By Barbara Thau
NEW YORK–Linens ’n Things’ bankruptcy filing earlier this month frees the chain to unload poorly performing stores and its high debt load, home vendors told HFN.
But while many vendors took financial precautions in anticipation of the retailer’s troubles, the filing has dealt a harsh blow to the home industry and the vendor community. Now the clock is ticking for Linens to carve a meaningful distinction from archrival and retail darling Bed Bath & Beyond if it is to survive, the vendors added.
“I’m glad the uncertainty is behind us,” said Loren Sweet, president of textiles supplier Brentwood Originals. “The longer this went on, the more of a chance Linens ’n Things would liquidate. I’m looking forward now to doing more business with them with the DIP [debtor-in-posession] financing secure.”
Closing 120 stores, which was part of the filing, “will make them stronger,” Sweet said. “They have to be stronger because they’ll get rid of their debt. The biggest problem is their debt, servicing their interest.”
Fritz Kruger, vice president of marketing for Pacific Coast Feather, said his company will continue to work with Linens.
“There are lots of details and work to be done,” Kruger said. “We certainly hope this is what they need to get out of these burdens, the debt and the underperforming stores.”
Still, Kruger added, “We’re disappointed with the financial reality of this for us. It’s not a surprise. The last 30 to 45 days, their problems have been well communicated in the media.”
As the nation’s second-largest home retailer, Linens’ filing will have a ripple effect, suppliers said.
“They have [589] stores,” said one housewares chief executive officer. “They will impact the industry whatever they do.”
Linens now has access to $700 million debtor-in-posession financing, “which can be used to pay vendors, if necessary,” a spokeswoman from the chain told HFN.
But the $700 million financing will “have to be spread over so many pieces of toast,” said Rich Giron, president of Emess Design Group, a division of Alsy Lighting.
Some vendors, anticipating Linens’ troubles, had been keeping the retailer at bay prior to the filing or had cut ties with the chain altogether.
“We kept them on a short leash for the last two years, so we didn’t take a big hit,” said one housewares vendor.
“Since mid-2007, we have utilized trade credit risk protection to offset the financial risk of a Chapter 11 filing by Linens,” Jeffrey Siegel, Lifetime Brands’ president and chief executive officer, said in a statement. As a result, the filing should have “no material impact on Lifetime’s financial condition.”
Emess Design Group let its last program with Linens lapse, and discontinued business with the chain in March.
Emess told the retailer then if you want our lamps, you’ve got to pay on letters of credit, Giron said.
Several lighting and home decor vendors said they’re unsure if Linens has a future in such a crowded marketplace, particularly in today’s tough economy, when even Bed Bath & Beyond—the better capitalized of the two superstore chains—is posting lower sales and profits.
“We don’t know what their future is,” Giron said.
That future is partly in the hands of Apollo Capital Management, the private-equity firm that purchased the chain in 2006, one home vendor said.
Going forward, “It will depend on Apollo, their direction, capitalization and the lead from their financial group to see where they are going.”
The chain is faced with a serious identity crisis, vendors said, and the answer is not to become a Bed Bath & Beyond wannabe.
Chasing Bed Bath & Beyond “would be ridiculous,” said the home vendor. “They owe the vendor community an outline of their plan.”
But some vendors started to see signs of improvement under Chairman Bob DiNicola, who was stripped of his chief executive officer title at the time of the filing. Michael F. Gries was named interim CEO and chief restructuring officer.
“They have made a lot of operational progress in the past year,” Kruger said. “Their stores offer a significantly better shopping experience.”
“Linens ’n Things has some great people inside; they were starting to make a turnaround,” a home vendor said. “Believe it or not, the store started to look better in the end.”
“I hate to see any retailer go away today,” Giron said. “It’s such a shrinking population.” — David Gill, Andrea Lillo, Nancy Meyer and Allison Zisko contributed to this report.