RB Furniture’s 28 Stores Shut; Cash Pinch Cited

Citing sales declines, the Irvine-based RB Furniture chain on Monday closed its 28 Southern California stores, saying it would reopen outlets to promote a “cash-raising” sale after Thanksgiving.

The actions, the latest sign of a severe national slump in furniture retailing, come amid industry speculation that RB will seek bankruptcy court protection. RB’s announcement came one week after Barker Bros., Southern California’s oldest furniture chain, closed its 10 retail outlets and filed in bankruptcy court to liquidate the company.

RB gave no precise date for the sale but said its 500 employees will be idled until the cash-raising event is held sometime after Thanksgiving. The employees will retain medical benefits, but they will not be paid during the sale preparation period, said Barbara Harris, a company spokeswoman.

RB executives were not available for comment Monday, and Harris had no details on the company’s financial difficulties. However, in a statement, the company said it plans to fulfill existing orders and pledged to correspond with customers who have placed deposits on merchandise.

“During the sale, RB Furniture will evaluate ways to reposition the company to service the furniture consumer of the 1990s,” a company statement said.

The statement reignites conjecture over RB’s future. A company spokesman last week said RB was negotiating with its suppliers to restructure its trade debt. Harris said those discussions have not been completed.

“There are no plans to file (for bankruptcy) at this time because (RB is) still negotiating with their vendor,” Harris said.

However, some industry executives said RB may reorganize under Chapter 11 of the U.S. Bankruptcy Code. If the company filed for protection from creditors before the sale, it would need court approval for such a cash-raising event.

“A sale under bankruptcy conditions--along with the Barker Bros. liquidation--would put a real squeeze on other retailers,” one executive said.

The deep problems at two of the Southland’s largest furniture chains dramatically highlight the devastating impact the recession has had on local retailers, particularly higher-end stores depending on affluent, white-collar workers.

Although retailers--particularly those in furniture industry--are hurting throughout the nation, the problems are especially acute in Southern California, where the recession has hit the aerospace, real estate, thrift and insurance industries.

Analysts have said excessive debt--part of it stemming from an inflated purchase price--is a major problem at RB Furniture, which was bought in 1988 for $53 million by a Beverly Hills investment group led by Gary Winnick, a former top lieutenant to junk bond king Michael Milken.

When Winnick’s group, Pacific Asset Management, purchased the company, it had 51 stores in California, Washington, Oregon, Arizona and Texas. The chain now has just 28 outlets, all in Southern California. The rest were either sold or closed as the company tried to pare down to a profit-making size.

RB last week said it was planning a “high-impact sale” after Thanksgiving aimed at moving a year’s worth of merchandise in less than four months to raise cash quickly. However, the company did not indicate at the time that the stores would be shut down in preparation for such a sale.

Harris said some employees would be retained to move merchandise from warehouses to store outlets, but she was unsure how many would stay on.

“Obviously, some of these employees will leave the company,” she said.