Nothing was left to chance on the morning of Monday, Jan. 29, as Chief Executive Officer Richard P. Crystal hunched over his crescent-shaped desk and gave his last instructions before his merchandise buyers left for Las Vegas.
They knew there would be questions. The Vegas trip was more than a vendors' show where retailers bought merchandise. It was a grand spectacle to be seen and to talk shop -- and quell rumors in the case of Merry-Go-Round Enterprises Inc., the national chain of teen-age-apparel shops threatening to collapse.
"Tell vendors it's business as usual," Mr. Crystal said. "Tell them management's working on a deal, that's why they didn't make the trip. Tell them you don't know anything."
What was left unspoken was the unease among the assembled buyers -- John Biemer, Scott Eichler, Buzzy Sklar and Debbie Thacker. But in jest, Mr. Sklar finally asked what everyone else was thinking: "Should we bring our resumes?"
Mr. Crystal just shrugged with an ambiguous smile.
Four days later, on Friday, Feb. 2, as the buyers waded through a sea of vendors in Las Vegas, Merry-Go-Round pulled the trigger. It was all over: The retailer was going out of business.
Mr. Crystal, hired seven months earlier as the savior of the Joppa-based company, ultimately presided over one of the greatest downfalls in retail history. There would be no resurrection for the once-charmed company of nearly 1,500 stores, a multimillion-dollar business that catapulted to fashion stardom from a single Atlanta boutique created by a pony-tailed rebel 28 years ago.
Instead, the final days of Merry-Go-Round -- 208 days under the ** reign of Mr. Crystal -- unfolded as a calamity of errors, blind hope, hubris and betrayal, according to interviews with more than 35 employees from the mailroom to the executive suites.
Until the very end, even as the walls began to cave in, Mr. Sklar recalled, "everyone had that glimmer of hope that that cancer patient would go into remission." But, perhaps the patient was already dead by the time the new CEO arrived. Mr. Crystal declined several requests for an interview, but Mr. Sklar, a close associate, said, "I just think it was so far gone that he couldn't stop the bleeding."
Prospects didn't seem so dire on July 10.
Under the gaze of more than 150 employees, Mr. Crystal was introduced as the retailer's fourth chief executive in two years, a strapping man of 50 with manicured nails, round glasses, a Navy blue suit, a blue and white pinstripe shirt with a solid white starched collar, luxurious black leather shoes and black hair slicked back, impeccably parted just off center.
Mr. Crystal sat at the front table of the "media room," a basement auditorium in Merry-Go-Round's sprawling headquarters, the sum of his parts -- veteran merchant from R. H. Macy & Co., denizen of New York's posh Park Avenue. A striking resemblance to a 1940s gangster, some in the audience thought, instantly nicknaming him "Bugsy."
"Bugsy" was a far cry from "Boogie," Leonard Weinglass, the iconoclastic founder who molded Merry-Go-Round on his own anti-IBM, funky vision of an apparel chain ruled by long-haired merchants wearing frayed jeans and dispensing wild fashions.
But the party was over.
A revolving door of successors -- Michael Sullivan, Tom Shull and Jim Kenney -- had failed to stop Merry-Go-Round's fall. Now, after applying for a division president's job at the chain more than a year earlier, Richard Crystal stood at the helm.
"A great specialty store has to have great focus," he told the gathering.
There was an aggressive edge in his voice -- that distinct New York brogue -- as he spoke of the hard work ahead in turning around a chain that had lost $186.3 million in the past fiscal year, a company that had shed nearly 500 stores since filing for bankruptcy protection in January 1994.
For the shell-shocked troops, Mr. Crystal instilled hope. They wanted to believe. "We were like children being led by their father," said senior planner Cathy Childs.
And no one seemed more confident than Mr. Crystal himself.
Later on his first day on the job, in the "glass bunker," a second-floor conference room adjoining the CEO's office, Mr. Crystal turned to division president Lou Spagna and said, "This place is so bad," snapping his fingers. "We'll fix it right away."
Worries, tensions rise
The task, as it turned out, wouldn't be that simple.
There were the obvious problems: Sales in stores open at least a year, a key gauge of performance, hadn't registered a gain since December 1992. Shareholder equity had plummeted from $191.2 million in fiscal 1994 to an alarming $5.7 million a year later. And lenders were leery.
Even the warehouse workers -- the men and women who packed and unpacked boxes -- were concerned about the merchandise, including a T-shirt with a caricature of a large-busted woman with two dogs.
It didn't inspire confidence. Nor did the sparsity of goods moving through the warehouse: Already, employees were being sent home early because there wasn't enough work. Conveyors and overhead trolleys, the stuff of a thriving warehouse, sat idle.
