Profits Dry Up for Debt-Ridden Potpourri Firm
Late December is usually a busy time of year for the Potpourri Foundry, whose colorful scented collections of dried flowers, spices and herbs are a traditional Christmas gift.
But this year will be a little busier than usual. Hurt by troubles in the retail industry, the recession and a business deal gone sour, the Huntington Beach company filed last week for protection from creditors under Chapter 11 of the federal bankruptcy code.
The company’s filing in U.S. Bankruptcy Court in Santa Ana lists assets of $181,000 and liabilities of $1.2 million.
Potpourri Foundry has been hit hard by financial troubles among major retailers, which are among its business customers. Some retailers have cut back on purchases, anticipating lackluster Christmas sales. And other clients, such as Bloomingdale’s and Buffums, have gone bankrupt in recent years.
“The irony is our factory outlet is doing wonderfully because we’re selling at cut-rate prices, (but) looking at the wholesale end of the business, this has been the worst one we’ve had,” said Michael Fanning, owner and president.
“The wholesale business suffered because retailers and department stores were afraid to buy,” he added. “Our economy is in such a sorry state . . . that no one’s stocking up much inventory.”
Fanning, who owns the company with his wife, Joan, said most wholesale orders for the holiday season are booked in the summer, and orders this year were anemic at best.
Fanning said one of his biggest mistakes was to act on a purchase order from S.C. Johnson & Co. Inc., in which he invested about $200,000 on new machines to package potpourri products for the Racine, Wis., manufacturer of home-care products including air fresheners and floor wax. When S.C. Johnson canceled the order, Fanning sued for breach of contract.
S.C. Johnson officials could not be reached for comment.
According to its Dec. 13 bankruptcy filing, Potpourri Foundry owes a total of $862,591 to unsecured creditors. Its largest unsecured creditors include Sears, Roebuck & Co., which is owed in excess of $100,000, and Winbigler Investments, a real estate company that owns Potpourri Foundry’s facility in Huntington Beach, which is owed $98,420.
It also owes secured creditors a total of $140,600, with $120,000 of that amount owed to S.C. Johnson.
Court papers also show that the company owes $148,807 in state and federal taxes.
Potpourri Foundry is involved in a number of lawsuits, five of which involve suits that the Huntington Beach company has brought against companies for breach of contract. According to court papers, Potpourri Foundry is named in 12 suits filed by companies claiming that the potpourri maker has not paid its bills.
Fanning started Potpourri Foundry six years ago and boosted its sales to $4 million by 1990. At the height of its success in the 1989-1991 period, the foundry employed about 100 people during its peak Christmas season. It now has just six employees.
Court papers show that the company earned $862,591 in 1989 and $1.3 million last year. Fanning estimates sales of $3.5 million this year.
“I thought the economy would recover this year and it did not,” Fanning said. “The filing will give us some breathing room. . . .”
