Ames Department Stores (Rocky Hill, Conn.), in Chapter 11 bankruptcy protection since August 2001, has announced it will liquidate its assets and close its 327 stores.
“This was a wrenching decision, but the right course to take,” said ceo Joseph Ettore. “Continued softness in sales, combined with tightening terms and slower shipments from our suppliers, have reduced our funds availability below critical levels.”
Ames, founded in 1958, had been forced to close many of its stores in the last decade in the face of increased competition from Wal-Mart, Target and Kmart. However, while other Northeast regional chains closed up shop — Caldor in 1999 and Bradlees in 2000 — Ames was considered a survivor. It had first emerged from bankruptcy protection in 1992, and in 2000 received an award for “turnaround of the decade” from an industry publication.
Ultimately though, in the view of analysts, Ames fell victim to over-expansion, mounting debt and competition. “Wal-Mart pole-vaulted past Ames in this last year,” Burt Flickinger III, a retail consultant at the Strategic Resource Group, told The New York Times. Wal-Mart converted nearly 40 liquidated Caldor and Bradlees sites, he said, to accelerate its expansion, which hastened Ames'collapse.
After 30 years of steady success, Ames encountered its first significant financial difficulties after it acquired the struggling Zayre chain of discount stores in 1988, giving it more than 700 stores to operate. Just two years later, Ames filed for bankruptcy protection, though it emerged 32 months later just as many of its regional competitors were going out of business.
In 1998, Ames bought 155 stores from the Hills Department store chain and benefited, for a time, from increased sales — some of that due to the demise of other regional retailers. In the end, though, analysts believe Ames'expansion was the main cause for its fall.
When Ames filed for protection in August 2001, it received $755 million from its creditors (which included GE Capital, part of the General Electric Co., and the KRC Acquisition Corp., a part of the Kimco Realty Corp.). Despite its efforts, Ames failed to significantly improve sales. In its first quarter, which ended in May, the company lost $43.56 million. Two months ago, Ames'creditors gave the company an additional $25 million.
“The competition for Ames got so big and so prevalent, it's just like they were in the wrong places,” said Marshal Cohen, co-president of NPDFashionworld. “They were in yesterday's locations. They had yesterday's merchandise. The competition became everybody else.”