Carls Furniture plans to emerge from bankruptcy with three stores
Retail president cites housing slump and landlord issues as reasons for filing
Clint Engel -- Furniture Today, May 26, 2011
COCONUT CREEK, Fla. — Carls Furniture, which filed for Chapter 11 bankruptcy protection Tuesday, said it intends to emerge by the fall of 2012 with three stores.
The seven-store Coconut Creek, Fla.-based retailer cited weak business, the housing slump and an "uncooperative landlord," for its decision to file, and President Jeff Baker elaborated on some of the Top 100 company's trials in a declaration filed in U.S. Bankruptcy Court Wednesday.
Baker said Carls had operated profitably over many years in business in South Florida. But when the 2007 recession hit, it "suffered a huge decrease in its business because of the housing crisis, the banks tightening credit and other reasons."
He also noted that Carls has been in a dispute with the landlord of its North Dade locations - one of the stores targeted to close - and has been paying less than full rent there for some time. The landlord filed an eviction action, but that was stayed by Carls bankruptcy petition, the document said.
In a statement, Carls said its goal is to restructure "to assure its successful continuing operations." Two of the retailer's board of directors, Myron Baker and Robert Dragin, said the seven-store chain will close unprofitable stores in the next 60 to 90 days and "obtain reduced rent on the continuing stores."
Two of Carls' seven stores - in Boca Raton and Kendall - have been in the process of liquidating and the locations will be taken over by Havertys and Baer's, respectively.
In his declaration, Jeff Baker said the company "intends to close its locations in South Dade, North Dade and Lauderhill and operate its locations in Coconut Creek, Fort Lauderdale and Pompano Beach. However, in a phone interview, when asked what stores could close in addition to two already in the process of liquidating, Baker said, "At this point that's all that we're sure (of, but) there are a couple of other locations that are possible."
In the filing, anticipated by many in the industry for some time, Carls listed assets of $6.1 million and debts of $9.1 million. A dozen industry-related companies are listed among its 20 largest unsecured creditors and owed $2.4 million, led by Klaussner with two claims listed - $366,683 for inventory and another claim listed for JDI Klaussner for $218,902.
Other industry creditors include Century, owed $292,896; Leather Trend, owed $199,379; and Lane, owed $189,946, according to court documents. All told, unsecured creditors are owed $8.3 million, according to court documents.
In a release, Carls said many of its top suppliers tried to continue working with the retailer "but were unable to do so because of a single uncooperative landlord."
"After months of unsuccessfully trying to restructure our debt, payables and leases, we were left with no choice but to file Chapter 11," the company said.
Carls is unaffiliated with Carls Patio, which is unaffected by the bankruptcy, Carls Patio said in its own release. Court records show Carls Furniture still owns a 10% stake in Carls Patio. It sold its majority interest in the outdoor chain in 2008 in a buyout led by Carls Patio management and investment firm Weinberg & Bell.
Baker cited falling housing sales on the subsequent drop in furniture sales, and said the filing will enable the retailer to stay open while reorganizing. He wouldn't disclose 2010 sales, but said they were down dramatically from the year before "because of our economic problems."
Jeff Baker also confirmed that the retailer's owners are behind debtor-in-possession financing that has been secured and, according to the company, is "subject to landlords executing the agreed upon rent reductions."
The retailer said it plans on honoring all customers' deposits.
Staff writer Heath E. Combs contributed to this report.
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