"People were standing around doing nothing," said warehouse worker Ellen Gerber. "We were all thinking, 'What's going to happen to us?' We were coming in day by day wondering if we were the ones who were going to be laid off."
Meanwhile, Mr. Crystal was like an Armani-clad machine. He never got around to decorating his office, except for some family pictures and a collection of crystal figurines. But in his first week on the job, the new CEO cut a wide swath through headquarters, firing off questions in staccato as he marched through well-guarded mock stores for each of the retailer's divisions -- the flagship Merry-Go-Round, Dejaiz, Chess King and Cignal.
Everyone was on edge. Tensions flared at an early meeting when Mr. Crystal asked a group of Chess King managers to tell him how much merchandise needed to be marked down to clear out leftover inventory.
"We'll get that together by the end of the day," Mr. Spagna said.
"No, I want it now," Mr. Crystal demanded.
En masse, the group took out calculators and began punching in the numbers. But Ms. Thacker, a knitwear buyer, was apparently taking too long. "I got upset because he said, 'Don't hide anything,' and I said, 'I don't run my business that way,' " Ms. Thacker recalled. "I felt like I was in a boxing ring, bobbing and weaving."
Tensions mounted less than a month later, in early August, when paramedics were called in on an early Monday morning: A merchandise buyer who was about five months pregnant had collapsed in a second-floor bathroom, hyperventilating, trembling in tears.
Panicked, Joan Frange, a regional vice president, rushed in to help. "I got her a glass of water, sat on the floor beside her and told her to calm down," Ms. Frange said. "She said, 'You don't understand, I'm pregnant, how can you do this to me?' "
She had just been laid off.
As the paramedics wheeled her down a long hallway, Mr. Crystal walked past in the opposite direction toward the media room to announce his first major decision: a management shuffle.
Later that afternoon, Mr. Crystal called Mr. Spagna, a division president, into his office and said, "I didn't know she was pregnant."
"I can't even get in to see you," Mr. Spagna replied.
There was little time for talk.
Back-to-school -- the retailer's most important selling season after Christmas -- was already upon Mr. Crystal, and he plunged in, cutting back on store clerks and supervisors to save money. And, at the last moment, he shifted Merry-Go-Round's promotional strategy, banking on sales of specific items of clothing rather than storewide sales.
Employees were sent scurrying to remove store signs and get new ones out to the shops. But there was a larger problem: Mother Nature. Before the back-to-school season, company officials had bet on the popularity of sweat shirts. But they didn't bet on a scorching August. The stuff wasn't moving, which forced the retailer to mark down prices and cut into profits.
Reeling, Mr. Crystal began to carry out his master plan in September, fundamentally changing the merchandise mix in the Merry-Go-Round division, eliminating brand-name merchandise in favor of the company's own private label.
It didn't work. It confused the customer. Sales began to fall, and the retailer was left with another stash of unwanted clothing. "Now, all of a sudden, they were left with piecemeal inventories that would have to be liquidated at a reduced price," said Vice President Charles Spalma. "It kind of wasn't orchestrated in the best manner."
Nothing seemed to be working. And nothing seemed simple -- not even selecting a number as a logo for a shirt planned for the spring.
Hunkered down in the Merry-Go-Round mock store in October, Mr. Crystal and Division President Frank Tworecke debated with other managers whether to put an "18" or "21" on a private label "IOU 2000" shirt.
The merchants favored 21 because it was the same number worn on the jersey of football star Deion Sanders and also represented the 21st Century. Mr. Crystal and Mr. Tworecke were leaning toward 18 because they thought it was a lucky number.
As the debate raged on, a vendor who had flown in from Hong Kong with about 250 clothing samples cooled his heels for a day and a half.
"Instead of making decisions on a grand scale, the CEO was entangling himself in very small issues," said Stephen Corallo, a Merry-Go-Round production coordinator. "This was a design of a garment. It was a detail."
The shirt design never made it to the stores.
Other matters preoccupied Mr. Crystal: Merry-Go-Round was crumbling.
Sales continued to spiral in October -- down 25 percent -- as the company announced the latest in a series of delays to come up with a plan to emerge from Chapter 11 bankruptcy protection.
Something needed to be done. There were pressing issues at hand -- gearing up for Christmas sales, rallying the troops and soothing growing fears about the company's deepening crisis.
Compelled to act, Mr. Crystal took his message on the road, meeting with more than 200 company field managers, store supervisors and merchants in a ballroom in the Stouffer hotel in downtown Baltimore on Oct. 19.
"We must focus on the customer and identify the customer," Mr. Crystal declared.
