San Lorenzo Express News


Ode to Mervyn's

DECEMBER 2, 2008

By Clint Reilly

The death of a business rarely evokes emotion these days. “Good riddance” is a frequent reaction. “Don’t let the door hit your fanny on the way out,” is another popular refrain.

But when Mervyn’s -– a Bay Area retail institution -– declared bankruptcy in July and announced a liquidation sale on October 15, many were saddened.

Of course, the company has been hurt by the same stormy economic picture that all retailers are now facing. But Mervyn’s is also an example of how unscrupulous financial engineers loot good companies and abandon them to be picked over by buzzards as they roll over and die.

When I was a young boy in the 1950s, my family lived in Washington Manor -– a small enclave of postwar homes near San Lorenzo’s Arroyo High School.

I can still remember the day my mother took me to Mervyn’s in the San Lorenzo Village Shopping Center to purchase my first pair of black-and-white Converse high tops. It was the first of many trips to the friendly local department store during my childhood.

Mervin Morris began in 1949 with this single store in San Lorenzo and built it into a chain he ultimately sold in 1977 to Dayton Hudson, (now the Target Corporation, one of the nation’s iconic retail brands).

Opening branches from Hayward to Daly City, Walnut Creek to San Jose, and from Vallejo to Marin, Morris developed the prototype of the modern department store chain serving working class families.

Decades later, my wife Janet worked for Mervyn’s before leaving after the birth of our second daughter. She created a program called the “Community Closet,” which outfitted women on welfare with free work-appropriate clothing.

The Community Closet was a 72-foot big-rig truck that had been converted into a miniature showroom. For six years, this Mervyn’s on wheels moved from city to city giving away thousands of beautiful new ensembles.

At its height the Mervyn’s chain included 300 stores in 16 states with 33,000 employees and annual sales of $4 billion. The company stayed true to its Bay Area roots by hiring Joe Montana and Kristi Yamaguchi -– local celebrities with national appeal -– as spokespeople.

In 2004 Target Corporation sold Mervyn’s to a private equity partnership. That was the beginning of the end. A November 22, 2008 Wall Street Journal story chronicles the downward spiral:

“Cerberus Capital Management LP and a group of private equity investors bought Mervyn’s from Target Corporation in 2004 for $1.25 billion. The investor group, which structured the buyout as two separate purchases – one for retail operations and one for the chains valuable real estate holdings, has earned more than 250 million in profits…The Mervyn’s store chain, by contrast, is in liquidation…”

By stripping out Mervyn’s valuable real estate, selling premium parcels and then leasing its own buildings back to the store at exorbitant rates, Cerberus guaranteed a big profit for itself and bankruptcy for Mervyn’s.

Thousands of long-term employees have been left without jobs or severance benefits. Even vacation pay has been withheld by the bankruptcy court.

Asked by KGO television how he felt about Mervyn’s liquidation, the company’s 88-year-old founder didn’t hide his disappointment. “Have you ever had anyone punch you really hard in the stomach?” Morris asked. “That’s the way I felt.”

Thirty-five-year Mervyn’s veteran Charlene Glafke summed up the sentiments of the 18,000 employees who lost their jobs. “I gave my life to Mervyn’s,” she told the Wall Street Journal. “It’s heartbreaking.” Mervyn’s death highlights the predatory practices of many vulture investors. Mervyn’s has filed a lawsuit accusing its private equity owners of looting the chain which, of course, the financiers loudly deny. As the final sale of Mervyn’s last merchandise winds down, a proud company and thousands of dedicated workers join their customers in honoring a store that outfitted generations of Bay Area families. But we will also remember the hard times and financial perfidy that bankrupted it.

See also: Mervyn's (Wikipedia article)


About Clint Reilly: Reilly’s initial foray into political consulting at age 23 developed into a successful 26-year career in politics, during which he founded the nation’s largest political consulting firm of its time. He managed winning campaigns for a wide variety of high-profile candidates, including current House Speaker Nancy Pelosi, Senators Dianne Feinstein and Barbara Boxer, and former California State Senate President Pro Tem Dave Roberti. Recently Reilly has led the battle to preserve media competition in the Bay Area via two landmark antitrust lawsuits (Reilly v. Hearst and Reilly v. MediaNews, et. al.). Reilly was chairman of the board of Catholic Charities/CYO from 2002 to 2006 and is active in a variety of civic and charitable causes. This article first appeared on www.clintreilly.com.