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 from the California-based discount department store chain Mervyns that it is filing for bankruptcy protection under Chapter 11 is another bad economic wave crashing on California's shores.
The fact that Mervyns LLC is based in Hayward, and that 129 of its 177 stores are located in California, makes its troubles a canary in the coal mine of the state's economy. Economists see its fate as indicative of deeper troubles in the state.
The company will keep open all its stores for now, but said it had identified a limited number of unprofitable stores that should be closed. How many Mervyns stores might be 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 midlevel 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 Rancho Cucamonga, Upland, Chino, Fontana and Corona. We don't 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 blight, something cities have had a hard time fighting even with the tool of redevelopment.
Other retail chains that have recently sought bankruptcy protection include Linens 'n Things Inc., Shoe Pavilion Inc. and Steve & Barry's.
Already, the Inland Empire is Southern California's hardest-hit region in terms of retail vacancies, which rose to 7.2 percent in the second quarter of this year compared to 5.2 percent a year earlier.
The Mervyns bankruptcy is a bad omen for California malls. With the overall economy not expected to recover for at least a year, cities would struggle to convert empty retail box stores into tax- generating entities.
Stopping the creep of blight caused by vacant building shells left behind by bankrupt retailers could be our cities' next challenge.
(c) 2008 Inland Valley Daily Bulletin. Provided by ProQuest Information and Learning. All rights Reserved.
Story Source: Inland Valley Daily Bulletin
