Sofa Express files Ch. 11
Chain will close; Klaussner owed $18.1M
By Heath E. Combs and Clint Engel -- Furniture Today, December 9, 2007
Groveport, Ohio — Top 100 store chain Sofa Express Inc. last week filed for Chapter 11 bankruptcy in the Middle District of Tennessee, where it is incorporated.
Manufacturer and importer Klaussner, which owns Sofa Express, is the largest unsecured creditor listed in the filing, owed $18.1 million. Spring Air is the second largest, owed $334,994.
Earlier, officials at the Groveport-based retailer and at Klaussner declined to comment on whether the chain would file for bankruptcy, even as it sent letters to local government officials and store managers saying it planned to close its stores, distribution centers and Ohio offices.
The letters to store managers said the retailer had attempted to "secure our financial future" but "has determined that it must close your facility due to its financial situation, resulting in the termination of your employment."
Sofa Express bankruptcy court filings point to losses stemming from a worsening economy, and expenses sustained with the move from a mainly upholstery lineup to a full-line furniture store format in 2005.
Increased sales from the expanded format didn't provide enough revenue to cover occupancy and expansion costs, the documents said.
In 2006, Sofa Express had revenues of $211 million, and $262 million in expenses, according to the documents. Revenues for 2007 had been projected at $166 million, but were below that figure at $144 million with one month remaining, and $160 million in expenses.
Sofa Express said in the documents it had sought a buyer, but was unsuccessful.
In a statement released after the bankruptcy filing, company officials cited sales declines, coupled with increases in fuel and other distribution expenses, as having hurt performance and the ability to cover operating costs.
"Over the first half of this year, we made some very positive strides in improving our performance," Sofa Express CEO Woolard Harris said in the release. "The impact of the uncertainty in the housing market resulted in a significant downturn in our business that we simply did not have the means to withstand.
"Given the challenges currently faced by the entire home furnishings industry, you've got to be nearly perfect to survive," his statement said.
Harris was unavailable for further comment.
The retailer, doing business as Sofa Express and More, ranked No. 40 on Furniture/Today latest list of Top 100 furniture stores, with estimated furniture, bedding and accessory sales of $206.9 million in 2006.
The company said it intends to close the remainder of its 41 stores, which are mostly in Ohio, Tennessee and the Carolinas.
Industry companies among the largest 20 unsecured creditors are owed about $19.4 million. In addition to Klaussner and Spring Air, they include Liberty Furniture, owed $289,865; Steve Silver, $169,857; Stein World, $139,866; Magnussen Home, $123,195; Guardian Products, $91,634; Powell, $81,840; Dalyn Rug, $77,477; Tempo Lighting, $64,209; and Riverside Furniture, $49,474.
At least 450 employees in 15 of the stores will lose their jobs, according to closing notifications sent to Ohio and North Carolina state and city government officials.
An employee at one of the company's Ohio stores said the letter sent to store managers was the first corporate communication from Sofa Express since a notice three weeks earlier, when stores were told to stop taking custom orders.
Sofa Express officials said it may take months to liquidate stores and distribution centers. "We intend to keep our employees fully informed as we move forward with the liquidation," Harris said in the statement.
Klaussner referred question to Harris and declined comment last week.
Klaussner purchased the 27-store Sofa Express and the 19-store Madison, Tenn.-based Sofa Connection chains in October 2002 through affiliate Harmony Investment Co.
The plan was to grow the chain as Klaussner looked to expand distribution into territories where it had little penetration.
Combined store sales after the acquisition were $180 million, and peaked in 2005 at $226 million from 73 stores.
In November 2006, Klaussner said it would close more than a third of the stores and exit five metro markets — Atlanta; Tampa, Fla.; Louisville, Ky.; Las Vegas and Charleston, S.C.
The move left Sofa Express with 39 company-owned full-line stores and four licensed units. Klaussner supplied an estimated 90% of the product offered at Sofa Express.
Klaussner said in September 2007 that it had opened four licensed stores as part of a new chain called Klaussnerhome. Some licensed Sofa Express units have been converted into Klaussnerhome stores.
Officials have said the new chain could grow to as many as 100 stores by the end of 2009.
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Sofa Express chain files for bankruptcy
Dec 7, 2007
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