Conn’s HomePlus enters bankruptcy

October 2024 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

October 2024 Issue

In July, Conn’s HomePlus, a 134-year-old furniture and electronics retailer with locations primarily in the southern US, filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the Southern District of Texas.

In the filing, the Woodlands, Texas-based retailer revealed it has estimated assets between $1bn and $10bn, as well as estimated liabilities between $1bn and $10bn to an estimated 25,001 to 50,000 creditors. Its top 20 unsecured creditors list includes home furnishings and mattress vendors as well as several well-known appliance and electronics suppliers, including Samsung, LG Electronics, General Electric, Instant Web and Google.

The bankruptcy filing covers Conn’s Inc and a number of its affiliates, including Conn’s Appliances, CAI Holding, Conn Lending, Conn Credit I, Conn Credit Corp., CAI Credit Insurance Agency, New RTO, W.S. Badcock, W.S. Badcock Credit and W.S. Badcock Credit I.

Conn’s, which recently merged with W.S. Badcock, and which saw 36 of its 374 locations close, announced that its existing locations were set to close by 31 October. Conn’s filings indicate that the company hired an investment banking firm in June, in an attempt to sell the company’s assets, but that effort was unsuccessful. Prior to the bankruptcy filing, Conn’s and Badcock began announcing a spate of store closures on their respective websites.

The financial strain led Conn’s to begin a nationwide liquidation sale. “Conn’s and Badcock have served as a go-to destination for its loyal customers’ home goods necessities for more than a century,” said Tim Shilling, president of B. Riley Retail Solutions, which is hosting the company’s liquidation.

Following the filing, the company was notified that it would be removed from the NASDAQ at the beginning of August, with its common stock suspended from 6 August. “Taking into account the Company’s desire to reduce operating expenses and maximize the value of its estates, the Company does not intend to appeal Nasdaq’s determination,” the company said.

According to court documents, the company employs approximately 3800 full-time employees and 150 part-time employees in the US. It has retail facilities in 15 states, totalling 553 retail stores and 22 distribution and service facilities. In April, Conn’s said its total annual revenue dropped 7.8 percent year over year, totalling $1.2bn. The company also posted a net loss of $76.89m for the year.

Conn’s, like so many other brick and mortar retailers, struggled in recent years, thanks in large part to customers’ changing shopping habits and the uncertainty which permeated the global economy. The coronavirus (COVID-19) pandemic saw a major shift in consumer spending on furniture and other larger products, with many major furniture retailers experiencing financial difficulty in its aftermath.

This was only compounded when customers faced rising inflation. Conn’s itself has seen increasing costs of goods, rising wage expenses and increased service prices. As a result, many customers are delaying financing for discretionary purchases.

Additionally, the company reported that its interest rate expense increased from $25.7m in 2020 to $81.7m in 2023. Costs from underperforming stores accounted for $35m of the company’s total $77.4m in lease payments, which the company was hoping to reduce by closing struggling locations.

Conn’s financial difficulties have also been exacerbated by the additional financial stress caused by its acquisition of W.S. Badcock in December 2023, which experienced a number of integration issues.

Other retailers have also suffered in recent years, with furniture chains Z Gallerie and Mitchell Gold + Bob Williams filing for bankruptcy within the past year. Following reports that Big Lots was potentially filing for bankruptcy, the company also announced that it was closing more locations and warned investors that it could no longer stay afloat much longer.

Additionally, in July, Bob’s Stores was forced to liquidate due to financial difficulties, despite having significant community ties. As a result, all of Bob’s Stores have closed. Furniture retailer Wayfair has also announced plans to drastically reduce its workforce.

Richard Summerfield