What went wrong at Ames? - Ames Department Stores Inc. bankruptcy; discount store chain

Discount Store News, May 7, 1990 by Pete Hisey

But regional competitors like Caldor and Bradlees have their own problems and operate much larger stores than the average Ames. Other regionals (like Stuarts) are too small to acquire and run a significant number of stores. To date, Ames has hired a real estate specialist to shop locations, but only Jordache, which recently picked up the bankrupt Heck's chain, has shown any interest.

The best opportunity might be for an independent concern to buy the urban stores and run them exclusively as a unit. Most of these inner-city stores were top grossers in the chain, but Zayre operations in the mid-'80s were just too chaotic to keep these stores, with enormous security problems and a loss leader habit, operating efficiently. Nevertheless, major urban markets are severely understored and most Zayre leases were and remain out-and-out bargains.

Short-term, the effect on major suppliers could be drastic. Ames was, for a short time, the third-largest discount chain in the United States and its buying clout is enormous. Many major suppliers, shut out of either K mart or Wal-Mart, have relied heavily on Zayre and/or Ames and a delay in getting paid by their largest or second-largest account could be devastating.

Several vendors, unable to reach their Ames contacts by telephone, reportedly showed up at the chain's Rocky Hill headquarters, only to be told that Ames' bankers had forbidden any payments whatsoever.

Under terms of the Chapter 11 filing, Ames will be supplied with $250 million by Chemical Bank, which vice chairman Peter Hollis said will be used "to continue operations and pay for merchandise shipments while it prepares a reorganization plan.

"Unfortunately, our cash flow problems led to uncertainty in our supplier relations and we could not reach agreements with our banks," Hollis said.