Sales slump prompts Z Gallerie to seek bankruptcy protection
Faced with a significant sales slump that forced it to close some stores, Z Gallerie Inc., the eclectic Gardena-based home furnishings retailer, has filed for bankruptcy protection.
The privately held company has 57 stores in 18 states and said it had sufficient cash to continue operating its business, including keeping all locations open and taking custom furniture orders through its stores and website.
In the Chapter 11 petition, the company said the economic recession, plus widespread markdowns and going-out-of-business sales at its competitors, had hurt its business.
“The debtor experienced uninterrupted sales growth through 2006 when sales peaked at $236 million out of 74 locations nationwide,” the filing read. “Since 2006, the debtor has experienced a severe drop in sales, with this decline accelerating in the last quarter of 2008 and continuing unabated in the first quarter of 2009.”
Z Gallerie said in a statement that it hoped to reorganize its operations and to unload leases from 21 stores and an Atlanta distribution center that the company began closing in February.
Those stores were either underperforming or in markets the company decided it would no longer serve.
“In light of current economic conditions, our company has had to make some difficult decisions,” said Mike Zeiden, co-founder and chief financial officer.
Z Gallerie listed assets of $10 million to $50 million in the petition filed in U.S. Bankruptcy Court in Los Angeles and reported liabilities in the same range. The company, which employs nearly 900 people, quietly filed for bankruptcy Friday without putting a prominent alert for customers on its website.
Founded in 1979 as a small poster shop in Sherman Oaks, Z Gallerie specializes in items such as furniture, artwork, lighting, tabletop items, textiles and decorative accessories from around the world.
As a seller of home decor items, Z Gallerie’s troubles are “not an anomaly,” said Brent Schoenbaum, a retail partner at Deloitte & Touche in Los Angeles.
“The whole home furnishings area is taking more of a setback because people are focusing more on basic necessities and less on discretionary items,” he said.
“For Z Gallerie in particular, there may also be a brand shift,” he said. “They’re more of a specialized home furnishings retailer, and maybe those who are shopping for home furnishings are looking for lower-priced providers.”
Z Gallerie’s Southern California stores include locations at the Third Street Promenade in Santa Monica, Del Amo Fashion Center in Torrance and South Coast Plaza in Costa Mesa.
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