Tough economy, cash flow woes led to Kreiss to Chapter 11
May 8, 2013-- Furniture Today,
LOS ANGELES — A difficult economy and cash flow problems contributed to the bankruptcy filing of high-end furniture source and retailer Kreiss Collections, according to court documents.
The retailer filed for Chapter 11 bankruptcy protection last week in the U.S. Bankruptcy Court for the Central District of California.
As of the filing, Kreiss has closed all but its marquee showroom at 8619 Melrose Ave. in Los Angeles, court documents said.
The company indicated that efforts to simplify operations, use new suppliers and reduce operating expenses didn't generate enough revenue to sustain operations. Kreiss also said credit card processors have refused to turn over proceeds from credit card sales, which represent the majority of its sales.
Court documents noted that in the 1990s, Kreiss Collections implemented an expansion strategy shifting beyond design centers into retail locations - peaking at 24 showrooms in the U.S. in 2005 with annual revenue of $43 million.
The economic downturn in 2008 caused the company to close less profitable showrooms. It had closed eight by 2010 and an additional seven in 2011 and 2012. It also downsized and relocated its corporate headquarters from San Diego to Beverly Hills.
As it was filing for Chapter 11 protection or just before, it vacated showrooms in West Palm Beach and Miami, Fla., Scottsdale, Ariz., and Newport Beach and La Jolla, Calif. The company said it transferred some of the inventory from those locations to the remaining showroom in Los Angeles.
Secured creditors include the Internal Revenue Service, which has a federal tax lien against Kreiss for $260,386. However, Kreiss believes it only owes $152,940, the documents said. Rug vendors AJA Rugs and Mehitabel are also named as secured creditors but totals owed are not listed in court documents.
In bankruptcy, the company plans to conduct a liquidation sale at the remaining showroom, where it is negotiating a settlement with its landlord, to restructure its debt with the proceeds and continue to operate under Kreiss name.
Kreiss said it believes that it is currently holding inventory valued in excess of $960,000.
Kreiss has filed a motion with the court to hold a store closing sale at the Melrose Ave. location with SPCI Promotions that would begin as soon as possible and continue through Aug. 31.
Its largest unsecured creditors include Robert J. Gowing of El Lago, Texas, owed $656,500; furniture maker and restorer RC Furniture of City of Industry, Calif., $404,560; ElPaseo Enterprises, $341,899; LDC Partners, $219,356; and Gainey Village Retail Center in Des Moines, Iowa, $172,169.
Industry suppliers listed include World Market Center, owed $59,739, and manufacturer Marge Carson, $47,180.
The Chapter 11 filing listed Norman Kreiss Special Trust as having the largest equity stake in the company at 49%, followed by Michael Kreiss at 20%, Thomas Kreiss at 16% and Robert Kreiss,12%.
Kreiss Collections is a fourth-generation family owned company, which was founded in 1939 by Murray Kreiss and which initially imported novelty items from Japan, court documents said.
The first showroom was opened by Murray's son, Norman, and his wife, Eileen, in West Hollywood in 1966, importing furniture from Italy, Spain, China and Thailand.
In 1972, Kreiss began making its own furniture and initiated in-house manufacturing and upholstery operations.
The management of the Kreiss was eventually passed to Norman and Eileen's three sons, Michael, Robert and Thomas Kreiss, who is the chairman and CEO.
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