A Business section article Saturday incorrectly reported Ames Department Stores Inc.'s plans to close stores in Salisbury, Md. One store is closing; the store at Route 50 and Tilghman Road remains open. (Published 6/14/90)

HARTFORD, JUNE 8 -- Ames Department Stores Inc., trying to jettison unprofitable operations, announced plans today to close 221 stores and lay off about 17,500 employees as it struggles to emerge from bankruptcy protection.

The closings, which represent nearly a third of Ames' 679 stores nationwide, must be approved by the U.S. Bankruptcy Court in New York, where the nation's fourth largest retailer filed for protection from its creditors under Chapter 11 of the federal bankruptcy laws on April 25.

"This is a critical first step toward our primary goal of leading Ames out of Chapter 11," said Stephen L. Pistner, the new chief executive officer brought in by Ames to steer it through its current troubles.

The 221 stores being closed include 33 that Ames previously said it would close and 184 former Zayre outlets. Analysts have said Ames's acquisition two years ago of the Zayre chain led to Ames's downfall.

Most of the stores being closed are in Illinois, Indiana, Ohio, North Carolina and Florida.

In Virginia, Ames will close eight stores in Chatham, Harrisonburg, Newport News, Portsmouth, Roanoke, South Boston, South Hill and Staunton. Thirty stores will remain open.

In Maryland, six stores will close: two in Baltimore, two in Salisbury and one each in Berlin and Glen Burnie. Forty-one other stores throughout the state will remain open.

The 458 stores staying open are mostly in the Northeast. The company employed about 55,000 people at the time of the bankruptcy filing.

Ames also plans to close distribution centers in Plant City, Fla., and Worcester, Mass. The retailer plans to complete construction of a distribution center in Leesport, Pa., in early 1991, subject to court approval.

Ames, which is based in Rocky Hill, Conn., hopes to realize $180 million in cash from liquidation sales this summer. The stores being closed lost about $48 million last year, Pistner said.

"By making this move now, not only do we stem losses immediately, but we cut out the losses from those unprofitable stores," he said.

Ames has already placed its orders for fall merchandise. Pistner said 85 percent of the company's suppliers have agreed to ship merchandise or take orders from it.

The closings will help ensure the "pipeline" remains open by reassuring vendors that their merchandise is going to stores that Ames is committed to keeping open, Pistner said.

Analysts said the move should help the company return to profitability. Pistner "is showing that he will not sit back and let this company bleed to death," said Walter Loeb of Loeb Associates, a New York retail consultant.

Ames, which reported losses of $228 million last year, has attributed its troubles to the sluggish retail market in the Northeast and to problems with its 1988 acquisition of the 392-store Zayre chain. The company has been unable to revitalize the stores by renaming them and has even lost some Zayre customers by changing that chain's advertising and pricing policies.

The $788 million acquisition doubled Ames's size and transformed the company from a little-known New England-based chain into the nation's fourth-largest discounter. It has since closed 90 of the Zayre stores and converted others to the Ames name.