Jay Jacobs Going Out Of Business
Jay Jacobs, the 58-year-old clothing retailer, is going out of business.
The Seattle-based retailer said yesterday that it has filed a Chapter 11 bankruptcy petition and will close all its stores, terminate its president and lay off 700 employees - 350 of whom work in Washington.
Nineteen stores in Washington will be closed within the next 75 days, including Jay Jacobs' flagship store at the southeast corner of Fifth Avenue and Pine Street, a key corner in downtown Seattle, said Bill Lawrence, Jay Jacobs' chief financial officer. Other U.S. locations could close as soon as next month. Jay Jacobs has 114 stores in 22 states.
The Gap is the most likely retailer to replace Jay Jacobs at its downtown location. Landlord Martin Smith Real Estate Services told Jay Jacobs it would not renew the lease when it expires in January.
With $20 million in assets and $28 million in debts, Lawrence called Chapter 11 the "only option."
"We were looking for additional funding, and we just could not obtain (it)," he said.
Chapter 11 allows a company to reorganize its business while putting together a plan to pay off creditors. But in Jay Jacobs' case, a reorganization seems unlikely.
Still, said Lawrence, "If there are any opportunities to restructure the company even after the filing, we will pursue them."
Founded in 1941, the company became a leader in teen fashion in the 1960s and '70s. In the 1980s, the chain included nearly 300 stores nationwide. Beset by growing competition and expansion costs, Jay Jacobs filed Chapter 11 in May 1994.
It emerged from Chapter 11 in 1995 but continued to encounter problems despite attempts to shift its focus from teenagers to young professionals.
Jay Jacobs' lender, Finova Capital Phoenix, told the company in July it was concerned about its lack of cash flow and would not provide additional financing.
On Aug. 27, after realizing Chapter 11 would be the only option, the company said it laid off 54 employees at its distribution center and corporate headquarters.
The retailer received $13 million in financing in 1998 and 1999 from an East Coast investor group. The company used the money to restructure debt and reposition itself for expansion and growth.
During the past six weeks, the company had "tried very diligently to find a way to get more money" but couldn't, said Rex Steffey, Jay Jacobs' president and chief executive who was terminated as part of the Chapter 11 filing.
Steffey, a retail-turnaround expert who started with the company in 1994, said he hopes to stay in the Northwest.
Jay Jacobs' stock closed at 25 cents yesterday. The stock fell to 18.8 cents March 5, the year's low, but shot up in April to $3.09.
The company went public in 1987 at $12 a share, hitting its all-time high at $15.50 later that year.
Seattle Times business reporter Robert Marshall Wells contributed to this report.
Tamra Fitzpatrick's phone message number is 206-464-8981. Her e-mail address is: tfitzpatrick@seattletimes.com