The home improvement retail industry has faced economic hardship over the last two years prompted by the effects of inflation, high interest rates and the end of the Covid-19 pandemic.
The demand from consumers for home renovations and repairs had an unprecedented surge during the Covid-19 pandemic’s stay-at-home era when millions of people were forced to refrain from public activities to prevent the spread of the disease. With plenty of time spent at home, many people turned to home improvement projects to occupy their time.
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Home improvement retailers saw a temporary increase in business during Covid until the pandemic subsided. Companies that were living on the edge before the pandemic and received a temporary reprieve during stay-at-home times, had to face financial reality when normalcy returned.
The pandemic played a role in the demise of historic paint retailer Kelly-Moore Paints, which in January 2024 shut down all 157 of its retail locations and furloughed about 700 employees, in an out-of-court wind-down of all of its business operations.
The Irving, Texas company, which was founded in 1946, blamed its closure on the heavy financial burden of paying off about $600 million in asbestos claims settlements, the risk of millions of dollars in future asbestos claims and its inability to invest in solutions to solve longtime supply chain issues that worsened during the Covid-19 pandemic.
Kelly-Moore did not file a Chapter 11 bankruptcy reorganization or Chapter 7 liquidation, since it did not have the capital to fund its continued operations.
Another huge home improvement retailer, LL Flooring, on Aug. 11 filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware in Wilmington seeking a sale of its assets, after suffering from broad headwinds in the housing, repair and remodeling markets that occurred when the Covid-19 pandemic subsided, court papers said.
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The downturn in LL Flooring’s business constrained its liquidity to unsustainable levels and the company’s efforts to market its Sandston, Va., distribution center for sale to inject liquidity was unsuccessful, according to a declaration from the company’s Chief Restructuring Officer Holly Etlin of AlixPartners.
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The company also sought a buyer for the entire company, but because of liquidity constraints, the company did not have sufficient time to reach a prepetition deal and decided that filing bankruptcy was its best option for selling the company as a going concern.
If LL Flooring is unable to find a buyer in the bankruptcy process, the company might opt to sell to third parties to wind down, close and liquidate its retail stores and store-level assets, court papers said.
The company listed $500 million to $1 billion in assets and $100 million to $500 million in liabilities in its petition, which includes $109.6 million in total funded debt consisting of about $99 million owed under a prepetition asset-based lending facility and $10.6 million in letters of credit issued and outstanding under the ABL facility.
LL Flooring will seek approval of $130 million in debtor-in-possession financing, which includes a $12 million letter of credit sub-facility and rollup of $10.6 million in prepetition letters of credit, from DIP lenders Bank of America (BAC) and Wells Fargo Bank (WFC) .
The Richmond, Va.-based flooring retailer was established as Lumber Liquidators by building contractor Tom Sullivan in 1994. The company changed its corporate name to LL Flooring Holdings on Jan. 1, 2022 after it paid $33 million in 2021 to settle securities fraud allegations.
LL Flooring, which in April 2024 was ranked as the top U.S. hardwood flooring retailer by U.S. News and World Report, operates about 430 locations in 46 states.
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