First, an answer to the somewhat vulturish question on everybody's mind yesterday after hearing about the closing of Garfinckel's:
The sale starts Wednesday, as plans now stand.
Yesterday was a period of relative calm in the wake of the sinking of one of the Washington area's oldest and most respected retailing institutions. Garfinckel's announced Thursday that it had filed for bankruptcy protection and would close at least seven of its nine department stores after 85 years in business, though many expect the entire business to perish.
Among the activities: a meeting of creditors was scheduled for next week, new bankruptcy bank accounts were set up and plans were made to sell off all of Garfinckel's merchandise next week, an action considered the beginning of the end for the retailer.
That means everything must go. But how do you get rid of pounds of Godiva chocolate? Dozens of Hermes scarves? A plenitude of pairs of panty hose with the name GARFINCKEL'S boldly printed on the package? Tons of French crystal? Boxes and boxes of bridal registry information?
That will be the task of the Columbus, Ohio-based Schottenstein Stores Corp., which will take inventory tomorrow when all Garfinckel's stores, typically open for business, will be closed.
Schottenstein, a well-known liquidator in the retail industry that recently handled the disposition of goods from B. Altman and Bonwit Teller of New York, has struck a court-approved deal with Garfinckel's to buy all of its merchandise for 43.5 percent of the ticketed retail value and sell it for an unspecified markup in the Garfinckel's stores.
After the value of the merchandise is certified by the court, Garfinckel's will receive a check from Schottenstein that court documents estimate will be about $10 million. The funds are expected to go directly to one of Garfinckel's principal secured creditors, First City Bank of Houston, which is owed about $30 million.
Every aspect of the two-month sale, from advertising to personnel, will be managed by Schottenstein, though it will seem to customers as if they are dealing with Garfinckel's.
"These things can be very profitable for a liquidator," said Ken Gassman, retail analyst with Wheat, First Securities in Richmond. "They'll start off at about 20 percent, then go to 30 percent and then on down. In the end, Schottenstein will have someone paying them 5 cents on the dollar to sweep up every last thing left on the floors."
The ownership of attached fixtures in the stores, such as mirrors, lights and, possibly, display cases, still is in dispute with various Garfinckel's landlords and their fate will be discussed at a hearing next Friday.
"There is a question of who has priority, and it's hard to say who owns what," said Edward Ryan, the lawyer for W.C. & A.N. Miller Development Co., which leases Garfinckel's its longtime Spring Valley location. "There is so much gray area here."
There will be a meeting Tuesday for Garfinckel's creditors, of which there are 3,000, though sources said that figure includes about 1,000 customers who have small positive credit balances on their Garfinckel's credit cards.
Among the issues in dispute will be who has rights to funds owed to Garfinckel's and who controls the retailer's potentially lucrative leases. There is no real estate to sell.
Other local department store chains were adjusting to the news yesterday and some took action. Woodward & Lothrop, the 20-store Washington retailer, placed an ad in yesterday's and today's editions of The Washington Post offering job consideration to former Garfinckel's employees. Already, they have received much response.
"A lot of people are going to need a job, and we can always use experienced people," said Robert J. Mulligan, vice chairman of Woodward & Lothrop. He said his company would likely not try to compete with Garfinckel's going-out-of-business sales.
But Nordstrom, one of the new stores in the area that has taken much of the market from Garfinckel's, said it would. "We will never be undersold and we are competitive," said John Whitacre, general manager and vice president of Nordstrom's two stores in the Washington area. "Even against an out-of-business sale."
Whitacre said many Garfinckel's employees also had called about jobs. "We currently have a lot of former Garfinckel's workers and they are among our best employees," he said. "We would be thrilled to have more since we would like to try to be as good as Garfinckel's was at their best."