Mervyns face financial squeeze

The privately held company, which operates about 175 stores in seven states but primarily in California, is facing bare shelves and a cash crunch as vendors are delaying shipments and key lenders that provide finance and credit to apparel makers have stopped approving orders.

"We are advising clients to hold off shipments primarily due to lack of communications from management," said Bob Carbonell, chief credit officer at Bernard Sands LLC, a credit monitoring company.

Carbonell, who said he's working with several dozen clients that sell to the chain, noted that Mervyns had been consistently providing financial updates until about a week ago.

A person close to the company who spoke on condition of anonymity because of the sensitivity of the issue said GMAC Commercial Finance stopped approving orders of merchandise last week.

Squeezed by high-end department stores at the top and large discounters like Wal-Mart Stores Inc. at the bottom, the 59-year-old Mervyns has been shuttering stores and leaving states such as Oregon and Washington since 2005, after a consortium of private equity players including Sun Capital Partners Inc. bought Mervyns from Target Corp. for $1.2 billion.

Asked about the possibility that the company would have to file for bankruptcy protection, Mervyns spokeswoman Meaghan Repko said, "The company does not comment on rumor or speculation."

Sun Capital did not immediately return calls for comment. GMAC spokeswoman Kelly Rionda declined to comment, noting that the company does not comment on customers.

The chain's heavy concentration in California, which is among the states hardest hit by the housing crisis, has made a turnaround harder.

Consumers in those hard-hit regions are being forced to make hard choices, Carbonell said: "Do you go shopping at Mervyns or do you pay for gas and food?" He added, "Everybody is fighting for the same piece of the pie."