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Storehouse anticipates sale

September 28, 2006
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(Furniture/Today Via Thomson Dialog NewsEdge) McLean, Va. Furniture retailer Storehouse said it expects to announce a new partner as soon as next week in the wake of the Chapter 11 bankruptcy filing last week of its current parent, The Rowe Companies.



According to news reports, the Atlanta-based retailer said it has been in discussion with several investment bankers to secure financing.

"We anticipate spirited bidding at the upcoming auction and expect to announce a sale by Oct. 6," said Storehouse President Caroline Hipple.

Storehouse, which has been a bright spot for Rowe Cos., went on the market last week after the Chapter 11 filing. Rowe said it planned to reorganize and concentrate on its core upholstery manufacturing business, which has sustained the company since 1946.

"We expect that the restructuring steps we are taking, while difficult, will ensure the future of our enterprise and our people," said Gerald Birnbach, Rowe president and CEO, in a statement.

In its most recent financial statement, Rowe reported a net loss of $8.3 million in the first half of its fiscal year, through May 28, compared with a $2.7 million loss in the same period a year earlier. Sales were down 7.3% to $134.8 million.

On Wednesday, the company said it was closing its Poplar Bluff, Mo., plant and moving those operations to its high-tech Virginia facilities, where it plans to add about 250 jobs. Those jobs have been offered to the 400 employees idled in Missouri.

Hipple, in New York talking to prospective investors last week, vowed, "I'm not coming home until I have a sale made." She acknowledged that usually in bankruptcy, the debtor and its creditors look at both sale and liquidation of assets as possibilities. But she said her focus is strictly on a sale of Storehouse as a business.

"It would be a travesty if it was liquidated and a terrible waste of time and talent," she said. "I believe there will be a sale. I have one mission and that is to keep Storehouse as a going concern."

Rowe acquired Storehouse, then a 43-store chain, in 1999 in a deal valued at $25 million. Storehouse, which now has 73 stores, had sales of $151.8 million in its most recent fiscal year, ended in November 2005, and ranked 51st on Furniture/Today's list of the Top 100 U.S. furniture stores.

When it acquired the chain, Rowe already had a retail arm called Home Elements, which it later consolidated into Storehouse.

Rowe Furniture is one of the largest U.S. upholstery manufacturers with shipments of $162.8 million in the year ended November 2005. Combined with Storehouse, Rowe Cos.' total sales that year were $299.4 million.

Already operating in an unstable economy affecting furniture sales, and an escalation of raw material prices, the company suffered a major setback in 2004 when it ran into glitches with a new computerized manufacturing system that disrupted inventory control, production and order processing.

In recent months, the company took steps including shrinking its work force, renegotiating some raw materials pricing agreements, reducing waste and improving efficiency. Storehouse had initiated a hiring freeze and travel restrictions.

Starting April 1, Birnbach voluntarily took a 50% cut in his salary, which in the previous fiscal year was $939,924. Earlier this year, he and Sidney Silver, a company director, had provided personal guaranties of up to $1.5 million each to modify the company's credit agreement to eliminate a requirement that it raise additional equity.

Rowe hired a financial adviser, Morgan Joseph and Co., late last year to assist in issuing additional debt or equity securities.

Rowe lists creditorsGary EvansMcLean, Va. In Chapter 11 documents, The Rowe Cos. filed separate lists of the top 20 unsecured creditors of its two operating companies, upholstery maker Rowe Furniture here and Atlanta-based retailer Storehouse.

Furniture industry companies on Rowe Furniture's list include Carpenter Co., owed $793,250; Quaker Fabric, $727,810; Hickory Springs Mfg., $653,373; Bluelinx, $389,872; Morgan Fabric, $320,906; Richloom Fabric Group, $212,859; Tietex International, $210,751; Barrow Inds., $182,713; Pacific Coast Feather Cushion, $174,757; Quality Sample, $133,276; Mastercraft Fabrics, $124,262; Furniture Transportation Systems, $108,863; and Universal Spring, $107,262.

Industry companies on the Storehouse list include d-Scan, $977,983; Shermag, $825,091; DeCoro, $428,304; Mitchell Gold, $279,881; Four Hands, $239,976; Barcalounger, $204,286; Carolina Mattress Guild, $180,749; Padma's Plantation, $144,819; Curvet USA, $141,973; Directions, $133,946; Purnell Furniture Services, $126,474; Sitcom, $125,761; Midtjydsk Mobelfabrik, $122,442; and Sam Moore Furniture Inds., $122,429.

Copyright 2006 Reed Business Information. All Rights Reserved.


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