In one of the biggest mass firings ever by a U.S. company, Ames Department Stores said Friday that it plans to dismiss nearly 18,000 workers and close 221 stores in the South and Midwest to try to pull itself out of bankruptcy.
The move, analysts said, both demonstrates the human toll being taken by ill-conceived takeovers and reflects the tumult in the U.S. retailing industry. But the cutback also was called a necessary, dramatic action to return Ames to financial health.
Ames--a major retailer in the Northeast and the nation's fourth-biggest discount chain--filed for Chapter 11 bankruptcy court protection in April after suffering huge losses due to its 1988 acquisition of Zayre stores.
"This is another excellent example of the abuses of buyouts," said Magda Lynn Seymour, a spokeswoman for the AFL-CIO in Washington. "They were in over their heads when they bought Zayre."
Still, analysts doubted that the job losses would do lasting damage to the communities hit by store closings. Many of the affected jobs, they noted, are part-time positions.
"The industry is such that it can swallow people back up," Seymour said. "There are job opportunities in the retail market."
Kevin Kelly, economic development manager for the Chamber of Commerce in Elgin, Ill., said the shuttering of the single Ames store in his city would have a "negligible" impact.
"There are a lot of those types of stores here. We have a booming economy," Kelly said. "Other stores will get those customers, and new stores will come into the area."
Officials at Ames, based in Rocky Hill, Conn., portrayed the store closings and layoffs as a "critical first step" toward revitalizing the company.
"This was a tough decision for the company to make, but they felt it was necessary. A lot of people will be losing their jobs, but a lot of jobs will be saved because this step was taken," an Ames spokeswoman said.
In a news release, Ames' chief executive, Stephen L. Pistner, said the move "will cut our expenses, reduce operating losses and allow us to focus our efforts on serving our customers."
The company will continue to operate 458 stores with about 40,000 employees in 17 states, principally in the Northeast. It has no locations in California. Most of the outlets destined to close during August and September are in Illinois, Indiana, Ohio, North Carolina and Florida.
Previously, Ames said it would close 33 stores. Friday's announcement signals that an additional 188 stores will be shut, along with distribution centers in Massachusetts and Florida.
Ames estimates that the 221 affected stores had an operating loss of $47.5 million for the fiscal year ended Jan. 27. The company posted a net loss of $228 million during the period.
The Ames spokeswoman wouldn't rule out the possibility of further closings. Ames' plans require the approval of Judge Howard C. Buschman III of the U.S. Bankruptcy Court in New York, but no delays are expected.
Experts were at a loss to cite other mass firings that would rival the one planned by Ames. During the past five years, the only cutback known to be bigger was AT&T's elimination of more than 27,000 jobs in 1987, but that number included people who took early retirement or who otherise left the company voluntarily.
The only retailing layoff believed to approach the size of Ames' came in October, 1986. When Gemco shut down, 14,000 workers--including 9,000 in Southern California--lost their jobs. Other big merchants that recently have sought bankruptcy court protection--including Circle K, L. J. Hooker and the department store divisions of Campeau Corp.--have closed, at most, small numbers of stores.
Analysts said Ames erred badly in buying Zayre because the acquired chain already had lost many of its one-time customers. Kurt Barnard, publisher of Retail Marketing Report, called the purchase by the once-thriving Ames "one of the stupidest moves I've ever seen in retailing."
"In effect, what Ames did was to buy a defunct retail chain, a chain that had nothing to offer but troubles and problems. To turn around a retail chain that's lost its customer base, is well-nigh impossible," Barnard said.
"By getting rid of most of the Zayre stores, plus a few of the weak Ames stores, they've cleansed the entire operation of all the non-productive parts," added Barnard, who said he now is "absolutely confident" that Ames will turn itself around.
Analysts also said Ames' executives failed to mesh the two companies' computer systems and marketing styles. Ames has followed an "everyday low prices" policy, while Zayre was a highly promotional chain that advertised heavily and had special sales. To top it off, Ames was hit by an economic slump in the Northeast.
Dismissed Ames employees will receive up to $2,000 each in severance pay and compensation for unused vacation time. A program to place workers in new jobs also is being set up.