The repercussions started by the subprime mortgage crisis and record number of foreclosures in Southern California, followed by high gasoline prices and the monthly toll of rising grocery bills, are now reaching the doors of local retailers.
Tuesday's announcement that the California-based discount department store chain Mervyns is filing for bankruptcy protection under Chapter 11 is another bad economic wave crashing on California's shores.
Locally, Mervyns has locations near Del Amo Fashion Center in Torrance and in the South Bay Galleria in Redondo Beach.
The fact that Mervyns LLC is based in Hayward, and that nearly all its stores are in California, makes its troubles a canary in the coal mine of the California economy. Economists see its fate as indicative of deeper troubles in the state. While the company will keep open its 175 stores - for now - the telltale signs are not good. Are some of these stores just a weak Christmas shopping season away from closing?
First, it is well known that as the economy falters, consumers will abandon mid-discount stores and look for bargains at regular department stores as well as flock to off-pricing stores. Second, when Kohl's stores started opening in California a few years ago, retail experts predicted Mervyns stores would feel the competitive pressure.
Whether this is more about oversaturation of the California mid- level retail market is up for debate. The bigger question is whether Mervyns will begin closing stores and, if so, whether they include any of those stores in coastal Los Angeles. We do not know, but city redevelopment managers should be on red alert.
Once a store moves out, it leaves a big hole in a mall or regional shopping center. This can translate into greater public fears that the economy continues to slow. Even with the tool of redevelopment, filling that economic void can be difficult.
Other retail chains that have recently sought bankruptcy protection include Sharper Image Inc., Linens 'n Things Inc. and Shoe Pavilion Inc..
The Mervyns bankruptcy is a bad omen for California malls. Some malls have gone from bustling retail centers to shells of their former selves. With the overall economy not expected to recover for at least a year, cities will likely struggle to convert empty retail box stores into tax-generating entities.
Stopping the creep of blight caused by vacancies left behind by bankrupt retailers will be a challenge for California cities. Are they ready?
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Story Source: Daily Breeze
