Art Van Furniture to close its stores, begin liquidation sales

By JC Reindl - Detroit Free Press (TNS)

DETROIT — Art Van Furniture, the Michigan-based company and the Midwest’s top furniture and mattress retailer, announced Thursday it is shutting down and will begin liquidation sales at all of its company-owned stores in Michigan, Illinois, Missouri and Ohio.

The shock announcement comes just three years after the company’s sale by the Van Elslander family to a private-equity firm.

Boston-based private-equity firm Thomas H. Lee Partners bought a majority stake in Art Van Furniture in early 2017, about a year before the death of company founder Archie Van Elslander at age 87.

Art Van is expected to declare bankruptcy early next week. The filing would be a Chapter 11 reorganization, yet could potentially result in the permanent closure and liquidation of all Art Van Furniture stores — unless one or more buyers step forward to rescue the retailer.

“Despite our best efforts to remain open, the company’s brands and operating performance have been hit hard by a challenging retail environment,” Diane Charles, Art Van Furniture spokeswoman, said in a statement.

The liquidation sales will begin Friday at all Art Van Furniture, Art Van PureSleep and Scott Shuptrine Interiors in Michigan, Illinois, Ohio, Indiana and Missouri, as well as select Levin& Wolf stores in Maryland and Virginia. The Art Van stores are to close in 60 days.

Art Van has about 190 stores and about 3,100 employees. Twenty of the stores are franchise locations, situated in the company’s “outmarkets” in Michigan and in Indiana.

The Art Van liquidation and anticipated bankruptcy — nearly unthinkable a few years ago — marks the latest collapse of a popular and once-healthy retail brand in the wake of an acquisition by a private-equity firm. Payless ShoeSource, children’s clothing store Gymboree and a well-liked New York grocery chain called Fairway Market met similar fates in recent years.

Private-equity firms use debt to acquire companies, and the debt is then owed by the company. The debt loads can leave companies with little room to maneuver if business conditions deteriorate. And any problems that arise can be exacerbated by the fees that private-equity firms ordinarily charge companies in their portfolios.

A source familiar with Art Van’s finances says the company has struggled amid changes in the furniture and mattress retail business, especially the growth of online retail and decline in foot traffic at traditional bricks-and-mortar stores. Gross sales have been on a downward trend, the source said who wasn’t authorized to speak on the record.

The company also may have over expanded in recent years. Additionally, the Trump administration’s tariffs on Chinese furniture imports has had a negative impact on Art Van, according to the source.

The 2017 sale price of the company was never disclosed, but was said to be over $550 million. The company at the time had more than 100 stores.

The size of the company’s debt load from that deal also isn’t known, and may not emerge until the bankruptcy filing. A Thomas Lee Partners representative declined comment Thursday.

Trade publication Furniture Today recently reported that Art Van’s private-equity buyer led the company into sale-lease back transactions for locations Art Van had owned. That move burdened the retailer with new rent obligations at the same time its business troubles deepened, the publication reported.

“Art Van is no different than any other brick and mortar retailer that has been impacted by the retail apocalypse,” said Alex Calderone, a financial adviser and turnaround consultant with Birmingham, Mich.-based Calderone Advisory Group.

“The private equity playbook, which almost always results in aggressive use of leverage which increases the risk of failure exponentially, has not worked out for other retailers in the past and didn’t serve Art Van well either,” Calderone said. “When an investment thesis doesn’t pan out, equity sponsors tend to cut their losses quickly.”

Art Van’s buyer, Thomas Lee Partners, had experience in consumer goods though companies such as Snapple, Dunkin’ Donuts and MoneyGram, although Art Van was its only portfolio company retailing furniture and mattresses.

Later in 2017, under its new ownership, Art Van went on to buy two Pennsylvania-based furniture companies, Levin Furniture and Wolf Furniture, with 35 and 18 locations, respectively. Terms of those sales weren’t disclosed.

Gary Van Elslander, one of the founder’s sons and a company board member, said at the time of the sale that under its new ownership, Art Van had expansion plans for several Midwest markets, including Chicago, Indianapolis, Columbus, Cincinnati, Cleveland and Pittsburgh.

The Chicago expansion proved unwise, according to an Art Van insider, and those market locations began to cannibalize each other and lose money.

Art Van started encountering cash-flow problems in January when creditors and suppliers became concerned about the business’s trajectory and tightened credit. Some suppliers later stopped making deliveries.

Crain’s Detroit reported in February that the Van Elslander family was considering a bid to buy back the retailer if it fell into bankruptcy. A representative for the Van Elslander family office was not immediately available for comment Thursday.

Art Van has experienced executive turnover since the 2017 sale. CEO Kim Yost retired in early 2018, soon after the elder Van Elslander’s death. His replacement, Ron Boire, a past chief executive for Barnes & Noble, went on to leave the company last August.

Current CEO Gary Fazio, a former Mattress Firm chief executive, came out of retirement in September to take the job.

The closure announcement Thursday said that Levin & Wolf Furniture in Ohio and Pennsylvania will be sold to Robert Levin, pending court approval. Eight Wolf Furniture stores in Maryland and Virginia will also be liquidated.

By JC Reindl

Detroit Free Press (TNS)

Post navigation