Published reports last week indicated that Mervyn’s, which operates about 175 stores in seven states, primarily California, may be forced to file for Chapter 11 bankruptcy protection as some of its vendors have halted shipments to the company and key lenders have pulled financing.

 

The Wall Street Journal last week said that Mervyn’s lender CIT Group Inc. stopped providing financing to the chain in the spring, causing vendors to get nervous and many began withholding shipments.
Mervyn’s executives in recent weeks have been trying to persuade vendors to ship merchandise to the retailer for the crucial back-to-school season to avoid a bankruptcy filing.


Retailer observers noted that Mervyn’s turnaround effort has been particularly hurt by the real-estate slide in California and Arizona. Mervyn’s also tried to cater to Hispanic consumers, many of whom have been hurt by the downturn and job losses in the mortgage and home-building industries.


Meanwhile, Boscov’s, a Reading, Pa.-based department-store chain, is also scrambling to keep itself afloat as a drop in consumer spending across the Mid-Atlantic region has hammered its sales and drained its cash, according to reports late last week in the New York Post. Unnamed sources told The Post that about half of Boscov’s major suppliers have halted merchandise shipments for lack of payment.

 

In addition, big commercial lenders including CIT, GMAC and Milberg have stopped guaranteeing deliveries to Boscov’s stores. The mid-priced department store operator, which operates about 50 stores, is looking for alternatives to a bankruptcy filing, including the closing of up to 10 underperforming stores.