Connecticut Post Online

Service Merchandise to close

January 05, 2002

By DANA AMBROSINI
dambrosini@ctpost.com

Service Merchandise is going out of service for good.

Battered by the recession and competition, the 42-year-old retail chain said Friday it had decided to convert from Chapter 11 bankruptcy reorganization to liquidation. The going-out-of-business sale will commence Jan. 19, the company said.

Service Merchandise Co. Inc. has 200 stores in 32 states, including five in Connecticut. Its locations in the state include Route 34 in Derby and Route 1 in Orange.

The imminent closing came as no surprise to former employee Josh Dellinger, who witnessed the shrinkage of customers at the Derby store.

"Nobody goes there," said the Derby teen-ager, who worked at the store for three months during the 2000 Christmas season.

Business wasn't even that good then, Dellinger said, adding that nearby competitors Kmart and Wal-Mart didn't help.

The company entered Chapter 11, which is supposed to give firms breathing space to reorganize, in March 1999.

Company executives said the weak economy and slow sales after the Sept. 11 terrorist attacks hurt the company's 2001 results and prevented it from completing its planned business reorganization and emergence from bankruptcy.

Service Merchandise reported losses of $180 million in 2000 and, as of November, had liabilities totaling $1.34 billion and assets of $1 billion.

The chain canceled all vendor orders and will slash about 500 of its 1,005 corporate, distribution and sales employees throughout the rest of the month.

Service Merchandise's 8,300 full- and part-time store employees will continue at the stores as they liquidate.

Employee severance packages and benefits will be paid out in accordance with prior Bankruptcy Court orders.

The company expects shareholders will not receive any distribution on their common stock in 2002. The company is headquartered in Nashville, Tenn.

The Associated Press contributed to this report.