Retail Closure and Unemployment

Mervyns, a clothing retailer servicing mainly California, has begun the trek of liquidation. This will probably have a relatively minor impact to their competitors from the liquidation mark-downs since their size is not national and there's many left standing in this field. They had 176 stores remaining after beginning the trimming process recently.

A difficult time for their employees for sure. They will lose their jobs into a weak retail environment that has other layoffs and seasonal hiring curbs. Based on this article when they closed 26 stores they had 3,000 laid off workers. While this isn't an exact science we will have to use an estimate since a fairly quick search failed to determine current headcount. Extrapolated up, that makes roughly 20,000 plus HQ. Recent layoffs at the HQ from 1,000 of 250 estimated leaves 750 HQ employees. Around 21,000 will be unemployed (slightly over the high range of the estimate noted here) and many will have difficult replacing their job and income in this environment. That will be a handicap on their ability to service existing debt, take on new debt, or spend freely as if there was disposable income.

This will leave several big box footprints bare on the commercial real estate market. With many prior closures and an abundance of seasonal halloween stores already occupying and Christmas to come. The owner of these strip malls and malls will have a hard time collecting monthly lease cashflow from these.

Mervyns headquarters was in Hayward, CA.

Retail consolidation and more consumers in trouble

Linens N' Things is due to close all remaining stores and liquidate under Chapter 11 bankruptcy. Seemingly this will strengthen others servicing the same consumers in the mid to long term due to less competition. In the short term the liquidation process of discounting comparable merchandise should divert some business from their healthy brethren.

Another side effect of this is that they employ many people (15,000 employees according to this article). With other business on restricted temporary holiday staffing, they may not be able to collect much more than an unemployment check. This will not allow them to service debt in the worst case, add on debt in most cases, nor practice discretionary spending. This will impact unemployment and lower consumer spending.

Their headquarters was in New Jersey and they seemed to provide a decent counter-balance to Bed, Bath, and Beyond. Since retail is due to hurt in the foreseeable future, I wouldn't personally expect BB&B to discontinue their coupon promotional activities. Don't use my word on this since I did not contact BB&B to ask this question.