As of last week, Z Gallerie has commenced its second bankruptcy in less than two years — its third since 2009, according to documents filed with the U.S. Bankruptcy Court for the District of New Jersey.
Z Gallerie Chief Financial Officer and Interim CEO Robert Fetterman blamed the company’s troubles on pandemic-related escalation of supply chain and import costs, and, more recently a housing slump due to spiking interest rates, per court documents.
The retailer is still searching for a buyer, but is preparing to liquidate in case none materializes, Fetterman also said.
Z Gallerie, once a family-owned furniture business that was snapped up by private equity owners after its Great Recession-era bankruptcy, is saddled with debt somewhere between $50 million and $100 million, court documents show. The company also filed for Chapter 11 in March 2019; that case was closed last year.
By then the retailer was emphasizing e-commerce, to the point where half its sales were online, in part because stores were more expensive to run, Fetterman noted in last week’s filing. Nonetheless, it is now “suffering under severe liquidity constraints brought on by a confluence of underperforming retail stores, adverse macroeconomic trends, and industry specific headwinds, including the lasting impact of COVID-19 on the retail industry,” Fetterman wrote.
“Needless to say, macroeconomic trends have significantly impacted the Debtor’s business in the second half of 2023 and has had negative consequences for many in the Debtor’s line of business,” Fetterman also said.
Indeed, Z Gallerie is not alone. Just in the last few months, furniture maker Noble House filed for bankruptcy and Mitchell Gold + Bob Williams shuttered after failing to secure critical financing. In September, RH, which saw Q2 sales plunge 19% and was downgraded by S&P in April, said it expects market challenges to persist.
Sales in the sector have tumbled after enjoying some lift during the shutdown era of the pandemic, as many people fixed up their homes to be used for office, school and a range of leisure activities. In September, furniture and home improvement sales each declined 6.5%, and GlobalData researchers expect that to improve little as the year closes.