Trans World Entertainment Corporation, which owns the Record Town and Saturday Matinee retail chains, announced that since sales of up to one-fourth of its stores are poor, they will be closed.

A. that since sales of up to one-fourth of its stores are poor, they will be closed
B. it is closing up to one-fourth of its stores, which accounted for its poor sales
C. it was closing up to one fourth of its stores because of poor sales
D. to be closing, on account of poor sales, up to one-fourth of its stores
E. having poor sales, such that up to one-fourth of its stores will be closed

This topic is back in the reckoning after about a decade, jumping from 2007 to 2017, but still eluding the exact rationale for rejecting A and B.

1. As per the tenet of logic, there is no ambiguity as far as the reference of 'they ' is concerned. it does refer to the stores, since one cannot close sales, in the given context. Closing sales means clinching the deal in business parlance. What does 'its' refer to? We must appreciate that Record Town and Saturday Matinee is a brand and not a corporate. Therefore, 'its' does undoubtedly refer to the TWE.
2. The actual reason why A is incorrect is that, in reported speech, when the main clause is in past tense, one has to report the relative clause also in the same vein. 'They would be closed" is the correct diction.
3. In B also the pronouns "it" and 'its' consistently refer to the owning company the TWE. However, omitting the relative clause - connector 'that' is a constructional error in addition to the shift of tense from past to present. The pronoun' which' refers to the one -fourth of the company's stores and these one- fourth number of stores are said to be performing poorly at the market. It may not logically refer to the stores, then it will mean that all the outlets fared poorly; but it is not the intent herein.
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Yes, ideally there should be "that" after "announce". However. since this is a GMATprep question, we can see that GMAT allows use of such verbs without "that" as well.

i have some issue with option c- we dont have that after announced. Also, use of would make sense. The company announced that it would close...was closing means during the announcement itself, the company closed. please help me to understand the OA

Though I was aware of pronoun ambiguity in choice A, I eliminated choice C, as C didn't use 'that' after announce.
Still unclear about when can we omit that after verbs like announce, told etc.. in reporting speech.
Could anyone provide insight?
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Trans World Entertainment Corporation, which owns the Record Town and Saturday Matinee retail chains, announced that since sales of up to one-fourth of its stores are poor, they will be closed.

C. it was closing up to one-fourth of its stores because of poor sales

I do not think that dropping of 'that' is an issue here. The grammar custom in written and spoken language is that one can drop the relative clause connector 'that' even in reported speeches if a noun or noun phrase follows the word.

Example: 1. On reaching the Airport, I realized (that) I had not brought my passport.

2. The minister gloated (that) the country ultimately got a well-qualified and deserving Judge for the top court.

3. The priest realized quite late (that) his preaching made people snooze

In all the above cases, we may see the dropping of the relative clause connector 'that' does not make any difference.

4. If you want an official example, then this is the one. But, there are many more I am sure.

However, one cannot drop 'that' if there is only a verb after it. Because 'that' in such cases acts as a subject of the verb and as such by dropping it you might end up in a subject -less clause

Example

1. MGMAT sells some books that are called five-pound books

2. On reaching the Airport, I could not spot my passport that is required for even entry into the premises.

Try dropping 'that' in these cases, you will find that those clauses do not mean sensibly.

We can confidently pass C.
_________________

you can know a lot about something and not really understand it."-- a quote
No one knows this better than a GMAT student does.
Narendran +9198845 44509