A discount furniture chain is now planning for a painful Chapter 11 bankruptcy in order to restructure its business after facing a decline in sales as well as annual losses.
Popular discount furniture retail chain Conn’s HomePlus is planning a Chapter 11 bankruptcy filing to reorganize its debts.
The Woodlands, Texas-based home goods retail chain operates 170 stores in 15 states across the Southern U.S. and employs about 4,000 workers, its website stated.
The retailer sells furniture, appliances, and consumer electronics and offers next-day delivery and personalized payment options, including an in-house credit program.
Conn’s HomePlus has struggled with sales declines and integrating home goods retailer W.S. Babcock into its company after purchasing the chain last year, people with knowledge of the matter told Bloomberg.
Business gets tougher for retailers as interest rates have increased and often squeeze consumers out of the market.
High inflation can also raise prices and discourage customers from buying their products.
High interest rates, as well as inflation, are often business killers for furniture retailers.
Inflated prices and high interest rates discourage consumers from purchasing homes, and when people don’t buy homes, it leads to consumers not buying new furniture to move into the new home.
Inflation began to rise in mid-2021 and peaked at 9.1% in June 2022.
The Federal Reserve started raising interest rates in March 2022 to fight inflation and increased rates 11 times through July 2023.
The rising interest rates pushed the average 30-year mortgage rate to 7.22% in November 2023, its highest rate in 20 years.
The current rate on July 2 is 7.07%, according to Bankrate.
This inflation has caused numerous furniture retail chains to suffer greatly due to a lack of sales.
Conn’s HomePlus (CONN) hired financial adviser Houlihan Lokey and Berkeley Research Group for operational assistance in order to rework its debt load.
According to sources, a bankruptcy filing could come in a matter of weeks, but discussions are not final and plans can still change.
Conn’s has recently faced economic problems, reporting losses in the last two years as its lower-income customer base has battled the effects of inflation, reports The Street.
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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy
Other Economy News Today
An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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