Employees were more concerned about their livelihood. And they said so, peppering the CEO with questions, even raising the delicate prospect of layoffs. With assurance, Mr. Crystal fielded the questions: There will be change, he said. There could be more store closings. But for those employees let go, he said, there will be severance packages.
It was just what they wanted to hear. "People felt assured he had a plan," said Vice President Greg Gillogly.
But they were not entirely convinced.
In early November, streams of employees increasingly found themselves wandering down to the basement mailroom at headquarters for pens, pencils -- and the real skinny on layoffs. A formal meeting with a chief executive in a ballroom carried weight, but the temperature reading in the retailer's mailroom, otherwise known as the "dungeon," was another matter.
"It was like a meeting room," said mailroom supervisor Bryan Luberecki. "Throughout the whole building, morale was real bad because we were never told anything."
Even at the highest levels, anxious executives expected the ax.
The mood was grimmer than usual on Saturday, Nov. 11, as a group of division heads waited for the arrival of their CEO over coffee and bagels in a second-floor conference room.
When Mr. Crystal finally showed up, he marched into his office, closed the door and summoned Mr. Spagna. "I'm going to honor your contract," Mr. Crystal said. "You can use me as a reference."
Moments later, Mr. Crystal entered the conference room and explained Mr. Spagna's departure in terms that left no questions. "He said, 'If anybody's uncomfortable with that, or you don't feel like a part of the team, then you can leave at this time as well,' " Mr. Spalma recalled. "He could care less, that was the look on his face."
No one volunteered to join the departed executive. They didn't have to. Two days later, on Nov. 13, Merry-Go-Round announced the most drastic cutback in its history: the closing of about 375 stores, wiping out 40 percent of the chain, the Chess King division and hundreds of employees. The retailer would be a shell of its former self with about 575 stores and 7,000 employees, down from a high of nearly 14,000 two years earlier.
Nobody felt safe anymore. A sense of paralysis spread as sales continued their relentless dive -- down 27 percent in November. Warehouse workers languished as merchandise trickled in. Meanwhile, systems programmers withdrew at their desks, listlessly surfing the Internet and playing computer games, like "Doom."
It didn't matter anymore that the company was still running on "DOS" software -- the antiquated disc operating system -- rather than the more updated "Windows" graphics software. The employees were just biding their time.
The inertia did not go unnoticed.
In Patton-esque style, Mr. Crystal barnstormed among his employees in a series of November meetings to rouse their spirits for the great battle -- the Christmas selling season.
"We'll carry the wounded and shoot the stragglers," he said during a warehouse rally.
"You are the best of the best," he said at an airport hotel gathering.
"You will be taken care of; you will be better off than the people who were let go," he said during a meeting at headquarters.
Where words failed, money was offered: Employees were promised bonuses if the company reached its December sales goal -- $72 million. But in the end, it came down to fear. "There was a prevailing instinct that we were in a survival mode," said Senior Vice President Eric Kyser.
Suddenly, the creative mayhem that had once made Merry-Go-Round a Wall Street darling seemed to reawaken as employees clocked frenzied six-day weeks, 12-hour days, pushing merchandise through the cash registers, even if that meant buying the stuff themselves.
It was just like the old days -- except more chaotic. Just as Thanksgiving arrived, Mr. Crystal pushed the button on wide-ranging merchandise changes: The Merry-Go-Round division continued to move toward private-label clothing, while the Dejaiz stores shifted toward more brand-name merchandise with an urban-street influence.
The switch left shoppers bumping into each other trying to figure out which store they belonged in. And executives were left wondering what Mr. Crystal was doing. "I don't think he had an easy job, but he was there a very short time, and what he tried didn't work," said Senior Vice President Gary Gillan. "I don't know who he relied on. It was his way."
Bad news in Las Vegas
His way didn't seem to be working: The day after Thanksgiving -- "Black Friday," traditionally the busiest shopping day of the year -- sales in stores open at least a year dropped, a disturbing result met with silence at headquarters.
Again, sweat shirts were dragging down sales: Throughout December, company merchandisers squabbled over why customers were not buying the athletic clothing hanging in Merry-Go-Round stores -- a melange of bright yellow, orange, lime, royal blue and dark red apparel. The merchants could not agree on what tack to take next.
Mr. Crystal did. The debate became a faint cry in January as the CEO began to gravitate to the top floor at headquarters -- the third-floor product development division -- to discuss ideas for summer clothing. Mr. Crystal sat at one end of a long table, leaning back, arms folded, hashing out concepts, colors and proposed fashion lines, like the "Crazy Country Club," a mix of polo shirts and T-shirts with an edge.
It seemed like business as usual -- except at a major vendors' show in Las Vegas.
