Room Store Files for Chapter 11 Bankruptcy
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Room Store Files for Chapter 11 Bankruptcy

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December 28, 2011


The Wall Street Journal reports discount furniture retailer RoomStore has filed a Chapter 11 bankruptcy petition. Sources note that the company plans to reorganize during its bankruptcy (not liquidate and close), and hopes to emerge leaner and better able to turn a profit.

Founded in Dallas, Texas, in 1992, RoomStore now has retail locations in Maryland, Virginia, Texas, Oregon, and Washington. A discount seller of furniture, RoomStore has a history with filing bankruptcy, the Journal notes. After being bought out by furniture vendor Heilig-Meyers in 1997, RoomStore was part of that company’s 2000 Chapter 11 bankruptcy filing.

For Heilig-Meyers, the 2000 bankruptcy marked the beginning of the end. Sources report that RoomStore, which boasted 54 locations at the time, managed to convert several Heilig-Meyers locations to its own outlets. When the company emerged from Chapter 11 bankruptcy protection in 2005, it seems there were 63 RoomStore locations around the country.

The housing boom apparently proved fruitful for RoomStore, which benefited from easy credit and brisk home sales as homeowners looked to furnish new properties and upgrade older ones. But as the housing market hit the skids, many home furnishing stores felt the pinch.

Until recently, though, RoomStore has managed to stay afloat, often benefiting from the bankruptcy filings of its competitors (including furniture seller Rhodes Inc. and Mattress Discounters Corp.). During those bankruptcy filings, it seems RoomStore picked up many leases, and at present has outlets in Alabama, Florida, North Carolina, Pennsylvania, and South Carolina.

Plans for Bankruptcy Reorganization

Reports indicate that RoomStore plans to use its bankruptcy as a tool for ditching its under-performing furniture outlets and restructuring around its stronger performers. While it is unclear at present which locations are most likely to face the chopping block, sources have noted that plans are already in place to close at least five locations.

RoomStore made a name for itself in the home furnishings industry by selling entire rooms together at a discount (compared to buying each piece separately). Its motto is “We Cut Prices, Not Corners.” If its Chapter 11 bankruptcy proves successful, RoomStore will likely be able to survive as consumers continue to seek bargain and discount necessities.

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