Posted on 01/04/2002 12:53:47 PM PST by ABC123
NASHVILLE, Tenn. –– Service Merchandise Co. Inc., a 42-year-old retail chain that has operated under Chapter 11 bankruptcy protection since March 1999, announced Friday that it is going out of business.
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, with more than 200 stores in 32 states, reported losses of $180 million in 2000 and as of November had liabilities totaling $1.34 billion and assets of $1 billion.
"Given the extraordinarily poor retail economy this past year, especially for jewelry retailers, our company's prospects for successfully reorganizing were compromised to the point that we and our creditors consensually concluded that winding down the business and distributing the substantial value of our inventory, real estate and other assets to our creditors was in their best interest," chairman and chief executive Sam Cusano said.
"While we wish the final result could have been otherwise, our foremost goal throughout the cases has been to maximize value for our stakeholders and we are doing so through this course of action."
The company says it will fire about 500 of its 9,300 employees in January, with the others receiving staggered termination notices throughout out the year.
The company will begin going-out-of-business sales Jan. 19 at its stores, pending approval by the U.S. Bankruptcy Court for the Middle District of Tennessee.
Service Merchandise said it intends to file a plan of liquidation by Sept. 30, to provide for the distribution of the proceeds of its assets to creditors.
The company expects shareholders will not receive any distribution on their common stock in 2002.
Service Merchandise said employee severance and other benefit payments would be paid in accordance with orders from the bankruptcy court.
The company will also sell its real estate, including its headquarters in suburban Nashville, 70 fee-owned properties and 150 unexpired leaseholds.
During the 1970s, Service Merchandise was the nation's top catalog-showroom retailer. At its peak, the company achieved more than $4 billion in annual sales.
In recent years, however, sales at Service Merchandise drastically dropped. The company responded with a series of restructuring plans, starting in 1997.
While changing its retail format, a small group of creditors filed an involuntary petition under Chapter 11 on March 15, 1999, seeking court supervision of the company's restructuring. The company later filed a voluntary Chapter 11 petition and management improved relations with its vendors and stabilized its business.
Over the past two years, Service Merchandise reduced its holdings from about 350 stores to 216 and about 41,000 employees to 9,300.
In February 2000, Service Merchandise discontinued unprofitable product lines such as electronics, toys and sporting goods and focused on jewelry and home products. It also rented its stores to other businesses.
© 2002 The Associated Press
I always hated the weird way they made you pick up your stuff. That kind of store has vanished.
Always thought it was a strange name, for they hardly provided service (find it in the catalog yourself, fill out a form, stand in line and wait for them to find the item in the storeroom seemed to be their extent of service).
Next on my wish list is Radio Shack - everything they sell is crap, and they need your name and address to sell you a AAA battery.
Well, they sure drove me away with thier "service"! I'm delighted! Last time I was stupid enough to shop there, I predicted to one of the managers that they wouldn't last another year. They didn't. Nuyk nuyk nuyk.
Oh well, time to get ready for the clearance sales!
I know the type. My guess would be that you could have added "...no respectable company in Nashville or anywhere else, for that matter, would do business with them."
Companies that expect vendors / partners to lose money in order to do business with them are invariably going to come up on the losing end eventually. It's a competitive world out there, and smart companies craft deals that are true win-win arrangements. You screw your "partners", you run out of "partners" REAL quick.
That's why you should give them a bogus address like I do.
Actually, I really never had a problem with their stores near where I lived in Jacksonville, Chicago, and now in Memphis. I've actually had quite good experiences there.
Once I was ordering a pretty nice (for SM) bookshelf that was a clearance item, The only one available in Memphis was a floor model that had scratches everywhere on it.
Of course, it was priced about $100, while it's regular price was about $200-250, I believe.
I called around, and Paducah's store had a perfect model of the shelf. However, they had a policy that they didn't ship clearance merchandise between stores, but the Paducah manager went ahead and put it on a truck to Memphis, and they didn't even charge me a shipping charge for it. They charged me $100 and I had a bookshelf better than the scratched-up floor model they had.
I'd done Christmas shopping with them every Christmas since, and have always had good experiences with them every time.
So many companies and business professionals do not realize the importance of good vendor relations, because often they are as important as your customers in being successful in business.
On the con side, Amazon.com was definitely overvalued on the stock market. And they expanded into other areas too recklessly. Everybody knows them for books and music. When they started selling garden rakes and other gardening tools, what the hell were they thinking? I go to Home Depot for that stuff. Who's going to pay to have a step ladder shipped to their house?
If Amazon.com is unable to turn a profit, look for them to get snapped up somebody like Wal-Mart. They are definitely not going away however.
As for Service Merchandise, it never did have that "status symbol" name brand that is so important for jewelry. If you buy your girlfriend an engagement ring or watch there, you certainly aren't going to tell her where you bought it from. Might as well tell her you got it from a gumball machine at the penny arcade. It just has no "class appeal." As for electronics and consumer appliances, Circuit City and Wal-Mart destroyed them. I'm sure that's why those sections started disappearing.
Good riddance to a sorry company, IMHO.
Bigtime! What a crappy and horrible place. The employees are right off the street and are totally clueless about the overpriced goods that they carry. I only go there a few times when I need something simple like a phone jack or audio cables. Even then, I always seem to get an employee on his first day, and he's got to punch in a zillion things on the register to ring up the one item. When it comes time for the inevitable address information, I just feed him completely fictitious addresses like 6969 Skyline Drive and try not to laugh as he dutifully takes it down.
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