Wickes asks for deferrals
Says delay needed to obtain new equity
By Clint Engel -- Furniture Today, January 13, 2008
Wheeling, Ill. — Wickes Furniture is asking suppliers to sign an agreement that would postpone the retailer's payment of its past-due debt until July 2009.
In a draft document of a "vendor modification agreement" obtained by Furniture/Today, the Top 100 chain said that Wickes Holdings LLC, possibly with other investors, has agreed to invest $10 million of new equity into the retailer if Wickes obtains concessions from its merchandise vendors.
The proposed agreement lays out the total past-due amount the retailer owed the supplier as of Dec. 31, then proposes that Wickes will repay one-sixth of the amount monthly over six months starting July 31, 2009.
It's unclear how many of Wickes' suppliers have received a copy of the proposed agreement for their signature. Five sources said they have received the letter, and two said they believe all Wickes sources with past-due amounts will be getting a copy.
Wickes President and CEO John Disa declined to comment except to say, "What we choose to do with our vendor partners is our business."
John Foster, chairman of importer American Woodcrafters, said he had received the letter and has no intention of signing the agreement. He wouldn't disclose what American Woodcrafters is owed but said his company is a small source for Wickes, supplying one case goods line at a starting price point.
With the Wickes proposal to defer payments, "all the liability is on the vendors," Foster said.
Another industry source, who was familiar with the plan but declined to be identified, said the retailers' investors appear to be asking vendors to share some of the company's financial burden by offering some relief until the marketplace turns around.
"Retail is tough," the source said. "Everyone is sitting with fixed lease (expenses) and fewer people coming into the stores. You can only cut so much out."
The type of concession Wickes is asking for is not unheard of, said Jerry Epperson, industry analyst and managing director of Richmond, Va.-based Mann, Armistead & Epperson. But he said it's the first one he is aware of that's coming from a retailer with a private-equity backer like Wickes' owner Sun Capital Partners.
"Usually, these stores are stand-alone operations, and in order to stay in business, they ask for their suppliers to help," he said.
The length of the deferral requested — 18 months — also seems unusual, he said. Typically, it's more like six to nine months.
"Maybe it makes more sense to address it seriously up front, since there is no sign of this malaise turning around," he said.
Epperson said he believes Wickes suppliers are likely to sign the agreement because the retailer is a growing company backed by a major private-equity firm with a large stake in the industry. "We're in a situation right now where manufacturers may take a little more risk because there isn't much business out there," he said.
"What's the alternative (to signing)?" asked one supplier, who did not want to be identified. "During these times, we need to keep every retailer we can going."
Wickes, which has about 43 stores in greater Chicago, Las Vegas, Los Angeles and Portland, Ore., is No. 19 on Furniture/Today's Top 100 list with estimated 2006 sales of $450 million.
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