bankruptcy | Oct 17, 2023 |
Z Gallerie files for bankruptcy

Z Gallerie has filed for bankruptcy. In documents filed in New Jersey district court yesterday, the company pegged its liabilities between $50 million and $100 million owed to between 200 and 999 creditors. In the same filing, Z Gallerie estimated its assets on hand to be between $50 and $100 million.

Among the biggest unsecured creditors are Federal Express, owed $1.3 million; AT&T, owed $1.1 million; and Google, owed almost $400,000. In the filings, Z Gallerie also cites debt to a variety of retail landlords and logistics providers.

According to documents filed in the bankruptcy proceeding, Z Gallerie was suffering from “severe liquidity constraints” brought on by “underperforming retail stores, adverse macroeconomic trends, and industry specific headwinds,” such as a stagnant housing market and pandemic-era supply chain snarls. Cash on hand falling below $500,000 sparked the need to file for chapter 11 protection.

In the filings, company leadership indicated that it had retained Stump & Company, an industry M&A firm, to market Z Gallerie assets for a potential strategic sale. Failing that, the filings suggest that the brand’s assets will be liquidated. It has secured a $1.1 million line of credit to fund operations during the bankruptcy process.

This marks the third time that the beleaguered home decor brand has filed Chapter 11, having previously done so in 2019 and 2009. After the most recent bankruptcy filing, the company was acquired by DirectBuy, a discount home goods membership club, which in turn had recently been acquired by parent company CSC Generation. At press time, CSC Generation leadership had not responded to a request for comment.

Founded by siblings Carole Malfatti and Joe and Mike Zeiden in 1979, Z Gallerie began as a poster shop in Sherman Oaks, California, with the siblings framing posters in their parents’ garage at night. A few years later, they opened a separate home decor store that showcased an eclectic mix of glam and retro designs, before combining the businesses under the Z Gallerie banner. By the time they went bankrupt in 2009, the company had opened 57 stores across the country. In the most recent filing, Z Gallerie lists 21 stores and roughly 250 employees.

In 2019, DirectBuy paid $20.3 million for the Gardena, California–based headquarters and at least 32 of its stores. In the intervening years, CSC founder and CEO Justin Yoshimura spoke openly about plans to pivot Z Gallerie to a digital-first brand and brought on two former Williams-Sonoma executives, John Trifoso and Mary Harrington, in 2020 in an attempt to shepherd the company back to profitability. Trifoso has since moved on to be the COO at CSC while Harrington departed Z Gallerie earlier this year.

This is a developing story; please check back for updates.

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