Year in Review: Distress in Home Leads to Bankruptcies, Store Closings
In the world of retail and fashion, home was 2023’s biggest loser.
Apparel firms faced some stress too, but the category managed to avoid the bankruptcy boom that hammered the home sector. In the U.S., the year saw the bankruptcy filings of women’s lifestyle brand Soft Surroundings in September and the April Chapter 11 petition by David’s Bridal, marking its second brush with bankruptcy following its November 2018 filing. Footwear firm Rockport Co. filed on June 14 for its second tour of bankruptcy proceedings, while Shoe City’s parent company ESCO Ltd. filed earlier in the year. Overseas, there was also the Scotch and Soda bankruptcy in March in the Netherlands, followed one month later by the Dutch filing of fashion brand Sandwich.
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And just this month, mall operator Pennsylvania Real Estate Investment Trust, better known as PREIT, found itself in bankruptcy proceedings for the second time in three years. The mall REIT expects to exit bankruptcy early next year, after which it will find itself under the ownership of its lenders.
Other retail bankruptcies include Party City, long a fixture on credit ratings watch lists, which filed in January. The party favor firm exited bankruptcy in October, but its bankruptcy also saw the closure of 35 big-box locations. And Christmas Tree Shops, once owned by Bed Bath & Beyond, ended up in bankruptcy court when its parent Handil Holdings filed for Chapter 11 protection in May. The company closed down operations in August, and shuttered 72 doors in the process.
But it’s been the troubled home furnishings category that has endured the most distress this year. That comes as little surprise, particularly after the home furnishings boom during COVID when people were sheltering in place. The return to offices, even in hybrid work environments, curtailed additional spending for refurbishing home workspaces. And the home sector was further hit by rising supply chain costs post-COVID, much of which was due to higher expenses connected to moving big pieces of furniture, both in imports and in shipments to customers.
Even credit experts foresaw trouble ahead in home. The home furnishings category carried the highest default risk across retail since 2021, according to data from S&P Global Market Intelligence.
And the firing salvo from Wells Fargo’s emergency motion on Dec. 30, 2022, that pushed United Furniture Industries (UFI) into an involuntary Chapter 7 after its shutdown one month earlier set the stage for the upheaval to come in 2023. UFI eventually filed a Chapter 11 petition on Jan. 6.
Home was also the big category loser due to the the mega filings of Bed, Bath & Beyond and Tuesday Morning, with the latter contributing to what seemed to be a trend in second filings, the so-called Chapter 22. Z Gallerie was the rare exception across retail sectors that landed in bankruptcy court for the third time on Oct. 16. It’s first filing was back in 2009.
There’s another reason why the home sector’s bankruptcies stood out this year. By the end of the first quarter of 2023, there were already nearly 2,000 announced store closures. That tally included 300 CVS doors and 545 Foot Locker Inc. stores by 2026, including 420 Foot Locker branded sites and 125 Champs Sports locations.
Moving to the end of 2023, total store closings are edging closer to 2,900 locations. The store closures in the home sector contributed a total of 1,228 closed retail doors in 2023. That’s over one-third of the total stores closed this year, with Bed Bath & Beyond contributing 896 to the home sector’s total.
Below is a summary of the top bankruptcies in the home sector in 2023.
Serta Simmons
Mattress maker Serta Simmons Bedding, owned by private equity firm Advent International, filed a Chapter 11 petition on Jan. 23. The filing included the company’s bed-in-a-box brand Tuft & Needle. The company owned more than $62 million to its top 10 unsecured creditors.
Serta Simmons said on June 29 that it completed its restructuring and had emerged from bankruptcy proceedings. “The Serta and Beautyrest brands in our portfolio have a deep heritage in innovation and have played meaningful roles in the lives of consumers for generations,” the company’s CEO Shelley Huff said. “With our financial restructuring behind us, we are taking steps to drive growth by getting back to our innovation roots, reinvesting in our iconic brands, and nailing the fundamentals of our business with a focus on commercial and supply chain excellence.”
During the bankruptcy process, the company reduced its funded debt to $315 million from $1.9 billion at the time of its filing. The $1.6 billion debt reduction lowered the company’s annual cash interest expense by more than $100 million.
