Barry’s Jewelers Files Chapter 11, Closes 34 Stores

Trying to regain its luster, Barry’s Jewelers said Monday that it filed for bankruptcy law protection and closed 34 poorly performing stores, laying off about 200 employees.

The store closings--which include nine in California--follow the shuttering of 11 stores in the quarter ended Feb. 28, when the Monrovia-based jewelry chain reported a net loss of $6.8 million on revenue of $49.2 million. In the same period of 1996, Barry’s Jewelers posted net income of $3.2 million on revenue of $50.9 million.

The company filed Sunday for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code so that it can obtain enough inventory for the Christmas selling season, said Sam Merksamer, who joined Barry’s in February as chief executive.

Barry’s suffered a disastrous 1996 holiday season when the company, the nation’s fifth-largest jewelry chain, ran short of merchandise and was forced to heavily discount what it did have. Sales at stores open at least 12 months, an important yardstick of retail performance known as “same-store sales,” have continued to plunge.

“A successful Christmas season is crucial to the company’s ability to remain a going concern and to compete effectively, now and in the future,” Merksamer said. “By taking this action prior to the start of the holiday buying season, we will assure the continued flow of merchandise to our stores.”

Barry’s said it will also change the stores’ merchandise selection to appeal to a more upscale clientele, to raise credit-granting standards “to industry norms,” to upgrade in-store computer systems and to eliminate some of the many store names under which the company operates.

Barry’s Chapter 11 filing listed assets of $148.5 million and liabilities of $134.7 million.

Under Chapter 11, a company is allowed to continue operating while it works out a plan of reorganization. Invoices for goods and services received after the filing are given priority over those received before the filing, said E. Peter Healey, Barry’s executive vice president and chief financial officer.

“Ironically, now that we’re in Chapter 11, all of the trade vendors want to send merchandise to us,” Healey said. “Last week they wanted to send it to us only on a COD basis.”

Barry’s new management team--18 executives have joined the company since February--also announced a business plan designed to polish company performance that included closing 34 stores in eight states. The nine closures in California were in Lakewood, City of Industry, Orange, Modesto, Richmond, Salinas, San Jose, Visalia and Yuba City.

Barry’s will continue to operate 130 stores under various names--including Hatfield Jewelers, the Ringmaker and Mission Jewelers. The layoffs leave the company with about 1,000 employees.

The company said it will honor all obligations to customers, including warranties, layaways, special orders and repairs.

This is Barry’s Jewelers second trip through bankruptcy court. In 1992, the company filed a pre-negotiated bankruptcy that lasted only four months.

On Monday, shares of Barry’s Jewelers lost 9 cents to close at 25 cents in Nasdaq trading.