Economic distress has taken down many furniture stores in recent years. The industry's health is closely tied to the performance of residential real estate. When the real estate market slows down or collapses, as it happened in the 2008 Great Recession, furniture stores often are a victim of a downturn.
Iconic Levitz Furniture, a national retailer founded in 1910, almost made it 100 years in business but fell short when it filed for bankruptcy in 2007, liquidated and closed down all its stores in 2008 during the Great Recession. Regional furniture retailer Wickes Furniture, which had 43 stores in the West and Midwest at its peak, also was a victim of that recession as it closed down its business also in 2008.
Related: Popular retailer moves from Chapter 11 bankruptcy to liquidation
Michigan-based regional furniture store Art Van Furniture filed for Chapter 11 in March 2020 just as the Covid-19 pandemic was beginning and liquidated and closed its 190 stores.
Financing crunch forces furniture retailer to liquidate
Upscale furniture maker and retailer Mitchell Gold + Bob Williams more recently filed Chapter 11 bankruptcy, and subsequently Chapter 7 liquidation. The retailer, which operated 27 stores in 14 states and several Canadian provinces, abruptly closed all its stores on the weekend of Aug. 26-27 when it was unable to obtain adequate financing to continue operations. The company reopened for business after the weekend, but filed for Chapter 11 on Sept. 6.
The company, which also operated 40 virtual stores and six brick-and-mortar outlet locations, reached the end of the line on Oct. 6 when Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court for the District of Delaware converted the bankruptcy case to Chapter 7 liquidation in the best interest of the debtors, their estates, creditors and all other interested parties.
The debtor had been trying to secure debtor-in-possession financing to continue operations and was negotiating with its secured lender PNC Bank, which failed, Furniture Today reported.
Z Gallerie
Z Gallerie seeks a sale of its assets in Chapter 11
The parent company of upscale furniture and home decor retailer Z Gallerie, which operates 21 stores in nine states and has an e-commerce platform, is the most recent in the industry to file for bankruptcy. Gardena, Calif.,-based DirectBuy Home Improvement, an affiliate of parent CSC Generation Holdings, on Oct. 16 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of New Jersey, claiming a lasting impact from the Covid-19 pandemic on the retail industry and supply chain and import cost increases in late 2021 and into 2022 severely impacted its brand profitability and cash position.
Additionally, the debtor said in court documents that increased interest and mortgage rates have led to a slowing of the housing market and new home purchases, which is a major driver of its brand.
DirectBuy said in court papers that it will try to sell its assets in a Section 363 auction, but if it can't sell, it will resort to an orderly liquidation of its assets and close its stores in the coming months. The debtor is seeking to hire Stump & Co., which is a merger and acquisition advisory firm that specializes in selling furniture companies, to conduct a sale of the retail chain.
The debtor is also seeking $2.2 million in debtor-in-possession financing from its prepetition lenders ZG Lending, which holds $19.8 million in prepetition secured debt. The DIP loan would roll up $1.1 million of the prepetition debt and provide $1.1 million in new money to fund operations during the Chapter 11 case. The DIP lender would retain the right to credit bid the DIP loan and prepetition debt in a 363 auction.
This is the third Chapter 11 filing for parent companies of Z Gallerie, as the retailer also filed for bankruptcy in 2009 and 2019.
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