Service Merchandise Co. (Nashville, Tenn.) received court approval to commence going-out-of-business sales and to liquidate the inventory in more than 200 stores and its warehouses. The court also authorized the catalog showroom retailer, which declared earlier this month that it was discontinuing operations, to enter into an agency agreement with a joint venture composed of SB Capital Group, LLC, Gordon Brothers Retail Partners LLC and The Ozer Group LLC to perform the store-closing sales and related activities.
It appears to be one of the largest going-out-of-business sales in U.S. history. The company says that nearly $1 billion in fine jewelry and housewares will be liquidated
“We believe the agreement . . . presents the best means to maximize the value of the company's merchandise for the benefit of its creditors, and limit administrative costs,” said Service Merchandise chairman and ceo Sam Cusano. The joint venture agency agreement was reached through a competitive bidding and auction process that concluded early this week. The store closing sales began on Saturday, Jan. 19, 2002.
In addition to the going-out-of-business sales, the wind-down will include the disposition of Service Merchandise's real estate portfolio, consisting of 70 fee-owned properties and 150 unexpired leases. The court today approved an extension of the deadline to reject or assume unexpired leases for 19 properties until Sept. 30, 2002 with the balance of the company's leaseholds having deadlines tied to the confirmation and effectiveness of the plan of liquidation.
Service Merchandise first filed for Chapter 11 bankruptcy protection in March 1999. It announced on Jan. 4, 2002, that reorganization efforts had failed and that it would wind down ongoing business operations. Although its business plan performance exceeded expectations in the prior two years, the company said, disappointing 2001 financial results “primarily attributable to the combined effects of the events of September 11, the resulting loss of consumer confidence and the soft economy” generally weakened its financial and liquidity position and precluded it from completing its planned business reorganization and emergence from Chapter 11. At the end, Service Merchandise was operating 218 stores in 32 states.
“The evolution of retail is fascinating,” said Mike Frieze, ceo of Gordon Brothers Group. “Thirty years ago, Service Merchandise innovated the retail industry by becoming the nation's top catalog showroom retailer. While in recent years Service Merchandise revitalized its retail format and moved from a showroom to a self-service retailer, big-box retailers like Best-Buy and Wal-Mart continue to dominate the retail landscape. Having said this, I think people who haven't been in a Service Merchandise store lately would be surprised to see how appealing their current offerings are.”
“The closing of Service Merchandise represents another example of the changing retail marketplace and pressures our current economy is facing,” said David Bernstein, principal of SB Capital Group. “To see a retailer close after 41 years in business is very unfortunate. However, it will present unprecedented opportunities for consumers to purchase top-quality jewelry and products for the home at liquidation prices.”