How Private Equity Strangled Mervyns

On the morning of Oct. 23, Mervin G. Morris went to the Hayward (Calif.) headquarters of Mervyns department stores one last time. As the retail chain's founder walked into the rust-colored concrete building, scores of shell-shocked employees were shuffling out with boxes full of their personal effects. Dozens rushed up to tell Morris, 88, how much they had enjoyed working at Mervyns. One woman told him she had been there 42 years. "It was a horrible scene," he says. As Morris walked past a lunch room, some 70 workers rose to give him a standing ovation. He later walked out in tears.

The grief is understandable. Mervyns, the chain that Morris founded six decades ago with $25,000 and two employees, is about to disappear. Its 149 remaining stores are being liquidated. More than 18,000 people have been thrown out of work—without severance and, in many cases, weeks of vacation pay—amid the toughest job market in a generation.