A home improvement retailer now closes all 157 stores and furloughs a whopping 700 employees, part of a plan to wind down operations.
Kelly-Moore Paints has suffered financial distress for years from paying out about $600 million in asbestos litigation claims and still faces millions of dollars more in payments from future asbestos claims, as well as unpaid taxes, according to a company statement.
Kelly-Moore, which operated in California, Nevada, Oklahoma and Texas, said in a statement that it would not file a Chapter 11 bankruptcy reorganization or Chapter 7 liquidation, since it does not have the capital to fund its continued operations, it leases all of its facilities, and it has no unencumbered hard assets that could be made available to distribute to creditors.
The regional paint store chain, which was founded in 1946, had moved its headquarters to Irving, Texas, in 2023 after operating from its main office in San Carlos, Calif., for 77 years.
The company had hired financial adviser firm Houlihan Lokey to help seek capital for a business turnaround and entertain offers from interested investors, but was unable to secure a letter of intent from any investor and failed to obtain additional funding to continue operations, reports TheStreet.
The company began closing its facilities on Jan. 12, including all of its retail stores and its manufacturing facility in Hurst, Texas, but said it would try to continue fulfilling previously placed customer orders from existing inventory at its Union City, Calif., distribution facility
Kelly-Moore said employees will be fully compensated for regular time worked, and management will continue its efforts to collect receivables to pay all accrued benefits including paid time off.
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Other Economy News Today
A massive furniture company now lays off 1,650 employees, which represent approximately 13% of its global workforce.
Wayfair has laid off about 1,650 employees, the company said Friday.
The online home decor retailer said the cuts represent about 19% of its corporate team and 13% of its global workforce.
The move is expected to give the company more than $280 million in annualized cost savings.
About $150 million of that will come from cash compensation savings.
However, the restructuring will likely cost Wayfair approximately $70 million to $80 million in severance and benefits costs, most of which are anticipated to be incurred in the first quarter, reports RetailDive.
While CEO Niraj Shah in an open letter to employees pointed to “many things at the company that are going well,” including gaining share with customers and making progress to operate more efficiently, the retailer has faced challenges.
The company “went overboard” with hiring during the height of the pandemic, when the retailer’s annualized sales doubled to $18 billion from $9 billion as people spent more on their homes, Shah said.
This is Wayfair’s third round of restructuring since the summer of 2022.
The company laid off 870 employees in August of that year.
Last January, a whopping 1,750 people were also let go.
This time, Shah said they decided to err on the side of having too few people versus too many.
“Each time we used our best judgment, identified the cost target we needed to hit, and believed we were resizing to the right point,” Shah said Friday.
“In many ways, having too many great people is worse than having too few.
With too few, you get a lot done quickly, but you may not get everything done that you want.
But having too many causes inefficiency, coordination costs, and investments in lower-return activities.
That is what we have been experiencing and what we need to end.”
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