Regional department store chain Boscov's Inc. filed yesterday for Chapter 11 bankruptcy protection and said it would close 10 stores, including anchors in three of the Baltimore area's largest malls, as the company suffers from slumping sales amid the housing and credit crunch.
Boscov's, based in Reading, Pa., will begin liquidation sales immediately and will close those "underperforming stores" when the entire inventory is sold, which officials estimate will take one to two months. About 1,400 employees, including about 400 in the Baltimore area, will lose their jobs.
Officials from the 49-store chain said in court filings and interviews that the collapse in the housing market, skyrocketing energy prices and higher food costs cut the discretionary spending of its shoppers and in turn put pressure on the company's finances. The decline also emerged after the 87-year-old privately held company began an aggressive expansion strategy into new markets two years ago.
"There was no way that we could have ever anticipated these tough economic times," said Maralyn Lakin, Boscov's senior vice president of marketing and public relations. "So many people were affected with their mortgages and high gas and food prices. This is beyond what anybody expected."
The bankruptcy comes after Federated Department Stores bought May Co. for $12 billion in 2005, freeing up valuable mall space that made way for the biggest expansion in Boscov's history. The Federated transaction resulted in the closing of several Hecht's stores in the Baltimore market. That opened the door for new Boscov's at White Marsh, Owings Mills and Marley Station malls in 2006. Each of those stores, which Lakin said were not making money, will close under this reorganization.
"It takes time to develop a customer base in new markets as customers come to understand who and what we are," Lakin said. "The stores had not turned a profit. Given the economic situation, we don't have the cash flow to keep supporting markets that aren't profitable."
Boscov's joins a list of retailers that have declared bankruptcy in recent months as consumers spend less, including Bombay Co., The Sharper Image, Linens & Things and Lillian Vernon. The California-based department store chain Mervyns LLC filed for bankruptcy protection last week as sales dropped because of the weak real estate market.
