Art Van’s bankruptcy filing fueled by declining sales, “operational challenges”

Warren – On the first official day of Art Van Furniture’s bankruptcy, the business was leasing trucks.

The 61-year-old furniture and mattress retailer filed for Chapter 11 bankruptcy Sunday night in Delaware, three days after launching clearance sales at most of its 190 stores.

On Monday afternoon, the expansive grounds of its furniture store, headquarters and warehouse on 14 Mile in Warren looked like a U-Haul lot as customers – some bargain hunters, some trying to recoup the investment. that they had made weeks ago – waited hours to pick up their merchandise.

Dozens of rental trucks joined pickup trucks, SUVs and a red Mazda3 subcompact in an afternoon crowd of over 300 vehicles, heading for a loading dock beyond a door manned by uniformed security guards.

At the end of the tidy, albeit mysteriously organized, queue at 4:30 p.m., Rich Laviolette of Durand idled in a full-size truck he had paid $ 100 for the day. Her daughter had paid $ 4,800 for a bedroom set and a sofa bed three weeks ago, and the newly bankrupt Art Van is not offering any refunds or shipping.

“They told me it was six hours from here,” said Laviolette, 51, who was scheduled to check in at GM’s Flint Truck and Bus at 10:30 p.m. “But they’re supposed to close in two and a half hours.”

From the top of the cabin, he shrugged: If the warehouse turned off the lights before its turn, “I might even cancel work and stay overnight.”

Following:‘Heartbroken’, ‘angry’: Art Van shutdown shocks clients and city leaders

On its new stripped-down website, www.artvan.com, the company announced on Monday that its Art Van Furniture stores and independent PureSleep stores would reopen to customers from 2 p.m. to 7 p.m. on Monday, and then Tuesday through Sunday from 10 a.m. to 7 p.m.

A long line of vehicles wait to enter the Art Van warehouse to be picked up by the customer in Warren on Monday.

The company’s liquidation sale began on Friday, but large crowds and angry customers – especially at the Warren flagship store and warehouse, where police ordered the shutdown – resulted in an early shutdown on Saturday.

The customer service line, (888) 427-8826, has been largely impenetrable since the end of last week. The company suggested that questions be asked there from 9 a.m. to 6:30 p.m. Monday through Friday, 9 a.m. to 2:30 p.m. on Saturday, and noon to 5 p.m. on Sunday.

Detroit News reported Friday that collateral purchased by customers is likely rendered worthless by bankruptcy.

Deposit refund requests, the Art Van website said on Monday, “will be given as store credit. There is no money in store.” This means that customers should select something already in stock.

Customers can wait after liquidation for a potential refund, the company said, but “a cash refund cannot be guaranteed if you choose to do so.”

Loan default

The sudden decline of the business founded by Art Van Elslander in 1959 with a single store angered observers such as Warren Mayor Jim Fouts, who attributed its collapse to “investment greed”.

“It shouldn’t have happened. It was a successful business,” Fouts said Thursday. Warren has come to rely on the $ 2 million plus in taxes he receives from Art Van each year.

The Van Elslander family sold the chain in 2017 to Boston-based private equity firm Thomas H. Lee Partners.

The bankruptcy filing contains a list of Art Van’s 30 largest unsecured creditors who owe more than $ 60 million. The largest of these is the Sussman Agency, a Southfield-based advertising company that owed more than $ 7.8 million. The Monroe-based La-Z-Boy Chair Co. owes nearly $ 5.2 million.

In a statement supporting the case, David Ladd, Chief Financial Officer of Art Van, wrote: “Given the continued decline in profitability and operational challenges over the past three years, and despite the best efforts of the company and its advisers to obtain the capital necessary to preserve the whole business as a business, the business is simply unable to meet its financial obligations. “

Ladd’s 32-page statement reveals some details about Art Van’s decline, challenges in finance, strategy and leadership, and a pattern of expansions or acquisitions that have proven to be unprofitable. The sale of the company to the private equity firm included the sale and leaseback of Art Van’s real estate portfolio.

“The proceeds from the sale-leaseback transaction were used to fund the purchase price paid to the selling shareholders,” and similar transactions took place when Art Van acquired Levin Furniture and Wolf Furniture later in 2017, according to the filing for bankruptcy.

Art Van’s same-store sales have declined quarterly since June 2016, Ladd wrote. Beyond that, “increased fragmentation and intense competition” both on the digital front, from Amazon, and in retail, from stores like Ashley, have hurt the company.

Art Van also faced a number of “operational challenges,” Ladd wrote, ranging from a failed expansion in the Chicago market to the departure of eight of its top nine executives in 2017 and 2018.

A November 2019 adjustment to Art Van’s asset-backed loan with Wells Fargo increased its line of credit from $ 60 million to $ 82.5 million. This loan would result in the dismantling of the company through liquidation and now bankruptcy.

Just two months after his line of credit increased, Ladd wrote, some of the company’s financial partners began to demand additional collateral and restricted access to credit due to the company’s poor financial results. These included credit card processing companies “critical to the company’s ability to accept credit cards in stores and online.”

The company defaulted on the Wells Fargo loan and began planning a “to preserve value” abandonment sale.

Following:Art Van stores to “regroup” remain closed until Monday afternoon

End of line

Donald Thurmond of Ferndale had been assured that the kitchen table and chairs he and his wife had purchased in markdown at the Warren store on Saturday could be picked up the following afternoon. Instead, the facility was shut down, meaning it had wasted a $ 30 rental fee for a pickup truck and had to come back on Monday at a higher rate.

His furniture had looked like a steal at $ 320. Waiting in one of the multiple diagonal rows for his turn to engage in a long looping line, he reassessed, “It really adds to the cost of this set of tables.”

The few customers in the showroom on Monday afternoon were outnumbered by staff, perhaps because it was an ordeal just to reach the parking lot: to cross two-fifths of a mile of Mound Road to the east. on 14 Mile took 20 minutes.

However, sales were made. The driver of the Mazda3, an Oak Park dental hygienist, paid $ 159 for a $ 200 chandelier. She said she was given three days to pick it up and there had been no refund. So, more than two hours after the start of the line, she was focusing on the beauty of her home.

Victor and Kathy Juengel drove through hours in their white Chevy Silverado to collect the layaway their daughter hastily paid after the liquidation announcement.

“What are you going to do?” Victor asked behind the wheel of his muscular pickup. “We are helpless.”

Kathy said she was sad about what was happening to the business. Art Van Elslander, she said, “is probably rolling around in his grave.”

Slowly.

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