Why Did Mervyn's Department Stores Close?

Reasons that Mervyn's closed down its stores in 2008 include a decrease in consumer spending due to the economic recession and competitors that had more appeal to consumers. Another issue was that private equity firms bought the company in 2004, stripping its real estate assets.

Mervyn's announced that it filed for Chapter 11 bankruptcy protection on July 29, 2008. On October 17, 2008, the case converted to a Chapter 7 liquidation, after which all Mervyn's stores were liquidated.

Meryvn's opened in 1949. The company's focus was low to middle class shoppers. Dayton Hudson, the company that owned Target, bought Mervyn's in 1978. However, it focused on the Target brand and used profits from Mervyn's to build Target. Mervyn's store openings slowed, and existing stores weren't maintained well.

Mervyn's competitors, such as Walmart, Target, Kohl's and Ross Dress for Less, offered similar products but were more popular. According to one retail consultant, Mervyn's didn't differentiate itself from its competition, as the only unique element was its prices.

Cerberus Capital Management, Sun Capital Partners and Lubert-Adler were the three private equity firms that purchased Mervyn's in 2004 for $1.2 billion. These firms split the company into retail and real estate sections. They closed stores and distribution centers, selling property leases to outside companies. The firms kept the money from these sales, then rented the same properties at current market rates, which were much higher than the previous leases.