Ames Liquidation Renews Concerns About Regional Chains

Regional chain store retailing received another blow recently with the announcement that Ames Department Stores is going out of business.

The Rocky Hill, Conn.-based discount chain said in mid-August that it would close all 327 of its locations after struggling under Chapter 11 bankruptcy protection since August 2001—its second bankruptcy filing in a decade.

The move to wind down the business came after the creditors’ committee sought bankruptcy court permission to liquidate the company’s entire inventory and warehouse distribution centers.

Ames is the latest in a long line of large regional operators—including Bradlees, Caldor, Montgomery Ward, and Service Merchandise—that shut down in recent years after realizing they could no longer compete.

The Nassi Group, Gordon Brothers Retail Partners, and SB Capital Group are the liquidators handling Ames’s going-out-of-business sales, which are expected to take 10 weeks (through late October). All stores will remain open during that time, with most of Ames’s 21,500 store employees and distribution center personnel expected to continue working until the stores close for good.

Following the GOB sales, Ames is expected to put the majority of its real estate on the auction block. Wal-Mart, Target, and Kohl’s are likely to be among the front-runners in the bidding.

“This was a wrenching decision, but the right course to take,” said Joseph R. Ettore, Ames chairman and chief executive officer, in a statement. “Continued softness in sales combined with tightening terms and slower shipments from our suppliers have reduced our funds availability below critical levels.”

Founded in 1958, Ames was one of the largest regional retailers in the country, with sales of approximately $2.7 billion. The company also was one of the nation’s largest volume jewelry retailers, with close to $200 million in total jewelry sales, according to industry estimates.

Analysts and other experts attribute Ames’s demise to factors similar to those that shut down other regional players: the ongoing sluggish economy; heightened competition in core Northeast markets from bigger, stronger rivals; and overexpansion in the 1990s, which sapped cash flow when sales went south.