Dive Brief:
- LL Flooring on Sunday filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware. The specialty retailer has retained Hilco to support the company with closing sales at 94 locations in 31 states. It plans to keep more than 300 stores open, according to an announcement.
- The specialty retailer reported liabilities of $100 million to $500 million and assets of $500 million to $1 billion. Court documents show the company’s top-five creditors are collectively owed nearly $20 million. LL Flooring said it has a commitment for $130 million in debtor-in-possession financing from its existing lenders.
- LL Flooring is pursuing a going-concern sale of its business and is negotiating with multiple bidders. In court documents, the company said it intends to find a stalking horse bidder by Aug. 26. If it cannot, LL Flooring plans to pursue a liquidation process for all its stores.
Dive Insight:
LL Flooring had historically been a successful business, but recent challenges squeezed the company’s liquidity to unsustainable levels. Lower levels of home improvement, decreased discretionary spending and declining demand in the sector following highs during the early months of the pandemic contributed to LL Flooring’s setbacks, Chief Restructuring Officer Holly Etlin said in court documents.
CEO Charles Tyson said Chapter 11 is the company's “best path forward.” The company attempted to implement cost-cutting measures and refinancing to resolve its financial issues, Etlin said in court documents. But those efforts were insufficient to fix the problems, which peaked this summer.
As the company’s financial situation worsened, it “started to strategically cut back on payments to vendors and suppliers in an effort to manage liquidity.” Once news of the company’s financial troubles became public, several of its key vendors refused to ship merchandise.
By July, 50% of LL Flooring’s vendors stopped shipping or reduced their inventory flow. And by the time of this week’s bankruptcy filing, the company said 80% of its annual volume was affected by stopped shipments or unfavorable payment terms.
The company was founded in 1994 under the name Lumber Liquidators. In 2005, the company was acquired by private equity firm TA Associates, and in 2007, it completed its initial public offering.
A 2015 investigative segment by CBS’ “60 Minutes” also hurt the company’s reputation and sales, Etlin said in court documents. The news report alleged that imported laminate flooring from China had unsafe levels of formaldehyde. Later that year, the company pleaded guilty in federal court to environmental crime charges and false statements.
The company settled related claims with California state officials, as well as consumer-led class action lawsuits. The “60 Minutes” segment “had a significant negative impact on the Company’s reputation” and the flooring retailer sought to revive its reputation by rebranding to LL Flooring in 2022.
LL Flooring offers over 500 varieties of hard surface flooring. It also began offering carpet in 2023. The retailer also offers flooring underlayments, tools and third-party installation services.
About 1,960 people work for the company. Nearly all of them are full-time employees and the majority, about 71%, work in retail stores. In addition to the retail locations, the company has three distribution centers — one in Henrico County, Virginia; one in Dallas, Texas; and another in Pomona, California.
