More than a century after pioneering mail-order catalogs by selling dry goods from a livery-stable loft, Montgomery Ward & Co. is seeking refuge in bankruptcy court to save its billion-dollar business.
The nation's largest privately owned retailer, which now operates 400 stores in 43 states, filed Monday for court protection from its creditors as it attempts to reorganize its finances.Struggling to emerge from under a $1.4 billion mountain of debt, Ward is the biggest retailer to seek bankruptcy since the famed Macy's chain filed for protection five years ago.
"It will allow us to concentrate on implementing our merchandising strategy and emerge as a healthier and more contemporary retailer," chief executive Roger Goddu said.
Ward has seen its customer base dwindle amid competition from huge companies like Sears and Wal-Mart and specialty sellers like the Circuit City and Best Buy electronics chains. It now focuses on appliances, furniture and jewelry.
The venerable retailer, which had sales of $5.8 billion last year, has said it expects to lose $250 million in the first half of this fiscal year.
Ward said it filed in federal bankruptcy court in Delaware after a small group of lenders blocked a restructuring plan that most of its lenders had agreed to.
The filing under Chapter 11 of the federal bankruptcy code allows Ward to stay in business while creating a financial recovery plan under court supervision without the threat of lawsuits from lenders.
Price-slashing signs at the company's stores - touting summer apparel reduced by as much as 65 percent - gave ample evidence of Ward's financial struggle.
Richard Bond, emerging from a Chicago store Monday night, said he was not surprised Ward sought bankruptcy.
"I don't shop here very often, and when I do come I remember why I don't," he said. "There really isn't much selection anymore. I came to buy a radio alarm clock, and all I could find was an alarm clock - no radio."
But in Spokane, Wash., where Ward has had a store since 1927, shopper Gerry Brass said he was shocked by the news.
"I didn't see anything like it coming," said Brass, an Edmonton, Alberta, resident making a south-of-the-border shopping trip with his wife, Edith. "It seemed real business-as-usual here tonight."
To keep things going that way, GE Capital Services, which owns 57 percent of Ward, promised to provide a $1 billion line of credit to make sure its stores remain fully stocked.
"We are convinced that Montgomery Ward's filing . . . is the best way for the company to conclude a quick and effective restructuring," GE Capital executive vice president Ed Stewart said in a statement. Late last month, the company fired 400 headquarters employees in an attempt to stave off bankruptcy. Goddu, a former Toys R Us and Target executive hired in December to shepherd the turnaround, said he wanted to close unprofitable stores.