Modesto's Linens 'n Things store will close in the next few months as the parent company reorganizes after filing for bankruptcy Friday.
About 25 employees will be affected by the closure of the 33,000-square-foot store on Sisk Road in the Sisk Road Center.
Linens 'n Things, which sells bedding and home furnishings, opened in Modesto in 2001.
A Tracy store that has 19 employees also will close within the next few months, but the Linens 'n Things in Merced will remain open.
New Jersey-based Linens Holding Co., the stores' parent company, filed for Chapter 11 bankruptcy and announced the closure of 120 of its more than 500 stores nationwide.
Officials at Modesto's store referred a call to store spokesman Richard Tauberman, who said Linens 'n Things was affected by the downturn in the housing market, though that didn't directly correlate to which stores will be closed.
Modesto's real estate market has seen some of the most severe price drops and rises in foreclosures in the nation.
"With the individual stores, the company looked at cost savings and efficiencies and what stores were each contributing to the company as a whole," Tauberman said.
There were no signs at the Modesto store Friday that indicated it would close.
Under bankruptcy law, stores do not have to honor gift cards after the store files for bankruptcy protection. A Modesto Linens 'n Things employee said Friday that cards still would be honored at that store.
Linens 'n Things shoppers in Modesto were surprised to hear that their supplier of household items and furniture would soon be gone.
"I use the bathroom hand towels from here a lot," said Tina Shatswell, 42, of Oakdale. "I'll miss it. They don't have a lot of specialty stuff in this town."
Shatswell said she shops at the store about twice a month. Another shopper said she came only once every other month, but that was every time she visited family in Modesto.
"They always have good deals here," said Chris Phillips, 56, of Weed. She said she often bought kitchen items, towels and sheets at the Modesto store.
The bankruptcy filing is expected to help rival home-furnishings retailer Bed, Bath & Beyond Inc.
"The number of stores Linens 'n Things is closing is equivalent to almost 15 percent of Bed, Bath & Beyond's core store base, so there is significant opportunity to gain market share," said William Blair & Co. analyst John C. Murphy.
In a note to investors Friday, Deutsche Bank analyst Mike Baker said 50 percent of Bed, Bath & Beyond stores overlap with a Linens 'n Things store within three miles.
In Modesto, a Bed, Bath & Beyond store is less than a mile away to the south from the Linens 'n Things store.
Another Sisk Road departure
Linens 'n Things is the third major retailer to close within the past few years on that stretch of Sisk Road, north of Vintage Faire Mall and south of Pelandale Avenue.
In late 2005, The Good Guys electronics store closed in the neighboring Vintage Commons shopping center. CompUSA closed in Vintage Commons last year.
Pet retailer PetSmart recently disclosed plans to open a store in the former CompUSA space this year.
Linens 'n Things' downsizing will create more vacancies at malls, but it could provide some mall operators the opportunity to adjust to the current economy, real estate experts said.
"Although the magnitude of this bankruptcy filing cannot be disputed, recent bankruptcy filings and store closings create new opportunities for other retailers to acquire space in the nation's shopping malls," said Dan Ansell, a partner at Greenberg Traurig LLP and chairman of its real estate operations division. "It also creates opportunities for shopping centers to redefine their tenant mix and thus adapt to current economic trends."
Some experts said that with retail sales in a significant slide, other large stores could follow Linens 'n Things, The Sharper Image and Levitz into bankruptcy in the next few months.
A Modesto Levitz store closed this year.
The Associated Press contributed to this report.
Bee staff writer Ben van der Meer can be reached at email@example.com or 578-2331.