell off merchandise beginning Sunday. The company intends to honor gift cards and will take returns through Aug. 25 on merchandise purchased before the liquidation.

Store employees are expected to keep their jobs through much of the 10-week liquidation sales, according to the company. Distribution center jobs will be eliminated when all merchandise reaches the stores. Most positions at the company's headquarters, about 420, were cut yesterday.

The company set up a hot line for employees, 1-888-745-7755, and planned to update its Web site, www.amesstores.com, with customer and employee information.

Ames will seek buyers for its stores and distribution facilities, possibly other retailers.

Shares, traded over-the-counter, closed yesterday at a half-cent, down 5.5 cents.

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