Texas retailer owes furniture to 4,500 customers

Says faulty computers, theft ring added to troubles

Heath E. Combs -- Furniture Today, June 7, 2010

SAN ANTONIO — Furniture Factory Warehouse, which filed for Chapter 11 bankruptcy protection May 28, said in court documents that it owes furniture to more than 4,500 customers who have placed $700,000 in deposits.

The 12-store retailer also reported owing about $1.3 million in unsecured trade payables.

FFW OPCO, the owner of the Furniture Factory Warehouse stores, told the bankruptcy court in Dallas that it had lost money each year since it purchased the retailer from the Giles Group in 2007. It also said it has had difficulty obtaining credit, and that sales have dropped since the economic downturn started in 2008.

FFW said it is in default on loans, including $400,000 still owed on a loan made in late 2007 and $1.2 million owed as part of the $1.68 million in notes it used to purchase the business.

FFW also said that shortly after it bought the business its computer servers malfunctioned, resulting in the loss of customer orders and deposits, inventory information, and financial and business records.

While working to resolve those issues, the company discovered a theft ring - which it said likely developed as a result of its inability to track inventory because of the faulty servers - in its San Antonio distribution center, resulting in a loss of $60,000 to $100,000.

The company is planning liquidation sales at its 12 stores in south Texas to be conducted by Planned Furniture Promotions, subject to bankruptcy court approval.

Paul Thompson, a company manager, said in a press release that the decision to liquidate was a result of "unfavorable financial conditions, including a sustained decline in furniture sales."

In addition to Thompson, FFW's list of designated officers also includes Dan Patterson and Rick R. Rennhack. Prior to the filing, the company reported having about 150 employees.

Furniture Factory Warehouse has stores in San Antonio, Killeen, McAllen, Corpus Christi, Harlingen, Brownsville and El Paso, Texas. It had operated a 13th store but closed it before the bankruptcy filing.

The retailer's approximate annual sales were in the $26 million to $30 million range, a Planned Furniture Promotions official said.

FFW OPCO said it had leased five locations from the Giles Group, which terminated those leases prior to the bankruptcy filing. Those locations included its San Antonio, Corpus Christi, Rio Grande Valley, El Paso and Killeen stores.

In a statement, Thompson acknowledged the company's employees and loyal patrons.

He said the company chose Planned Furniture Promotions as a "highly experienced and reputable partner" in the liquidation process, and said he believed the sale would result in the best possible outcome for secured and unsecured creditors.

In its Chapter 11 filing in U.S. Bankruptcy Court for the Northern District of Texas, the company lists both assets and liabilities in the $1 million to $10 million range.

Industry companies listed among the retailer's 20 largest creditors include American Furniture Mfg., with a claim of $399,031; Ashley Furniture Inds., $254,073; Taylor Bedding, $242,556; Corinthian, $119,162; Pinnacle Sleep Products, $90,508; Trade Master, $90,002; Serta Mattress, $76,725; New Classic, $69,291; Standard Furniture, $65,489; Designs Unlimited, $54,683; and Harden Mfg., $45,304.