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Mervyns will close remaining 149 stores

The Mervyns department store chain, battered by financial troubles in recent years, announced Friday that it is going out of business.

The Hayward-based chain will close after Christmas-season liquidation sales at its 149 stores. They include locations in Modesto, Turlock, Merced, Manteca and Sonora.

"Although we took a number of steps to improve our financial performance, we were unable to return the company to profitability," Chief Executive Officer John Goodman said in a news release.

Mervyns filed for bankruptcy protection in July in an effort to work through its debts, but executives said they found no way out.

"It's not really surprising considering the way the economy is going," said customer Emily Renteria of Modesto outside the McHenry Avenue store Friday afternoon.

Goodman cited the company's "declining liquidity position and the extremely challenging retail environment."

The number of lost jobs in the Northern San Joaquin Valley was not available Friday, but it likely is in the hundreds.

The impact will be mainly on entry-level workers, said Jeff Rowe, director of the Stanislaus Alliance Worknet, which assists job seekers.

"It ends up being really tough on teenagers who need some income to support themselves and their families, people who are working for the first time and people who are trying to get off public assistance," he said.

Discount chains such as Wal-Mart and Kmart could gain sales with the Mervyns' closure, he said.

Mervyns, founded in 1949, thrived for years by targeting families and using innovations such as revolving credit.

In recent years, it has been squeezed between high-end and discount retailers. Since 2005, its has been shuttering stores and leaving states such as Oregon and Washington.

The Modesto store opened in 1972, when McHenry was the city's retail hub. Downtown was declining, and Vintage Faire Mall had yet to open.

Friday afternoon, the store's racks and shelves were full of merchandise, much of it marked down. An employee referred questions about the closure to the corporate office.

Customer Denise Sandoval of Modesto said she will miss the store.

"Especially for my boys," she said, "because it's always hard to find nice clothes for boys."

The closure likely will reduce walk-in traffic at the Curls, Tips & Toes salon, employee Autumn Jenkins said. It is one of three businesses sharing a parking lot with the department store.

Mervyns officials said liquidation sales during the holiday season were the best way to maximize value for the company's creditors. Other options, including the sale of the company, were exhausted.

"We are confident that the deep discounts available through going-out-of-business sales will drive significant traffic in our stores," Goodman said.

Last month, Mervyns sued the private equity firms involved in the leveraged buyout of the chain from Target, alleging that the 2004 deal stripped the retailer of its real estate assets, forcing it into bankruptcy.

The lawsuit claimed that the investment group, which included Cerberus Capital Management and Sun Capital Management, acquired Mervyns real estate and leased it back to the com- pany at substantially increased rates. Mervyns said the increased rent was used to finance the buyout.

Bee staff writer John Holland can be reached at jholland@modbee.com or 578-2385.

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