Jostling among thousands of retailers on Tuesday, Jan. 30, the ++ four buyers dispatched from Merry-Go-Round felt like lost souls. Vendors, acutely aware of the company's precarious finances, refused to sell them anything.
No one wanted to have anything to do with them: Mr. Crystal had promised to call the buyers on Wednesday night or Thursday morning, after a meeting of the board of directors, to give them further instructions about what to buy. But the call never came.
On Friday morning, Mr. Biemer found out why: As he waited in line to check out of his hotel, an industry friend approached him and offered his condolences: "I'm really sorry about what happened, the company liquidating." The buyer played along like he knew.
That afternoon, the worst was confirmed when Mr. Sklar got a call from Mr. Crystal: "It's over, I tried," the CEO said. Speechless, Mr. Sklar returned to the vendors' show. Everyone already knew. "It was like somebody died," he said. "Vendors were actually crying. It was like a death."
It was even more real than that for the Merry-Go-Round buyers: Suddenly out of work, they had to make their own arrangements to get home.
Workers lament closing
L There would be no one waiting for them back at headquarters.
That Friday morning, before the news broke, security guards hovered outside the offices of Mr. Crystal and Chief Financial Officer Isaac Kaufman. Merry-Go-Round shares were frozen on the New York Stock Exchange pending an announcement. And there was a voice mail message to all home office employees to convene in the cafeteria at 3 p.m.
Everyone knew what was coming. At 1:30, senior managers were informed. Twenty minutes later, a young woman wept in a hallway. At 3 p.m., employees filed into the cafeteria past security guards in suits and waited in whispers. Ten minutes later, Mr. Crystal entered with Mr. Kaufman, two attorneys and an unemployment official.
". . . liquidating . . ."
Few could hear Mr. Crystal as he stood by the coffee machine. "All employees will be terminated as of today," he said, raising his voice. " We're all in the same boat."
There were muffled cries.
For many employees, the moment was even more bitter because they knew that Mr. Crystal was guaranteed about $2 million in the event of Merry-Go-Round's liquidation -- not to mention that he had received a signing bonus worth an estimated $550,000 when he was hired less than a year ago.
Employees called out questions: What about our severance? What about our benefits? Nothing was guaranteed. "We understand people have all these questions," one of the attorneys interjected. "But in this process, you have to wait. "
By 5 p.m., the building was empty. But rage was only beginning to spread as employees were notified across the country. "I had been lied to, I had been deceived, I felt I had been betrayed," said Zoltan Michael Connor, a regional operations manager in Florida. "Richard Crystal is a wolf in sheep's clothing. It really didn't matter what the outcome was [for Merry-Go-Round] because he was guaranteed compensation."
In Aspen, Colo., retired Merry-Go-Round founder "Boogie" Weinglass mourned.
"It's just a sad situation," he said. "I started this in '68, and this is the final chapter." The founder mused ruefully of fashion decisions gone bad, of the death of his business partner, Harold Goldsmith, in a 1991 plane crash. Of the ill-fated acquisition of Chess King for $46.2 million in 1993.
"This bankruptcy really got to me," Mr. Weinglass said. "Even though [Merry-Go-Round] is one of the greatest things that happened in my life, it's also one of the worst things in my life. It was my baby."
The death of Merry-Go-Round was harder for some than others that Friday night.
Stan Fox, director of store design and construction, was leaving the sumptuous Ruth's Chris Steak House in downtown Baltimore when he made eye contact with Mr. Crystal, ensconced at a table with an attorney. "I gave it my best shot, I just couldn't get financing," the CEO said.
"It wasn't just a place to work, it was family," Mr. Fox said.
"You'll get a job, I'll get a job, everybody'll get a job," Mr. Crystal replied.
Mr. Fox stared at him and walked away in disgust. "I'm expecting him to say, 'Good luck, if you need a reference,' " he said, nodding his head. "Just no compassion."
The anger lingers. But there is understanding, too.
"Merry-Go-Round probably died a long time ago," said merchandise planner Keith Krabbe. "We saw the numbers and we saw it coming, but in our hearts, we couldn't believe it."
On the skids
MGR sales continued to drop in the months after Richard Crystal took over
Percent change from same month of 1994
Month .. .. Total ... ... Same-store*
... ... ... sales ... .... .... sales
July .. ...-21% ... .... .... ..-12%
Aug. ... ..-22 ..... ..... ..... .-7
Sept. .... -23 ...... ...... ....-10
Oct. .... .-25 .... ...... ......-13
Nov. ..... -27 ..... ...... .....-16
Dec. .... .-47 ....... ......... ..-4
* Stores open at least a year