RTG to reopen some Rhodes stores
By Clint Engel -- Furniture Today, September 5, 2005
Atlanta — U.S. bankruptcy court here has approved the acquisition of Rhodes' remaining assets by a Rooms To Go affiliate and liquidation specialist Great American Group.
The move essentially means the end for Top 100 chain Rhodes, based here, and paves the way for No. 1 furniture store Rooms To Go's quick entry into the Florida Panhandle and possibly other new markets.
Rhodes Acquisition LLC, created by Seffner, Fla.-based RTG for the purchase, and Great American will pay about $45.8 million for the assets, which includes 51 Rhodes stores, three distribution centers and 12 home delivery centers, said Jeff Yellen, president of Great American's furniture division.
The stores will be liquidated and closed. Then, Rooms To Go will reopen up to 17 of the stores under its own name, primarily in new markets.
"The reason we bought our share of the (Rhodes) assets is it allows us to get into certain markets we wanted to get into a lot faster," said RTG President and CEO Jeff Seaman.
RTG now has 102 stores, and finished 2004 with 98 stores and sales of $1.42 billion. By the end of this year, but before selected Rhodes stores are reopened, it will have 103 to 105 stores and sales nearing $1.6 billion, Seaman estimated.
The Rhodes buy will help RTG grow to about 125 stores next year, he said, declining to project 2006 sales. Rhodes ended last year with 65 stores doing $439 million in furniture, bedding and accessories sales.
Early next year, after closing sales, RTG will reopen most, if not all, of Rhodes' Florida Panhandle region stores as Rooms To Go — in Panama City and Pensacola, Fla., Mobile, Ala., and Gulfport, Miss. It also will reopen a store in Wilmington, N.C., and is evaluating about a dozen other Southeastern units for possible reopening.
Seaman wouldn't identify the other locations, noting the retailer has yet to enter discussions with landlords, but said the markets would all be new ones for Rooms To Go. A few other Rhodes stores may end up replacing existing RTG units, he said.
RTG and Great American were the winners in an Aug. 8 bankruptcy court auction that went on for 14 hours and 22 rounds of bidding. At one table was RTG and Great American representatives. At the other were representatives from the "stalking horse" original bidder, The RoomStore of Richmond, Va., and Hilco Merchant Resource and Hilco Real Estate, along with an attorney representing Top 100 company American Signature.
As part of the court-approved deal, The RoomStore/Hilco, which originally bid $38.8 million, will receive a $995,000 breakup fee.
Great American, assisted by another liquidation specialist, Zimmer-Hester, expects to begin closing sales for most of the stores by Labor Day weekend. By court order, they can end no later than Dec. 31, Yellen said. He couldn't estimate how much revenue the sales will generate.
Seaman said Rooms To Go is handling liquidations for 23 stores in Atlanta and in the Orlando, Jacksonville and Fort Myers, Fla., markets.
He said there are no plans to feed the store closing sales with merchandise from RTG's existing distribution pipeline. As part of the deal, RTG bought the Rhodes' distribution centers in Atlanta and Orlando, "so we're going to have to sell (that inventory) off," he said.
Great American, along with Zimmer-Hester and Professional Sales & Consulting, also is handling the previously approved liquidation of 14 Rhodes-owned stores in Chicago, St. Louis and Louisville, Ky., including the six remaining John M. Smyth's Homemakers stores in metro Chicago.
Asked what will happen to Rhodes employees, Seaman said RTG will interview many and he thinks "there is a lot of opportunity for Rhodes employees at Rooms To Go."
Seaman said he wasn't sure how much of Rhodes top management would move to RTG.
Joel Dugan, Rhodes president and CEO since July, said key management will remain at least until Feb. 28, selling off real estate, working on creditor claims and winding down operations.
He said the lengthy auction was a plus for Rhodes creditors as it netted millions of additional dollars over the initial bid. He also praised RTG, calling its room-package concept "the best innovation in furniture retailing that I've seen in 20 years."
