Six-store Canadian retail chain to liquidate
Owned by Stan West, operation includes four Furniture Direct stores
By Michael J. Knell -- Furniture Today, May 21, 2007
Kitchener, Ontario — An unexpected and quick decline in sales coupled with a spurt of negative press have led to the bankruptcy of a six-store furniture retailer in southwest Ontario, owned and operated by industry veteran Stan West.
One of West's companies operated two high-end stores — Home Fashion Market in Waterloo and Stan West Interiors in Mississauga — while the other ran four units under the Furniture Direct banner in Pickering, Mississauga, Kitchener and London, Ontario. Furniture Direct mainly sold product from Ashley Furniture.
The filing took place in late April, and all six stores are closed for an inventory of assets.
"We are quantifying the business," said bankruptcy trustee Susan Taves of BDO Dunwoody. "This is not a restructuring. The company will not be resurrected. We are preparing to raise funds to provide for an orderly liquidation."
Taves indicated that inventory not belonging to customers will be sold sometime soon. "We are moving towards some type of liquidation or sell-off. We're trying to stabilize a very unstable situation."
About 4,000 customers have made deposits and there are about 20,000 pieces of furniture in the companies' warehouses, she said.
According to court papers, the two companies owe C$9.5 million and have assets of about C$3.6 million. Customer deposits were valued at approximately C$3 million. The company's assets are mainly inventory, vehicles and office equipment.
A meeting of creditors is scheduled for May 28.
Stan West, president of both Home Fashion Market and Furniture Direct, said he was forced into bankruptcy by the Canadian Revenue Agency, which seized the company's bank accounts in late April.
"It was sudden and a bit unwarranted," he said in an interview.
The company had grown rapidly in the past four years, he said. In 2003, West had one store — Home Fashion Market — with sales of about C$5.5 million. With six stores last year, sales came to about C$30 million.
"We had a dip in sales across all our stores last fall and product wasn't flowing through as fast as it should have," he said. He said a slowdown in cash flow caused the company to fall behind on certain obligations, including remittances of employee withholding taxes to the government, although he said he believed that he had negotiated an arrangement to pay those obligations.
A few weeks ago, a television station in London, Ontario, ran a story about Furniture Direct customers complaining that ordered merchandise had not been delivered.
"They put together a scathing report without even talking to us," West said, adding that while the companies were having problems with deliveries, they were addressing the problems.
West said he believes the Canadian Revenue Agency froze his assets after the news reports, believing the companies wouldn't be able to meet their obligations.
"What we got caught in was a series of misfortunate events," he said.
He added that the companies tried to raise capital to continue operating. "We've been in business for 15 years. Our stores were doing between C$300 and C$425 a square foot in sales and we've had a lot of growth in recent years. But in the current business climate, raising capital is pretty tough," he said.
West believes he simply ran out of time to save his business. "We didn't get the opportunity to reorganize ourselves," he said.
Among the creditors for Home Fashion Market and Stan West Interiors are West Bros., owed C$221,517; Broyhill Furniture, C$220,000; Stanley Furniture, C$119,227; Lexington Home Brands, C$81,515; Ferretti Interiors, C$53,234; Bermex International, C$50,461; and, Bernhardt Furniture, C$50,461.
Furniture Direct has only two large industry creditors: Ashley Furniture, owed C$476,600, and Sealy Canada, owed C$41,000.
