Furniture retailer Conn’s filed for bankruptcy and is shutting down outlets nationwide after experiencing a slowdown in recent years that negatively affected the firm’s sales and liquidity.
The Chapter 11 bankruptcy was filed on July 23 in the U.S. Bankruptcy Court for the Southern District of Texas. Founded in 1890, Conn’s operates 553 retail stores across the country that will be closed as part of the bankruptcy proceedings. The company has started running store closing sales at some of its locations and requested the court to allow it to continue with these sales.
The bankruptcy filings were made after the company’s growth faced “significant headwinds” in recent years, CEO Norman J. Miller said in another court filing. These challenges include “drastic shifts” in consumer behavior, interest rate pressures, inflation, and integration delays and increased costs associated with the firm’s merger during 2023–24, he stated.
“The resulting slowdown in the Company’s growth has placed a strain on the company’s sales and liquidity position,” Mr. Miller said.
Conn’s key debtors reduced the debt limit available to the firm, and the company was forced to take in loans at higher costs.
The company sought alternative financing arrangements to stabilize its financial position. However, none of these attempts bore fruit.
Given the macroeconomic headwinds faced by Conn’s and the poor merger and acquisition environment in the consumer retail sector, the firm chose to commence Chapter 11 proceedings, the filing said.
Conn’s voluntary bankruptcy petition states that it has between 25,001 and 50,000 creditors, with assets and liabilities in the range of $1 billion to $10 billion.
The furniture retailer has already listed 71 stores that it intends to close down soon. The store closures affect outlets in 13 states. Florida is set to see the highest number of closures at 18, with single digits in other states. The firm has outlets in 15 states in total and employs roughly 4,000 individuals.
Shares Crash
The company’s shares have crashed significantly over the past year, with its value declining by more than 92 percent. On July 24 alone, shares fell by more than 30 percent.
Late last month, Conn’s received delinquency notification from the NASDAQ exchange after it failed to file a quarterly report for the period ended April 30. The firm was given until Aug. 19 to rectify the issues.
During an earnings call in April, Mr. Miller said not to expect “any variance” in store counts in the near future.
While “there could be some consolidation” in store numbers, “I wouldn’t expect that to happen probably until next fiscal year,” he said in the call.
Mr. Miller said that a recent acquisition made by the company would result in one-time costs in the April–June quarter. However, the company expected to produce “accelerating revenue and earnings growth through this year.”
“I want to reiterate my optimism for our path going forward. Over the coming quarters, I am confident we will start to benefit from the powerful financial model we are creating, which is supported by our premium shopping experience, best-in-class payment offerings, leading e-commerce capabilities, and unique dealer network,” he said.
Conn’s is the latest big brand to file for bankruptcy in 2024. Some of the largest bankruptcies so far this year involving companies with more than $1 billion in liabilities include IT firm Dynata, seafood chain Red Lobster, biotechnology company Invitae Corp., and Enviva, the world’s largest industrial biomass producer, according to S&P Global.
A total of 3,016 commercial Chapter 11 bankruptcies were filed in the January–June period this year, an increase of 34 percent from last year, the American Bankruptcy Institute (ABI) said early this month.
“The continued increase in bankruptcy filings reflects the growing economic strain on businesses and households,” ABI Executive Director Amy Quackenboss said.
Businesses have been battered in an environment of high inflation and interest rates. The 12-month inflation rate has been hovering above 3 percent since June last year, although some analysts calculate that it may be much higher than that.
Meanwhile, the Federal Reserve has kept interest rates within a range of 5.25 percent to 5.50 percent since July last year. This combination of higher expenses is putting pressure on businesses.
