Dive Brief:
- The New York-based home goods retailer ABC Carpet & Home filed for Chapter 11 bankruptcy with plans to sell itself in a court-supervised process.
- In court papers, the retailer's CEO blamed a litany of COVID-19-related issues for its distress, including last year's store closures, supply chain delays, and difficulty finding buyers or investors to fund a turnaround.
- The company has a stalking horse bid and bankruptcy financing agreement from an entity named 888 Capital, which is controlled by the financial firm Regal Investments with a minority interest held by Paulette Cole, the great-granddaughter of the retailer's founder.
Dive Insight:
ABC Carpet & Home's roots go back to 1897, when Cole's great-grandfather sold rugs out of a cart in Manhattan's Lower East Side. Decades later, Cole's grandfather opened a rug store, which, in 1961, moved to a two-story location on Broadway.
The company added stores and categories, going on to become a "chic home furnishings emporium" offering antiques and products made by designers around the world, according to ABC CEO Aaron Rose. By 1988, the retailer's carpet division alone was worth $60 million in revenue.
It eventually added stores in Florida and London. In the 2010s, the retailer downsized and closed some of its locations, including the Florida store. Today, ABC operates its store at 888 Broadway — which accounts for the majority of its revenue — an outlet location in Brooklyn and an e-commerce site, as well as warehouses in Long Island City and New Jersey.
Rose said that ABC "occupies a unique position in the market at the apex of socially conscious, inspired living, quality and modern home furnishings and floor coverings." The company has roughly 150 employees and works with 1,000 vendors worldwide, spending about $30 million a year on merchandise. Cole took over the business as CEO in 2003 and served until 2019. She is currently its controlling owner, and serves as a board member and ABC's creative director.
In recent years, the company has tussled with landlords over construction disputes, and Rose said the company currently owes "approximately $3.5 million in back 'rent.'" Construction delays at the company's flagship building, as well as shifts in consumer preferences and the uptake of e-commerce — which Rose acknowledged the retailer was slow to transition to — led to sales declines.
The pandemic, which brought store closures, foot traffic declines and supply chain backups, made things worse. From January to July this year, ABC made negative EBITDA and less than half the revenue it did in the same period in 2017, a year in which it made $100 million in total.
ABC has searched on and off for a buyer since April 2020, but in the early months of the pandemic it couldn't find any takers. It filed for bankruptcy on Wednesday with a stalking horse bid from 888 Capital that includes a credit bid worth about $15 million as well as $300,000 in cash for assumed liabilities.
The stalking horse bid would be subject to higher offers in an auction process, if other qualified bids emerge. Rose said the goal in bankruptcy is to maintain ABC as "a viable business." The company hopes to hold an auction by Oct. 22 and to close on a sale of the company no later than Oct. 31.
