Art Van is out of money and is liquidating and closing all stores

[MWmetalhead]

I earlier wrote (regarding last Saturday's events):

What are the issues in play? I suspect a lot of the traffic was due to local buyers wanting to immediately pick up their order straight from the warehouse.

Bingo.

https://www.freep.com/story/money/busin ... 995781002/

[Deleted User 24]

MW, what did/do you think of the Crain's take?

https://www.crainsdetroit.com/retail/ho ... ouse-afire

[Rate This]

Passing through Gaylord I pass an Art Van... tonight the sign read “Locally Owned”. That message flashed across with 3 different colored backgrounds along with the time and temp. Are the franchises still going to roll along after the corporate stores die? Clearly this person doesn’t plan on closing and wants people to know it.

[MWmetalhead]

The fate of the franchised stores will be up to each individual franchisee.

They may or may not be able to still use the "Art Van" name. The corporate support structure is completely gone. They are 100% on their own now.

The Crain's article was pretty good. I don't doubt for a second that Thomas H. Lee Partners mismanaged the business. I also don't doubt for a second that incumbent management and the Lee people didn't play nice in the sandbox with one another.

Per the article, it sounds like the Van Elslander family and Art Van's executives at the time knew the company's digital presence was sorely lacking. Not sure how on earth they concluded THLP was the solution to that problem. As the Crain's article duly notes, THLP had zero prior furniture industry experience, and its other retail holdings aren't exactly known as online retailing juggernauts.

The assertion that Art Van "cut way back on advertising" is amusing to me. The airwaves in Metro Detroit were plastered with their ads as recently as a month or two ago. I also saw plenty of their ads in Grand Rapids in recent months. The TV advertising strategy was the same tired strategy the company had been using for years. The exception was the commercial for the Outlet inside Art Van, which had a distinctively different look from the other spots (the overused "find your fab" commercial, complete with unintelligible song lyrics).

Were things much better in 2017 than they are now? Sure. However, I continue to maintain that the long-term outlook for the company was not a favorable one. If everything was great, there's no way in hell the family would've sold damn near all equity in the company.

In the last 24 months, I think store traffic decreased significantly, real estate rents probably increased, interest expense increased (usually as Borrowing Base utilization increases on an Asset Based line of credit, the interest margin you must pay to the bank increases), and the tariffs on Chinese imports certainly didn't help. Instead of writing a check to allow Art Van to pay down its Asset Based revolver, Thomas H. Lee Partners instead decided to pull the plug.

It's a very, very sad ending for one of the last large Detroit-based retail chains. Frankly, I'm in shock at how quickly the wheels came off. I've probably made $7,000 in purchases at Art Van since 2001. Two sofas, a loveseat, two nightstands, a dresser, a kitchen table with four very comfortable chairs, a dining room table with six chairs, a dining room buffet, a TV stand, a coffee table, and an end table. All of the above furniture with the exception of one of the sofas and the kitchen table set are still in use at my current house.

I know I goofed on their overdressed sales associates earlier, but 90% of the time, I had what I would describe as a good customer experience. The stain protector demonstration was always amusing.

I also feel bad for their employees. This has to be pure hell for some of them.

[Rate This]

The fate of the franchised stores will be up to each individual franchisee.

They may or may not be able to still use the "Art Van" name. The corporate support structure is completely gone. They are 100% on their own now.

Interesting... the fate of that one will bear some watching... it looks fairly new...

[Deleted User 143]

The fate of the franchised stores will be up to each individual franchisee.

They may or may not be able to still use the "Art Van" name. The corporate support structure is completely gone. They are 100% on their own now.

In NW Ohio, at least two of the franchisees are reverting to their pre-Art Van names (Samsen Furniture in Gibsonburg, Rettig Furniture in Findlay).

[SolidGoldDancers]

See, not a vulture capital situation at all. Far from it. Thomas H. Lee lost its ass. They are a subordinated creditor at best and a common equity holder at worst. Their entire investment is "out of the money." Granted, we don't know how much of the $550 million purchase price was funded with their money versus senior secured loan proceeds from Wells Fargo.

It is classic private equity playbook. Come in, slash costs, convert anything to cash that can be sold and if the business survives, even better!

From the Crain's article:

At closing in 2017, Thomas H. Lee entered into a series of sale-leaseback deals on Art Van's real estate, including its 1.06 million-square-foot headquarters in Warren and 20 locations in Michigan, with a variety of buyers after closing the deal to buy Art Van.

Think about that for a moment. They took an asset, sold it, and then required Art Van to lease what it previously owned. A surge of cash at the sale, a steady flow of cash out of Art Van afterwards. I bet some of the buyers, have ties to the private equity firm.

"Private equity saw value outside the business in the real estate owned by Art Van, who owned a number of their stores," O'Keefe said. "They entered into a massive sale-leaseback to liquidate the value of the real estate and recover a big part of their initial investment."

Lost their ass, eh? No, they covered it first and foremost.

I don't think this is a bust-out similar to what has been happening to Sears. The private equity firm screwed up, brought in people who had no idea what they were doing (executives at other failed businesses) and the people who get to pay are the workers and the community. But lets not lose any tears over their alleged lost capital. Part of the reason they failed is they drained cash and assets to cover their bet. When the bad decisions hit home with the debt, the company failed.

