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Monday, Mar 2, 2009 10:07 PM UTC

The unnatural death of Mervyn’s

Did this West Coast discount retailer really have to die? (And is it really dead?)

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Topics: U.S. Economy, Brand Graveyard, Business,

Did Mervyn’s die, or was it murdered?

In 1949 Mervin Morris opened a department store in the unglamorous California town of San Lorenzo. He built Mervyn’s into a West Coast institution, where generations of lower-middle-class families bought work pants and school clothes, before selling it to Dayton Hudson for $300 million in 1977. And now that Mervyn’s has ceased to be, the 88-year-old Morris says the private-equity firms who wound up owning the chain looted it for cash — “raped” it, in his words — and left it to die.

Mervyn’s, which at its peak had spread from the Bay Area across the country and totaled 300 stores in 16 states, was the kind of retailer more likely to be found in a strip mall than a galleria, more East Bay than Marin or Palo Alto. Morris was proud of his loyal blue-collar clientele, and claimed to have been the first retailer to offer revolving credit.

But after he sold out in 1977, he began to feel that Dayton Hudson, the precursor to Target, was neglecting his stores. Mervyn’s expanded, and then contracted back to the West Coast. In 2003, Kohl’s entered the California market, a director competitor in the bargain clothing business.

Target sold out to Cerberus Capital Management and Sun Capital Partners for $1.25 billion in 2004, and the private equity firms quickly proved more interested in Mervyn’s real estate than its retail business. They made a healthy profit by selling the real estate and then leasing the buildings back to Mervyn’s.

Mervyn’s was hit hard by the recession, which arrived early and in full force in California. Anecdotally, there were signs that Latino customers, who had become an important constituency, were not spending on work clothes at the chain because the construction business had faltered. Mervyn’s had shrunk to 149 stores by the time it declared bankruptcy in July 2008. It held liquidation sales through the Christmas holidays. There were still 18,000 workers at Mervyn’s when it went under; many of them did not receive severance, were stiffed on vacation pay, which has been withheld by the bankruptcy court, and are having trouble collecting on their 401Ks.

Store brands like High Sierra, Hillard and Hanson were snapped up at a bankruptcy sale. But the name of the store may live on. More than three decades after their father left the business, Mervyn’s three sons have bought back the trademark and the customer list. They plan to relaunch the chain as an online store. “I think there will be a Mervyn’s name on the horizon somewhere there,” says Mervin Morris, “just how and when and what the magnitude will be I am not sure. That is going to depend on my boys.” Kohl’s, meanwhile, has sucked up 31 of the old Mervyn’s locations in California.

Mark Schone is Salon's executive news editor. More Mark Schone.

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