NASHVILLE, Tenn. — Service Merchandise Co. Inc., a 42-year-old retail chain that has operated under Chapter 11 bankruptcy protection since March 1999, said Friday that it is going out of business.

        The company, which has more than 200 stores in 32 states, including five in Greater Cincinnati, had been attempting to turn itself around at a time when the retail industry endured what some analysts are calling the weakest holiday season in about 30 years.

        Company executives said the weak economy and slow sales after the Sept. 11 terrorist attacks hurt the company's 2001 results and prevented it from completing its planned business reorganization and emergence from bankruptcy.

        Service Merchandise lost $180 million in 2000, but had less than $100 million in losses in 2001, attorney John Butler Jr. said. As of November, the company had liabilities totaling $1.34 billion and assets of $1 billion.

        “Given the extraordinarily poor retail economy this past year, especially for jewelry retailers, our company's prospects for successfully reorganizing were compromised to the point that we and our creditors consensually concluded that winding down the business and distributing the substantial value of our inventory, real estate and other assets to our creditors was in their best interest,” chairman and chief executive Sam Cusano said.

        The company said it will fire about 500 of its 9,300 employees in January, with the others receiving staggered termination notices throughout out the year.

        The company will begin going-out-of-business sales Jan. 19 at its stores, pending approval by the U.S. Bankruptcy Court for the Middle District of Tennessee.

        Service Merchandise said it intends to file a plan of liquidation by Sept. 30, to provide for the distribution of the proceeds of its assets to creditors.

        Executives told a bankruptcy judge Friday about the company's anticipated closure. The judge will review more detailed plans about how the company will cease operations at a hearing Jan. 18.

        The company expects shareholders will not receive any distribution on their common stock in 2002.

        Service Merchandise said employee severance and other benefit payments would be paid in accordance with orders from the bankruptcy court.

        The company will also sell its real estate, including its headquarters in suburban Nashville, 70 fee-owned properties and 150 unexpired leaseholds.

        Service Merchandise was founded by Harry and Mary Zimmerman as a “five and dime” in 1934.

        During the 1970s, Service Merchandise was the nation's top catalog-showroom retailer. At its peak, the company achieved more than $4 billion in annual sales.

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