Report: Art Van exploring sale and possible bankruptcy filing
DETROIT — The private equity owner of Art Van Furniture is exploring options including the sale and possible Chapter 11 bankruptcy filing for the Top 100 company, according to a report by Crain’s Detroit.
While rumors about these potential moves have swirled around the industry for weeks, the retailer and its owner, Thomas H. Lee Partners, have declined to comment. Crain’s cited an unnamed source close to the negotiations, and said the Van Elslander family — led by Art Van Chairman Gary Van Elslander — has prepared an offer as the stalking-horse bidder in a Chapter 11 reorganization. It said a decision on the Warren, Mich.-based retailer’s future could come next week.
Diane Charles, Art Van vice president of communications, told Crain’s the company is “actively exploring a variety of options with our creditors, investors and landlords to ensure” the company’s future, but she didn’t spell out the options. She has not returned calls to Furniture Today.
While Art Van’s troubles have been rumored for months, if not longer, a potential collapse into bankruptcy by one of the industry’s largest furniture chains — and one so recently in growth mode — was hard to believe for some sources and industry observers, most speaking on background. Still, they acknowledged several problems leading to the demise. The retailer’s expansion strategy was overheated, some say. It had a private equity owner that lacked industry understanding. It faced a steady drain of industry-rooted talent across multiple management and leadership levels, and business in many of Art Van’s markets has been challenging just as the retailer become burdened with leases on properties it once owned following sale-leaseback transactions.
In March 2017, private equity firm Thomas H. Lee Partners acquired a majority stake in the Warren, Mich.-based retailer. THL liked Art Van’s growth track, the retailer said at the time, and, in turn, Art Van saw THL’s access to capital as a way to accelerate that growth.
Before the end of the same year, that acceleration had begun, as Art Van acquired Levin Furniture, in greater Pittsburgh and Cleveland markets, and Wolf Furniture, with stores in Pennsylvania, Maryland and Virginia — two large buys announced on the same day. Art Van’s then CEO Kim Yost saw growth opportunities for all three core brands. Back then, the company was expecting to hit Top 10 status among Top 100 U.S. furniture stores with combined sales of an estimated $1.3 billion in 2018.
But it never got there. The growth promise never fully materialized as the retailer hit a series of setbacks. For starters, it faced an exodus of leadership with deep industry experience, particularly on the merchandising side. A few months after the THL acquisition, Bob Price, senior vice president of merchandising and inventory management, left to become CEO of Houston-based Star Furniture; others from Art Van’s merchandising and marketing teams would follow him out — to Star and elsewhere. CEO Yost left the next year, replaced by Ron Boire, who came with little industry experience and a mixed track record. (He was out at Art Van after 15 months on the job).
There also was at least one big glitch on Art Van’s franchising front. In early 2019, about a year after converting St. Louis-based Rothman Furniture into its largest (and farthest away) Art Van Furniture franchise, it ended up buying the business from franchisee Jay Steinback. Boire cited opportunity in the St. Louis market at the time, but there was little information provided about why the stores were changing hands, other than that it was Steinback’s decision. Industry sources familiar with the move, meanwhile, told Furniture Today on background that Art Van couldn’t find anyone else to buy it.
Last year, acknowledging missteps, Art Van named retired bedding industry veteran Gary Fazio as its new CEO. This was after Boire stepped down, after the retailer streamlined the merchandising team (removing more of Boire’s influence) and after David and Gary Van Elslander, sons of the late founder Art Van Elslander, had stepped up their involvement in the business.
Art Van made it to No. 14 on Furniture Today’s Top 100 for 2018 based on 2017 estimated furniture, bedding and accessory sales of $1.1 billion at 178 combined stores. It rose to No. 13 the following year. While sales were down slightly in 2018, store count grew by 16 units to 194 stores. As of late last year, the retailer operated 190 stores in nine states, including Wolf, Levin and its Art Van PureSleep chain among other banners.