Days after quietly beginning to liquidate its stores, the parent company of paper goods specialist Papyrus filed for bankruptcy.
The greeting cards and stationery retailer buckled under debt left over from an expansion as well as from pressure in brick-and-mortar retail, according to court documents.
After efforts to keep the business afloat, including through talks with landlords and a major supplier, the company filed for Chapter 11 with an agreement with liquidation firms to shut down all of its stores. Retail Dive reported last week that the company planned to close its stores and had begun unannounced going-out-of-business sales.
Schurman Fine Papers, which owns SFP Franchise Corp., the entity that filed for bankruptcy, controls the Papyrus chain as well as Paper Destiny, American Greetings and Carlton Cards retail stores. Today the company, headquartered in Tennessee, operates a total of 254 stores under its banners (178 in the U.S. and 76 in Canada) and has about 1,100 employees in the U.S.
Founded in 1950 by Marcel and Margrit Schurman, the Schurman group started out as an importer and wholesaler on the principle that there was a U.S. market for "greeting cards and stationery that intersected with the world of fine art," Craig Boucher, a senior managing director with Mackinac Partners working as a restructuring officer for Schurman, said in court papers.
After opening its first store in Berkeley, California, in 1973, the company gradually grew into a national specialty retailer. During the 1980s, Dominique Schurman, the daughter of the founders, took over leadership of the company as it further built out its retail business to complement its wholesale distribution.
According to Boucher, debt taken on during the company's rapid expansion "led to a period of over-leverage" just as the financial crisis in the late 2000s hit, putting the company into financial distress.
In 2009, the company sold off its wholesale business, including the Papyrus brand, to American Greetings while taking on American Greetings' retail unit, leaving the Schurman group with more than 500 stores. Under the deal, American Greetings agreed to supply Schurman's retail stores with products.
Refurbishing and closing stores it acquired from that deal added to Schurman's capital costs, at a time when much of the specialty brick-and-mortar industry went into a downturn. Even with those struggles, the company made $157.5 million in revenue and $700,000 in EBITDA in fiscal 2019.
Over the past two years, the company tried to fix its financial and operational woes, including through talks with landlords to gain concessions, negotiating credit terms with American Greetings and through talks with "strategic partners" about a possible sale or recapitalization, Boucher said.
But before the company could reach any potentially life-saving deals, American Greetings, on Dec. 5 — in the throes of the holiday season — told the Schurman group it was in default on its supply agreement and stopped shipping products to the retailer. That "had an immediate negative impact on [Schurman's] business operations," Boucher said.
Unable to strike a deal, Schurman opted to liquidate and filed for Chapter 11. (Boucher said in court papers that the only alternative would be a Chapter 7 bankruptcy overseen by a trustee, which he argued would immediately lead to thousands of job losses while assets would liquidate for less value.) By the time it filed, the company had total liabilities of $54.9 million.
Dominique Schurman told employees last week, in a letter viewed by Retail Dive, that the move to wind down the retailer was "heartbreaking for me, personally of course, and also because I know how dedicated you all have been to your stores and this company."
In a statement on its Facebook page Thursday acknowledging the liquidation, Papyrus told customers that "we hope that through our artistic, thoughtful greeting cards and personal expression products that we were able to inspire you to celebrate and honor the special people in your lives." The post had more than 700 comments at press time.
