Discount retailer Syms Corp. and its subsidiary Filene's Basement have filed for bankruptcy protection and plan to close all 46 of their stores, including two in Manhattan.
Syms, based in Secaucus, N.J., acquired Filene's Basement out of bankruptcy protection in the spring of 2009 for $62.4 million, but struggled to turn the chain around. This is the third bankruptcy protection involving the Filene's Basement chain.
Syms and Filene's Basement stores are located mostly in the Eastern U.S. and employ about 2,450 people, the company said.
There are six Filene's Basement stores in the greater New York City area, including the Union Square and Upper West Side locations in Manhattan, and stores in Queens, Westchester and Long Island.
It's an indicator of the tough economic times as the retailer struggled to stay afloat amid tough competition and consumers who have curbed their spending.
Company CEO Marcy Syms said in statement the two discount chains were burdened by increasing competition from department stores offering the same brands at similar discounts and by a rise number of private label discounters. She also said there was less overstock for her company to buy as businesses continue to manage their inventory carefully during the tough economy.
Syms said the bankruptcy filings capped "a process that has taken place for several months."
The company announced in May that it was exploring strategic options, including a potential sale.
CEO Syms said the company's board decided that the Chapter 11 bankruptcy filing and liquidation was the best way to maximize value for those with a stake in the company such as suppliers that are owed money.
"Blame the economy, blame the world," said St. John's University business professor Anthony Michael Sabino. "I wouldn't call it expected, but I wouldn't call it surprising. "
The filing before the key holiday season could be a bad sign for retailers, Sabino said. He said even distressed retailers wait until after Christmas to file for bankruptcy, as the holiday season is their last chance to make some money. A filing in anticipation of the peak shopping season is a sign that consumers are still not spending and could mean bad news for other retailers.
Founder Sy Syms started the company in 1959, buying excess merchandise directly from manufacturers at a discount. Off-price retailers did well during the recession as consumers traded down and spent less money, but the category has been weaker in the recovery as some shoppers are returning to luxury goods.
Filene's Basement was started in 1909 in Boston by William Filene, initially as a place for the Filene's department store to sell excess merchandise. It may be best known for its "Running of the Brides" sales event, where eager brides-to-be would wait in line for hours for a chance at buying deeply discounted bridal gowns.
The liquidation is anticipated to run through about January.
The petitions were filed in the U.S. Bankruptcy Court for the District of Delaware.
Syms and Filene's will be jointly administered during the bankruptcy. The companies are seeking court approval to hire someone to handle the merchandise liquidation and conduct sales.
Shares of Syms rose $1.58, nearly 21 percent, to $9.25 in late afternoon trading. But trading volume was low, indicating a small segment of investors saw an opportunity to benefit from the company's in the long run as it emerges from bankruptcy.
Customers who recently bought merchandise at Filene's stores will be able to return items for the first 30 days of the going-out-of-business sales, which will start around mid-November, depending on the store, the company said. Gift cards that have already been issued will be honored for as long as the stores are open, but no new gift cards will be issued.
Many stores are expected to be open through the holidays.
