It comes as little surprise that the industry is seeing some companies unable to withstand the combined disruption of pandemic, supply chain chaos, plummeting demand, inflation and tightening credit. The succession of challenges that have confronted the furniture industry over the past three years would test the mettle of the most creative and savvy CEOs, and they have.
It is not surprising then that some companies would fall before this economic onslaught.
What is surprising — at least in the three most recent instances: Lane, Klaussner and Mitchell Gold +Bob Williams — is the stunning rapidity with which all three went from conducting business as usual one day to shutdown tight the next. In each case most employees had no advance notice and no time to react or adjust.
In the case of Lane, it was midnight e-mails telling employees not to show up for work the next day … or ever. Klaussner was more direct. People came to work for a normal day of work only to be told at the day’s closing that they had just worked their last day. At least they had a chance to clean out their desks and lockers and take-home personal effects.
In the case of Mitchell Gold + Bob Williams, the news came in the form of a hastily printed letter taped to a sign in the front of the building. Attention employees coming in for work … don’t, you’re all fired (that’s paraphrased of course).
In both latter instances, these announcements were supposed to constitute the companies’ WARN notification. I am no legal expert, but I am reasonably certain that’s not how the law was intended to work. In all three cases, the sudden shutdown was attributed to the companies’ respective banks pulling the plug.
It begs the question, what made a lender decide that these companies were a better asset dead than alive? It also raises the question of why complete and immediate shutdown was preferrable to filing of the more traditional Chapter 11 or Chapter 7. Were things judged (and by whom) to be so irreparably damaged that a reorganization or sale was out of the question?
In the 30-plus years I have been covering retail and various consumer products industries, this is the first time I have seen this tactic used, not once, but three times in rapid succession. I’m no banking expert, but I can spot an emerging trend when I see one, and this has all the earmarks of a new strategy.
While I’m not suggesting anything conspiratorial, it would not be surprising if there has been some assessment made across the banking sector that the traditional Chapter 11 and Chapter 7 proceedings are no longer the preferred response when companies struggle to meet their obligations. Perhaps there is something uniquely similar about these three instances that made shutdown the preferred option, but it’s unclear, at least to this industry veteran, what that might be.
These three are not the only ones struggling in the current business climate. Others will confront similar choices in the coming months. It bears watching to see whether more traditional reorganization methods return or whether shutdown is the new Chapter 11.