Be on the look out for going-out-of-business sales at a Filene's Basement near you. The Massachusetts-based discount retailer announced Wednesday morning that it has filed for bankruptcy -- for the third time -- and plans to close its 21 discount stores in the next few months.
The Chapter 11 filing was announced Wednesday morning by parent company Syms Corp (SYMS), which is also filing for Chapter 11. Syms, another discount retailer, acquired Filene's Basement for $62.4 million in June 2009 after the store had declared its second bankruptcy and closed 11 stores.
Competition from other large department stores, a proliferation of private discounters and "the worst economic downturn in our lifetimes" were all too much for the 102-year-old Filene's Basement, making it impossible for Syms to turn the business around, according to the press release.
During the past year, Filene's Basement attempted to close and liquidate under-performing stores in order to avoid bankruptcy, according to documents filed in Delaware Bankruptcy Court. But "business continued to deteriorate," wrote Gary Binkoski, Syms' CFO, in his court statement.
Syms is now planning a "wind-down" of its and Filene's Basement's retail businesses in order to "to capitalize on the upcoming holiday shopping season" and the "Black Friday shopping opportunity," according to court documents. It plans to liquidate inventories through January 2012.
Before the Bankruptcy
"There was no energy, no newness, no freshness in Filene's and Syms," says Mike Tesler, a partner at Boston-based retail consultancy firm Retail Concepts. "Retail is all about change."
The increased buying power of discounter-giants like TJ Maxx and the rise of private brands with their own outlet stores made it difficult for Filene's Basement to access merchandise in recent years, says Tesler, who has consulted in the past both for Filene's Basement and separately owned Filene's (acquired by Macy's in 2005).
But the nail in the coffin for Filene's Basement was losing its flagship store. In 2007, the downtown Boston location, which made up 25% of company sales and was one of the city's prime tourist attractions, closed temporarily to make way for a new skyscraper development. When the real-estate market crashed, the development stalled, leaving Filene's Basement without a flagship up until today. In 2009, the company filed for bankruptcy.
"The heart of the organization was ripped out," Tesler says. "It would be like Macy's losing their 34th street store."
For much of the 20th century, Filene's Basement was a Boston institution. It was first opened in 1909 in the basement of Filene's department store, and became famous for marking down items on an automatic schedule based on how long they had been in the store.
As for the 2,465 employees of Filene's Basement and Syms stores, distribution centers and corporate office, Syms has requested the Delaware court to allow it to continue to pay wages and benefits during the wind-down process, as well as meet retirement and other pension obligations post-liquidation.