Karat Home seeks to buy Z Gallerie e-commerce assets

Court hearing for proposed sale is planned for Dec. 28

HACKENSACK, N.J. — Karat Home, a home textile and furniture e-commerce company based in Texas, has been identified as the preferred bidder for various assets of Z Gallerie, which filed for Chapter 11 bankruptcy protection in mid-October.

Karat Home is a 100% owned U.S. subsidiary of J&S Yard, a China-based textile and furniture manufacturer and retailer that sells products to Home Depot, Costco and Michael’s, among others.

One of several companies that bid for Z Gallerie’s assets, it has been identified as the preferred bidder in the sale process. It is looking to purchase Z-Gallerie’s e-commerce platform and the intellectual property and inventory tied to that platform. It also is looking to absorb the retailer’s distribution facilities and employees associated with the platform.

E-commerce represented about half of Z Gallerie’s sales in 2022 according to bankruptcy court documents.

The sale does not include the leases to about two dozen brick-and-mortar retail stores that are currently holding going-out-of-business sales through the end of the year. A source familiar with the deal said that several parties have expressed interest in taking over those leases from the landlords.

Meanwhile, Z Gallerie parent CSC Generation is expected to provide transition services to Karat once it takes over the e-commerce part of the business to help ensure a smooth transition for its customers.

According to court documents, the debtor is continuing to negotiate terms of an acceptable asset purchase agreement with Karat Home. A hearing for the proposed sale is set for the morning of Dec. 28.

Karat Home launched its e-commerce business in 2018, with an early emphasis on textiles that soon grew to other product offerings including furniture. This, in turn, allowed it to cater to a larger customer base.

In 2022, it reported gross income of $75 million, which it said is 20 times its income in 2018. Meanwhile, its assets total $40 million, which it said is 50 times that of 2018.

The company added that its growth has been supported not only by traditional retailers, but also “deepening business cooperation” with e-commerce resources such as Amazon and Wayfair. It noted that it is one of Wayfair’s top three vendors in the upholstery category.

In addition to three warehouses it operates in New Jersey and Texas, Karat Home works with 12 third-party warehouses in Texas, California, New Jersey and Washington, which it said “complement our comprehensive logistics system in the U.S.”

Parent company Y&S Yard Home Fashion Co. Ltd. was founded in December 2006 and is based in Hangzhou, China. It occupies a 150,000-square-foot plant in China that has more than 360 employees. In addition to upholstery fabric, it also produces furniture, overseeing various parts of the product design and product manufacturing process along with wholesale and retail operations.

“This unique advantage sets us apart from other players in the market, making us a manufacturer-to-consumer (M2C) player,” the company said.

Thomas Russell

Home News Now Editor-in-Chief Thomas Russell has covered the furniture industry for 25 years at various daily and weekly consumer and trade publications. He can be reached at tom@homenewsnow.com and at 336-508-4616.

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