[MWmetalhead]

Crain's Chicago Business has some interesting tidbits in its article that I've not seen reported elsewhere:
https://www.chicagobusiness.com/retail/ ... bankruptcy

Art Van's late founder, Art Van Elslander, sold the company to a Boston-based private equity firm, Thomas H. Lee Partners LP, three years ago in an estimated $550 million deal.

As the company sought to turn things around, it fired its then-CEO and among other leadership changes, brought in former President Gary Van Elslander as chairman of its board[/b] to rekindle the relationship between Art Van's founding family and employees and customers.

...Despite the efforts, Art Van ended 2019 in the red, seeing continued revenue and profit losses for the fourth year in a row.

In other words, the bleeding started BEFORE the sale.

Also, isn't it interesting that most if not all of Detroit's mainstream media outlets failed to mention the fact that Gary Van Elslander was brought back into the fold a while ago and was Chairman of the Board at the very end?

The final death knell came in January when Art Van's financial partners including credit card processing companies Bank of America Merchant Services and PNC Merchant Services — which provide consumer credit and were critical to Art Van's ability to accept credit cards in stores and online for customer purchases — demanded approximately $33 million in collateral.

Damn. That's rather remarkable, for all the wrong reasons.

Art Van subsequently talked with at least 31 potential buyers and investors to recapitalize or sell all or parts of the business. The most promising investment that emerged was from a consortium of investors that included a new-money investment from Thomas H. Lee, the Van Elslander family and three suppliers to the Art Van business. Art Van's five largest lessors also agreed to reduce rent obligations and allow Art Van to close certain underperforming locations, Ladd said in the filing.

However, due to a number of factors, including the impact of the coronavirus outbreak on investor confidence, the consortium was unable to secure needed investment in late February and last week some master lessors pulled out of the deal.

Why can the CHICAGO media unearth all of these details, yet the DETROIT media is uncapable of doing so? Good to see real journalism still thrives in the Windy City. Too bad we cannot say the same of Detroit.

I would have loved to have been a fly on the wall in the above described negotiations.

[Rate This]

Crain's Chicago Business has some interesting tidbits in its article that I've not seen reported elsewhere:
https://www.chicagobusiness.com/retail/ ... bankruptcy

Art Van's late founder, Art Van Elslander, sold the company to a Boston-based private equity firm, Thomas H. Lee Partners LP, three years ago in an estimated $550 million deal.

As the company sought to turn things around, it fired its then-CEO and among other leadership changes, brought in former President Gary Van Elslander as chairman of its board[/b] to rekindle the relationship between Art Van's founding family and employees and customers.

...Despite the efforts, Art Van ended 2019 in the red, seeing continued revenue and profit losses for the fourth year in a row.

In other words, the bleeding started BEFORE the sale.

Also, isn't it interesting that most if not all of Detroit's mainstream media outlets failed to mention the fact that Gary Van Elslander was brought back into the fold a while ago and was Chairman of the Board at the very end?

The final death knell came in January when Art Van's financial partners including credit card processing companies Bank of America Merchant Services and PNC Merchant Services — which provide consumer credit and were critical to Art Van's ability to accept credit cards in stores and online for customer purchases — demanded approximately $33 million in collateral.

Damn. That's rather remarkable, for all the wrong reasons.

Art Van subsequently talked with at least 31 potential buyers and investors to recapitalize or sell all or parts of the business. The most promising investment that emerged was from a consortium of investors that included a new-money investment from Thomas H. Lee, the Van Elslander family and three suppliers to the Art Van business. Art Van's five largest lessors also agreed to reduce rent obligations and allow Art Van to close certain underperforming locations, Ladd said in the filing.

However, due to a number of factors, including the impact of the coronavirus outbreak on investor confidence, the consortium was unable to secure needed investment in late February and last week some master lessors pulled out of the deal.

Why can the CHICAGO media unearth all of these details, yet the DETROIT media is uncapable of doing so? Good to see real journalism still thrives in the Windy City. Too bad we cannot say the same of Detroit.

I would have loved to have been a fly on the wall in the above described negotiations.

Mostly investment I think... leg work costs money... rip and read is cheap...

[Mega Hertz]

We have a Pure Sleep store on the corner of Grand River and Old US 23. It's not near an Art Van, but has the typical "everything must go" stickers in the window. What does this mean for them? They're gone too?

[MWmetalhead]

Yes. Those stores were a horrible mistake.

[ADD in TC]

I heard the company that took over a number of Art Van stores are now closing locations.What is that all about?I recently read that home furniture is a hot commodity now due to Covid.

[MWmetalhead]

You are correct - 13 store closures; 10 in Michigan. Basically most of the stores outside of the immediate Metro Detroit and Grand Rapids regions will be closing.

A couple stores in the Ann Arbor area - and perhaps some others - will become Value City Furniture stores.

Evidently, some of the acquired stores have performed poorly. The company also is reporting difficulty in being able to purchase sufficient inventory. They've blamed supply chain issues, but I suspect that is only part of the story.

[MotorCityRadioFreak]

Lots of unhappy customers. The quality of the furniture not left over from Art Van is poor. Have had this confirmed by two friends.

[MasterB]

Art Van became Love Furniture in Kazoo and Bob's also build a store as well.