Mervyn’s Closing 26 Stores

SAN FRANCISCO (Reuters) – Regional U.S. department store chain Mervyn's LLC, which filed for bankruptcy protection last month, said on Thursday it would shut 26 of its 176 stores by November.

The privately held mid-tier retailer, which operates in Western states, cites problems in the housing market and tighter credit for causing customers to cut back on spending.

The store closures will be mostly occur in California and Texas, with some stores closing in Nevada and Arizona. The company is also shuttering its only store in Idaho.

“The stores identified for closure are under-performing operations and are being closed as part of Mervyn's reorganization to reduce expenses and reverse losses,” the company said in a statement.

Employees at a Mervyn's in Napa, California, were told on Tuesday that the store would be closing in mid-November, said Adriana Alvarez, a men's department supervisor.

“It was very surprising. We were hoping to stay open for business,” Alvarez said. “We have no information whatsoever. The company is trying to figure out what we're going to do.”

Chief Executive John Goodman said in a statement that remaining locations “continue to meet our performance objectives and we intend to focus our attention and resources on maintaining their future growth and success.”

A U.S. bankruptcy court last month approved a $465 million debtor-in-possession financing from a lender group led by Wachovia Capital Finance Corp to fund the chain's ongoing operations.

The company had originally said it would keep its stores open as it worked through restructuring.

Mervyn's, based in Hayward, California, was sold in 2004 by Target Corp (TGT.N: Quote, Profile, Research, Stock Buzz) to a private investment company formed by affiliates of Sun Capital Partners Inc, Cerberus Capital Management LP [CBS.UL] and Lubert-Andler and Klaff Partners LP.

Cerberus sold out of the chain in 2007, but kept a 15 percent interest in its real estate holdings.

Besides lower consumer spending stemming from the U.S. economic downturn, Mervyn's — selling clothing, accessories, footwear and home goods — has faced stiff competition from larger mid-tier chains like Kohl's Corp (KSS.N: Quote, Profile, Research, Stock Buzz). (Reporting by Alexandria Sage; Editing by Braden Reddall)