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Sudden exit for Berkline

Retailers scramble to fill floor slots

Mark Battersby, Larry Thomas -- Furniture Today, May 2, 2011

HIGH POINT — The sudden demise of Berkline, which ceased operations three days before the start of the High Point Market, sent retailers scrambling to replace the floor slots that had been occupied by the now defunct motion upholstery producer.

Companies that once competed with Berkline said buyers were looking to fill those slots quickly, and vendors offering domestic production or a sizeable domestic warehouse stock believe they are in the best position to get that business.

"The problem (for Berkline dealers) is that they have samples on the floor, but no inventory to back it up," said Chuck Tidwell, vice president of merchandising and product development at Franklin. "That's just dead space for them."

Franklin and several other upholstery producers used the market as an opportunity to gain additional business, and most emphasized their ability to ship product quickly.

"We think our domestic production gives us an advantage," said Greg Roy, president of Lane. "We can crank up new production lines quickly if we need to."

Franklin, Lane, Catnapper, Southern Motion, La-Z-Boy, Best Home Furnishings, Klaussner and Palliser are among those with North American production that could benefit almost immediately, executives said, although importers such as Man Wah/Cheers also could gain business because of their high volume and low cost structure.

Executives agreed that Berkline was the market share leader in home theater seating, and vendors such as Palliser and Lane, in particular, see big opportunities in that category.

"The category grew over 40% for us last year, and we think we can grow it even more this year," said Palliser President Cary Benson. "We believe Berkline was the only company that was doing more home theater business than us."

Lane helped its cause by hiring Bo Morrison, Berkline's former merchandise manager for recliners and home theater.

Roy noted that Lane's latest national advertising campaign positions the company as a leader in home entertainment furniture, and said the disappearance of Berkline presents even more opportunities for new business in the category.

"We've already experienced some good gains in home theater ... and we will continue to benefit from it," he said.  "But whenever one competitor goes away, there will be at least two new ones taking their place."

Berkline suddenly ceased operations March 30 after the financially troubled company was unable to find a buyer.

Sales representatives and other employees were in the midst of preparing the company's showroom on the fourth floor of High Point's Showplace building when the shutdown was announced. Product samples were quickly moved out and the showroom doors were locked shortly after the announcement was made.

The company said its assets will be liquidated to pay down debt. It's not clear if a Chapter 7 bankruptcy filing will be made.

Berkline said it hired a financial advisor earlier this year to "explore strategic alternatives and pursue a sale" as a going concern. However, the company said it was unable to find a buyer and secure the needed financing.

Sources familiar with efforts to sell the company told Furniture/Today that at least two furniture companies seriously considered buying Berkline as part of a Chapter 11 bankruptcy filing, but backed away when Berkline couldn't line up financing to continue operating under Chapter 11 protection.

If either of the two deals had been completed, the potential buyer would have been the so-called stalking horse bidder for Berkline's assets after the company filed for bankruptcy, sources said.

The investment firm Sun Capital Partners, which acquired controlling interest in the company in 2007, refused to pump additional money into Berkline or provide financing for a sale, sources said.

Berkline, whose annual sales topped $400 million as recently as 2006, had $140 million in sales last year, sources said.

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