by Retailers face ongoing competition, particularly against e-commerce players with fewer expenses including physical stores to run
ALBUQUERQUE, N.M. — With its Chapter 11 bankruptcy petition filed in U.S. Bankruptcy Court for the District of New Mexico this week, American Home Furniture is the latest retailer to fall victim to the crushing expense of running a brick-and-mortar store operation/network in today’s market.
Citing between $1 million and $10 million in assets, the company cited a similar amount of liabilities, with dozens of creditors now waiting in line to be paid what they’re owed.
The list of creditors with the 20 largest unsecured claims includes 18 well-known furniture brands owed more than $1.9 million. Together, they represent 88% of the $2.17 million in claims overall among the listing of these largest unsecured creditors.
For a retailer with four stores, including two in Albuquerque, one in Santa Fe and one in Farmington, that’s still a lot of furniture to sell to pay those bills, not to mention any remaining claims that are above and beyond the Top 20.
The bankruptcy also highlights the struggles retailers face today in running a brick-and-mortar operation that employs dozens if not hundreds to thousands of employees across many physical locations.
In addition to paying all those salaries and benefits, retailers shoulder the cost of inventory, real estate, marketing expenses and showroom set-up and décor, which changes at least twice a year as new products arrive. There are also utilities, electricity, freight to deliver products to customers’ homes, plus employee travel expenses, including attending two to four markets a year, not counting shows overseas.
This equates to major financial pressure, particularly as they compete with pure-play e-commerce operations that may have many of these same expenses, but don’t have the added cost of real estate needed to show products on the floor. Instead they have an endless digital aisle that costs far less to maintain than a physical retail store operation although many e-commerce players have more capital tied up in inventory.
With all the costs involved, physical stores continue to be challenged, even if they sell product at 50%-70% margins. Certainly tariffs have managed to help raise price points, but at what expense? Surely retailers too have borne some of the added costs, while still trying to be as competitive as possible in a challenging market.
Thus it’s likely increasingly difficult for some retailers to know for certain whether they are making money or not. This is particularly the case with slow-turning inventory that is simply taking up space on the floor or in the warehouse.
Of course, retailers finding themselves in the same position as American Home have a chance to reorganize their business, whether it be closing stores, cutting staff or winnowing down inventory at reduced prices.
But there obviously are bills to pay amid all this upheaval. Unfortunately, many creditors end up receiving much less than they are owed, thus leaving very little to show for their own best efforts.
But in this environment, which continues to be challenged by a slow housing market, we hope there’s still plenty of opportunity ahead for American Home Furniture and the industry overall despite the greater macro issues facing the economy.
Below is a listing of the furniture companies listed among the creditors with the Top 20 unsecured claims in the American Home Furniture Chapter 11 bankruptcy.
+ Bernhardt Industries – $328,319.58
+ Ashley Upholstery – $189,822. 86
+ Best Chairs Inc. – $170,327.26
+ Aspen Furniture – $168,534.94
+ Bassett Upholstery – $163,463.16
+ A-America Domestic – $159,266.74
+ Ekornes – $111,199.57
+ Flexsteel Industries – $97,493.80
+ Woodbrook Designs – $92,518.69
+ Homestretch – $80,307.05
+ Crestview Collection – $76,553.11
+ Hooker Imports – $59,852
+ Max Home Imports – $53,762
+ Four Hands – $47,311.39
+ England Furniture – $42,671.87
+ Armen Living – $40,580.52
+ Era Nouveau – $39,59358
+ Jason Furniture Co. – $37,690.85
