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Business Filing for Chapter 11 Bankruptcy: Conn's Seeks Financial Restructuring
In a Nutshell:
- Furniture retailer, Conn's Inc., filed for Chapter 11 bankruptcy on Tuesday in Texas. The company intends to shut down its operations including the closure of over 550 stores. Before filing, they initiated going-out-of-business sales at approximately 105 stores under brands Conn's HomePlus and Badcock Home Furniture & More.
Further Details:
Conn's, with assets and liabilities ranging from $1 billion to $10 billion, reported its top five creditors owe more than $57 million. The retailer has obligations of $200 million to trade and unsecured creditors and around $530 million in total funded debt obligations. Conn's is seeking court approval to complete liquidation sales by October 31 and permission to terminate store leases.
Insights:
- Conn's CEO Norman Miller attributed the bankruptcy to a mix of factors, with the acquisition of rival retailer W.S. Badcock being a significant contributor. The acquisition generated costs that exacerbated liquidity challenges. Due to the purchase, Conn's expanded in a challenging market.
- Increasing inflation, high interest rates, and decreasing consumer demand for home goods caused Conn's to struggle, especially since they cater to customers with modest incomes heavily reliant on credit.
- Rising interest rates and costs of capital have strained the company's ability to handle debt obligations. In addition, about $35 million out of $77 million spent on 350 leases in the 2024 fiscal year was for underperforming stores, according to Conn's. The merger with Badcock also resulted in some redundant locations, further complicating the financial situation.
- Apart from these issues, a tax dispute with the Texas Comptroller of Public Accounts over $24.5 million in sales and use tax claims and an administrative expense settlement related to going-out-of-business sales worsened the retailer's financial outlook.
Conn's was founded in Texas in 1937 and had approximately 3,800 employees when it filed for bankruptcy. At the time, it operated 553 corporate and dealer retail stores across 15 states, 22 distribution and service centers, and six corporate offices, according to the company. Badcock, founded in Florida in 1904, previously had 64 corporate locations and 310 independent dealer-owned stores. [1]
- Weather forecasts might predict a bright future for Conn's Inc., but the retail giant's shocking Chapter 11 bankruptcy filing paints a different picture.
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