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The bidding for Mervyns’ 149 remaining stores continues.

This story first appeared in the October 7, 2008 issue of WWD.  Subscribe Today.

The bankrupt Hayward, Calif.- based retailer has held preliminary negotiations with several parties about its locations, credit sources told WWD, and hopes to keep them in operation with the Mervyns nameplate intact. All of the remaining stores are leased.

Earlier this week, reports surfaced on the West Coast that Los Angeles-based Forever 21 had bid on the chain and hoped to use some of the real estate for expansion into a larger footprint. However, sources said the Forever 21 offer came about a month ago and was rejected. It wasn’t immediately known whether the company remained interested in Mervyns. Calls to Forever 21 weren’t returned by press time and a spokesman for Mervyns declined to comment on the matter.

Forever 21, which had revenues of $1.3 billion in 2007, currently has more than 400 stores. The company operates stores under the Forever 21, Forever XXI, For Love 21 and Gadzooks nameplates.

Although 15,000-square-foot stores were once the norm for the teen retailer, many, like the two-story flagship opened in Pasadena, Calif., in 2006, are now 40,000 square feet. The company’s Forever XXI stores, which cater to a broader demographic range than the teen-focused Forever 21 shops, average 24,000 square feet. The bulk of its stores are in malls.

The Mervyns’ locations have a footprint of about 75,000 to 80,000 square feet and most are freestanding.

Bankruptcy court records revealed no information about bids for Mervyns or its real estate. The retailer has the exclusive right to file a reorganization plan for up to 90 days after its Chapter 11 filing, which occurred on July 28, although that exclusivity period could be extended by the retailer’s creditors through the holiday season or longer.

Mervyns was acquired by a consortium including Sun Capital Partners Inc., Cerberus Capital Management LP and Lubert-Adler/ Klaff from Target Corp. for $1.2 billion in September 2004. Cerberus since has sold its stake in the retail operation, although it retains an interest in the retailer’s real estate holdings. Forever 21 expressed an interest in acquiring the chain when it was put on the block by Target Corp. four years ago, according to published reports.

Mervyns said previously that it would shutter 26 of its 175 stores.

Whether Forever 21 continues to pursue Mervyns, the retailer has made it clear that it is looking to open more and bigger stores.

In June, Christopher Lee, senior vice president of the company, told a Fashion Group International panel discussion the firm plans to build larger stores and within four years expects to be in a position to be a mall anchor as it evolves from a teenfocused business into one devoted to a youth-lifestyle retail concept.

He said the company is moving toward a 90,000-square-foot model in select locations, making it a potential anchor. With the recent bankruptcies of Mervyns, Boscov’s and Steve & Barry’s, and with other retailers either putting the brakes on expansion or, as with Macy’s Inc. since its acquisition of May Department Stores Co., seeking to close stores, Forever 21 would likely find many mall operators anxious to be its landlord.

Forever 21 also is eyeing stores in South Korea, possible acquisitions in the U.K. and going into Russia on its own, rather than with a joint venture partner, Lee said in June.