New signs emerged yesterday that the reorganization of Merry-Go-Round Enterprises Inc. will last well into next year and will be more difficult than once expected.
The Joppa-based apparel chain had a net loss of $8.10 million for May, on sales of $52.83 million, according to unaudited results filed with U.S. Bankruptcy Court in Baltimore. In the first four months of its fiscal year, Merry-Go-Round has lost $32.16 million, the filing said.
As expected, Merry-Go-Round asked the court for more time to decide which stores to close -- until Jan. 31, for most stores. The deadline now is July 31.
The company has already closed more than 100 of its 1,400 stores, which sell clothes to teen-agers and young adults. It argued that it won't be able to assess adequately the strengths and weaknesses of many of its remaining shops until after the back-to-school and Christmas shopping seasons.
Some landlords, many of whom want to know more quickly whether they'll lose Merry-Go-Round as a tenant, are expected to object.
Bankruptcy Judge E. Stephen Derby allowed the hiring of New York investment bank Rothschild Inc. to act as financial adviser to Merry-Go-Round's shareholders'committee. The routine appointment became noteworthy yesterday because of the comments it elicited from one lawyer regarding Merry-Go-Round's prospects.
"This is not going to be the quick fix that some people thought it would be," said Thomas E. Biron, explaining why the creditors' committee he represents was dropping its objection to the hiring of Rothschild.
The value of Merry-Go-Round's stock "may be impaired," Mr. Biron said in a court hearing, arguing that shareholders' deserve their own advisers. The company's condition "is more negative than it was earlier," he said.
Merry-Go-Round's May loss was no surprise. The company, which sought Chapter 11 bankruptcy protection in January, had previously disclosed poor sales results for the month.
Because it had problems buying spring merchandise last year, Merry-Go-Round has had much less apparel in its stores than normal. Sales are down as a result, but the company hasn't been able to cut costs by a like amount. Hence the red ink.
Special lawyers' and accountants' bankruptcy fees have also boosted losses.
Merry-Go-Round's management has promised financial improvement this summer. June sales in stores open for at least a year were down 16 percent, less than the 24 percent reported for May. When back-to-school clothes hit the racks in a few weeks, managers have said, inventories should climb closer to previous levels.