Tuesday Morning
Tuesday Morning found itself bankrupt for the second time in three years. It filed for Chapter 11 bankruptcy protection on Feb. 14, citing “exceedingly burdensome debt.” The off-price home retailer has since liquidated operations.
Tuesday Morning’s first petition was in May 2020, which saw it close 213 of its 700 stores. The retailer emerged from bankruptcy in January 2021 with 487 locations in operation. At the time of the second filing, the retailer said it planned to shutter 265 doors. This past May, the 49-year-old retailer decided to shut down operations and join the retail graveyard.
Bed Bath & Beyond
The long-awaited Bed Bath & Beyond bankruptcy finally occurred on April 23, eight months after speculation about its finances had suggested that a collapse was forthcoming.
One month before the bankruptcy, Bed Bath & Beyond closed 416 stores in the U.S., including some Buybuy Baby doors and it shut down its 45-store Harmon’s Beauty business. It also closed its Canadian stores, resulting in a loss of 1,400 retail jobs. When it shut down operations in June, the retail sector lost another 360 Bed Bath & Beyond stores and 120 Buybuy Baby locations.
The Bed Bath & Beyond intellectual property (IP) assets were sold to Overstock.com, best known for its liquidator origins selling excess or closeout inventory, for $21.5 million. Overstock in August rebranded itself as Bed Bath & Beyond. And the Buybuy Baby IP assets were sold to one of its suppliers, Dream on Me Industries Inc., for $15.5 million. Dream on Me subsequently acquired 11 of the Buybuy Baby store leases for $1.17 million, and reopened those locations on Nov. 18. The Harmon IP asset was acquired by investor Jonah Raskas for a reported $300,000. His initial plans are to open five Harmon locations, a CNBC story said.
The home goods chain had been struggling for years, but things started going downhill in a big way after it dismissed chief executive Mark Tritton and its merchandising leader in the wake of a first-quarter flop in 2022 when it burned through nearly $500 million in Q1 alone. It also spent $589 million on share buybacks instead of investing in turnaround strategies.
Its other problem was Tritton’s turnaround plan, which saw the retailer triple the number of private brands to lift opening price points and bring in more value products for a customer base that was on the hunt for deals on national brands. More bad news followed the troubled chain when its former chief financial officer, Gustavo Arnal, committed suicide in September 2022 after being named in a lawsuit alleging securities violations that included investor Ryan Cohen and his firm RC Ventures as defendants. Arnal has since been removed as a named defendant.
Altmeyer Home Stores
The 81-year-old family-owned regional home chain Altmeyer Home Stores filed for Chapter 7 liquidation in July.
The company operated 11 stores. It was headed by a fourth-generation Altmeyer at the time it filed its Chapter 11 petition.
The company sold primarily soft home linens in bedding, rugs, window treatments and kitchen accessories. But like many in the home sector, it also faced sourcing problems and a slew of online competitors.
Mitchell Gold + Bob Williams
August saw one of the biggest surprises of the year with the abrupt shutdown of upscale home lifestyle retailer Mitchell Gold + Bob Williams after its lender pulled the plug on financing, resulting in the closure of about 35 retail stores and outlets. The company filed its Chapter 11 petition in September, and went into liquidation mode after failing to find a buyer. In November, Surya, a Cartersville, Ga.-based home furnishings firm that specializes in rugs, textiles, lighting, furniture and decor, stepped up to acquire the Mitchell Gold + Bob Williams assets, including its IP and manufacturing facilities.
Surya, which brought on co-founder Mitchell Gold as an advisor, plans to restore the home lifestyle brand to its former glory. It plans to begin shipping the brand’s product line in the first quarter of 2024.
August also saw the closure of furniture firm Klaussner, better known as Klaussner Home Furnishings. And Solid Comfort, a Fargo, N.D.-based maker of casegoods for firms such as Marriott and Hilton in the hospitality industry, also shut down.
Z Gallerie
Upscale home decor retailer Z Gallerie landed back in bankruptcy court for the third time following a Chapter 11 filing by its parent company DirectBuy Home Improvement Inc. in October.
Z Gallerie was sold to DirectBuy, as affiliate of CSC Generation Holdings, during its second tour of bankruptcy proceedings in 2019. Its first petition was filed in 2009. The retailer started out as a picture framing and poster shop in 1979. During its heyday, it operated about 60 locations. At the time the business shut down for good, there were only 21 stores left in operation.
