A month after ABC Carpet & Home landed on bankruptcy watch, the New York City home furnishings institution officially sought Chapter 11 protection Wednesday.
The retailer filed in U.S. Bankruptcy Court in the Southern District of New York, listing assets of up to $50 million and as much as $100 million in liabilities in its petition. ABC revealed gross sales to July 31, 2021 were approximately $25.46 million, roughly half of what they were in the same 2018 period.
Known for extravagant, luxury products across home categories like rugs, décor, furniture, bedding, pillows, linens, dinnerware and lighting, ABC did not immediately respond to Sourcing Journal’s request for comment.
“ABC Carpet & Home is in advanced discussions with a strategic investor who has provided funding for the company’s operations and is developing a long-term financial plan that will continue the company’s legacy,” CEO Aaron Rose said in a statement to Bloomberg. “Business is operating as usual during this process.”
The business said it has reached the point that further deterioration, without near-term funding, would likely require the company to cease operations.
“Accordingly, the debtors (ABC Carpet & Home) have determined in their business judgment, after exploring various strategic options, that a sale of substantially all of their assets as a going-concern is in the best interests of their creditors and estates,” the petition said.
As part of the filing, 888 Capital Partners would give the luxury furniture retailer a debtor-in-possession (DIP) loan of up to $5.7 million upon the petition’s approval, with $2.25 million to be advanced immediately following the entry.
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Like many other New York City businesses, ABC Carpet & Home stores saw a precipitous decline in shoppers as many of the company’s target demographic decamped to greener pastures at the height of pandemic disruption. The furniture seller’s 60,000-square-foot Union Square flagship remained under renovation throughout the pandemic, making access difficult for shoppers. To make matters worse, the retailer had struggled to pay rent for the building since reopening last summer, falling behind by $1 million.
With roots reaching all the way back to 1887, the home retailer is still a digital newbie, only launching a modernized e-commerce site in February last year, just weeks before the pandemic forced non-essential retailers to close. Given that ABC Carpet & Home exclusively sells high-ticket items that shoppers likely want to view and experience in person, like a $6,400 Alchemy silk rug or a $3,480 Callie sofa, e-commerce couldn’t quite match the benefits of brick-and-mortar. However, visitors to the site can book virtual appointments with store associates.
The 125-year-old business operates a second store in Brooklyn’s Industry City, which first broke ground in 2017, moving to a new location in May this year. The 20,700-square-foot outlet store includes more than 4,000 handmade rugs and features a custom bar where customers can consult with both furniture and carpet specialists to customize pieces or access expert advice on specific styles.
With the help of advisors B. Riley Financial Inc. and Greenberg Traurig, ABC Carpet & Home had sought out new financing or a buyer for more than a year since a private equity sale to MHR Fund Management fell through.
The bankruptcy filing revealed that the retailer has more than 30 unsecured creditors with trade claims, plus bank debt of more than $15.5 million owed to wealth management fund Northern Trust. furniture manufacturer Mccreary Modern, Inc., Japanese carpet and rug manufacturer Ashoka Creations, Indian carpet manufacturer Art Palace and freight shipping and trucking company DFC HD, Inc. are among those stuck holding the bag. Thirteen of the trade claims exceeded $100,000.
According to a report from The New York Post, the legacy brand and its assets have drawn interest from buyers ahead of an auction officially taking place. Several interested buyers already have submitted bids, with the first from a consortium of Iranian rug merchants alongside private equity firm Windsong Global and brand licensing firm Hilco Brands. The parties are hoping to be selected as the stalking horse bidders, meaning the party that sets the initial, minimum bid, the report said. In July, Windsong and Hilco became the stalking horse bidders for the high-end Aquatalia footwear brand.
Burch Creative Capital, which is led by Chris Burch, who co-founded Tory Burch and was previously married to the celebrity designer, also is interested, the report said. 888 Capital Partners, which provided the DIP financing, is another potential bidder, a Bloomberg report said.
Whoever wins the bid will determine the scope of potential layoffs, but WARN notices went out to company employees this week, according to the filing. New York requires employers with more than 100 workers to give 60 days’ notice before cutting more than 50 employees under the state’s Worker Adjustment and Retraining Notification Act.
Amma421, the special purpose real estate LLC that ABC’s fourth-generation owner and creative director Paulette Weinrib Cole established for the retailer, already filed for bankruptcy in July. The Post reported in August that Cole used her own personal funds to keep the business afloat during the pandemic. Cole is the leading shareholder in the company, owning 36 percent of shares, while her daughter, Lena, owns another 18 percent, making the family the majority shareholders at the time of the bankruptcy.
If the company is sold in an auction, it would be the first time in more than a century that a descendant of carpet peddler and brand founder Sam Weinrib is not intimately involved in the business.