Liquor Barn to Close 19 Stores, 6 in Orange County : Retailing: An executive says that expensive leases and the recession forced the chain to shut down the profitable outlets and that 200 will be laid off.

Liquor Barn, the California-based discount liquor chain, said Thursday it was closing 19 of its Southern California stores, including six in Orange County, and laying off 200 employees.

The stores are profitable, executive vice president Lewis Silverberg said, but two things forced the move: First, lean economic times made it impossible for the chain to refinance some of its debt, and second, the leases on the buildings were worth more than the stores themselves.

“When we acquired the chain,” Silverberg said, “we acquired it without the excise tax increase (on alcoholic beverages) and without the recession, and that combined to make us unable to get the refinancing done.” He said the credit market is tighter than the company anticipated it would be.

A holding company, La Jolla-based Intermark, along with Silverberg, Liquor Barn President Harvey Rosen and other partners, bought the chain in 1989 out of bankruptcy court after the former owners, Majestic Wine Warehouses of England, filed for court protection in 1988.

Orange County stores to be closed include two in Huntington Beach and one each in Costa Mesa, Irvine, Mission Viejo, and Orange. Other outlets to be closed include three each in Los Angeles and the Palm Springs-Riverside area, and one each in Canoga Park, Glendale, Granada Hills, Pasadena, Thousand Oaks, Escondido and Torrance.

Silverberg said all the stores were profitable--”some were among the most profitable in the chain.”

The stores being closed operated out of leased buildings averaging 20,000 square feet each. “All of the leases have value, some in the millions of dollars,” Silverberg said.

Remaining in the chain will be 44 stores, six in San Diego County--the original test market for the concept--and 38 stores in Northern California.

“This is a very positive move for the chain,” Silverberg said. “We will have 44 strong stores that will not have operational or credit problems. We’ve met with all of our suppliers and I feel they are behind us.”

The Liquor Barn concept started out in the early 1980s as a test by Safeway. A vice president with Safeway, Steve Boone, converted Safeway’s La Mesa store into what then was called ALPS (Always Low Price Store).

When the concept seemed to work, Safeway converted or opened 104 stores called Liquor Barn, including 18 in Arizona.

In 1986, after Safeway was taken private in a multibillion-dollar buyout by Kohlberg Kravis Roberts, KKR sold the chain to Majestic in a deal valued at $110 million--a price some analysts said was far too high.

Less than two years later, Liquor Barn was in bankruptcy.

Intermark, a publicly traded holding company, acquired two-thirds of Liquor Barn, and Rosen, Silverberg and their partners bought the remaining third in a deal valued at $40 million. That acquisition came after the Arizona stores had been sold separately.

Among employees to be fired are vice presidents and floor clerks, Silverberg said, adding, “This is a very painful decision, but it’s best for the chain.”

He said the headquarters of the company would remain in San Diego and the firm would keep its Northern California buying office.