Furniture retailer Z Gallerie in Chapter 11
Company says it aims to strengthen balance sheet
By Clint Engel, Furniture Today -- Home Accents Today, 4/13/2009 1:34:00 PM
Top 100 company Z Gallerie has filed for Chapter 11 bankruptcy protection to strengthen its balance sheet and get out from lease obligations associated with 21 closed stores and an Atlanta distribution center, the company said.
The privately held retailer of home furnishings and decorative accessories said all of its remaining stores will stay open and that “it has sufficient cash to operate all aspects of its business, including custom furniture orders through its stores and Web site, and is seeking Court approval to do so.”
“In light of current economic conditions, our company has had to make some difficult decisions,” Chief Financial Officer Mike Zeiden said in a news release.
The filing and restructuring “will allow us to eliminate certain lease liabilities from discontinued stores, and to continue to operate and serve our customers well,” he said.
The retailer’s list of its largest 20 unsecured creditors appears to include a number of landlords, but no furniture suppliers.
The company said it will ask the court, among other things, for permission to pay any pre-petition wages and benefits, as well as to allow the company to honor existing customer programs and deposits, maintain Z Gallerie’s cash management system.
Vendors who do business with the company going forward will be paid on an administrative priority basis for all goods and services the company receives after today, it said.
Earlier this year, Z Gallerie closed nearly two dozen of its 78 stores in various markets, culling out the poorest performers in hopes of strengthening its operations.
Zeiden said the economic climate had taken a toll on the Gardena, Calif.-based company. The retailer closed all four of its stores in Ohio, along with single stores in New York, Michigan, Minnesota and Tyson’s Corner, Va. It also closed two stores in Colorado and its Coconut Point, Fla., store among others.
“Our hope is that it’s going to make us stronger,” Zeiden said. “We’ll be able to focus on the stores we have, narrow the inventory we have to carry and better focus on our customers. We’re more or less going back to our core competency — the way we were back in 2002 and 2003.
By that, Zeiden said he means a more manageable store base that carries the right products.
Last year, the lifestyle specialty retailer did about $190 million in total revenue, down about 12% from the year before, he said, adding that the company struggled through the fourth quarter and early this year, too.
But more recently, he said, Z Gallerie has seen sales increases on its daily business reports despite having fewer overall stores now.
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