- Executives with luxury furniture retailer RH expect no supply hiccups after one of the company’s suppliers, the Mitchell Gold Co., shut down and filed for bankruptcy recently.
- “There is, I don't know, probably $30 million, $40 million of demand with them. We can resource it all pretty easily,” Chairman and CEO Gary Friedman said on the company’s earnings call in early September. “We don't see any meaningful interruptions or anything.”
- Friedman acknowledged that other suppliers in the space could go bankrupt as well, “but we don't see any real fundamental risk to our business that is going to be meaningful,” he added.
The Mitchell Gold Co., owner of the Mitchell Gold + Bob Williams brand, careened into bankruptcy, telling the court overseeing its case that it didn’t have access to enough cash through its lender to pay its vendor or service its customers. Among those buying its goods, as noted in an affidavit from the company’s chief restructuring officer, are “high quality wholesale customers such as Restoration Hardware.”
Founded in 1989, Mitchell Gold Co. was attempting to restructure after suffering from supply chain delays in the furniture industry during the pandemic era, among other financial issues.
The company represents only a small part of RH’s business. But its bankruptcy was enough to prompt a question about “the financial health of some of your key suppliers” from an analyst on the company’s earnings call.
In responding, Friedman pointed to Mitchell Gold’s particulars — including private equity ownership, management issues and its venture into retailing — rather than any broader distress in the bankrupt company’s supplier network. If RH anticipated more risk from failing suppliers, “we would have talked about it in [the company’s] disclosure,” he added.
The risk of financial defaults in supplier networks is among the top risks facing supply chains in 2023, according to an earlier report from risk management software and intelligence firm Everstream Analytics. Falling demand and high interest rates could trigger more insolvencies, Everstream noted, pointing not only to the risk of supply shortfalls but also the operational costs of replacing suppliers.
In the home goods space, the retailer Big Lots has faced shortages this year after the failure of one of its largest suppliers, United Furniture Industries, shut down and forced it to pursue creative sourcing alternatives. President and CEO Bruce Thorn told analysts in August that the supplier failure caused a nine-month interruption for Big Lots. “We now have that behind us,” he added.