Anyone surprised by the news this week that Conn’s HomePlus filed for Chapter 11 bankruptcy just wasn’t paying attention. The Woodlands, Texas–based electronics and home furnishings chain listed liabilities ranging from $1 to $10 billion to tens of thousands of creditors—and many in the industry had been murmuring about its problems for some time.
Much less expected was the shocker that Conn’s will be liquidating its inventory, shuttering its stores and going out of business completely, according to paperwork filed on Wednesday.
Conn’s is only the latest in what has become an exhaustive list of retailers that are struggling with the doldrums of the housing market and its impact on sales of home furnishings products. It joins a rogues’ gallery of brands—from Tuesday Morning and Oka to Z Gallerie and Mitchell Gold + Bob Williams—that have all gone bust. (Ironically, MG+BW’s private equity backers also owned a big stake in Conn’s.) Throw in any number of local independent furniture dealers, add Bed Bath & Beyond for good measure, and it’s not a pretty picture.
But when it comes to Conn’s, it’s not just a bad economy to blame. Last year, in one of the odder—frankly, mystifying—deals out there, the company bought promotional furniture retailing chain W.S. Badcock, which operates its mostly independently owned franchised store network under the Badcock Home Furnishings & More banner.
Together the two nameplates have 553 corporate and franchised stores across 15 states, primarily in the southern half of the country, with 22 distribution and service centers and six corporate offices. At the time of its bankruptcy filing, Conn’s said it employed about 3,800 people.
The company had been sending out distress signals for some time, announcing various rounds of store closings and trying to round up new financing or even new owners to bail it out. Right up until the bankruptcy court filing this week, it appeared that Conn’s was headed for reorganization, not liquidation.
But the ill-timed Badcock acquisition caused what leadership called a “location functionality” issue (that description is a flash of creativity Conn’s could have used in its stores rather than in its public statements). This purchase, the high interest rates that impacted the company’s credit-driven sales model and the industry-wide malaise all combined to doom the retailer.
According to published reports, the victims on the supplier side are concentrated in the consumer electronics and appliances sectors, with three Asian suppliers on the hook for the most: Samsung, at $21 million; LG, at $14 million; and GE Appliances (owned by Chinese multinational Haier), at $13 million. Larger furniture creditors include Standard Furniture, at $3.7 million; Man Wah, at $2.9 million; and Hackney Home Furnishings, at $1.8 million.
While it’s always possible a last-minute savior could ride onto the retail playing field, it seems unlikely given the overall condition of the home furnishings sector. In this case at least, the Conn’s have won out over the pros.
____________
Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.
