On the Block

Fixture manufacturer RHC/Spacemaster Corp. (Melrose Park, Ill.) is selling its assets under bankruptcy protection, Crain's Chicago Business reports. RHC/Spacemaster, which makes shelves and other in-store fixtures for retailers, filed for Chapter 11 protection in February, following the well-publicized troubles of two of its biggest customers, Kmart Corp. and Gap Inc.

The company also was hurt by an industry-wide slump, as many of the retailers that expanded rapidly in the 1990s have since cut back on building new stores or remodeling existing ones.

With more than 1600 employees and about $200 million in sales last year, RHC/Spacemaster is one of the largest players in the highly fragmented in-store fixtures industry. Yet the company's difficulties illustrates the perils of relying heavily on a small pool of huge customers.

RHC/Spacemaster's sales to Gap, for instance, plunged last year to about $20 million from $80 million as the struggling San Francisco-based retailer slashed spending, Scott Schreiber, the company's bankruptcy attorney, told Crain's. RHC/Spacemaster also had about $2.5 million in receivables from Kmart when the Troy, Mich.-based discounter filed for Chapter 11 protection in January 2002, according to Schreiber.

RHC/Spacemaster has been controlled by the Umans family and relatives since 1901. The company has hired a Chicago-based Westmoor Capital Advisors LLC to sell its assets and has already received a letter of intent from one party interested in most of company, Schreiber says. He declines to identify the prospect.

RHC/Spacemaster is not alone in facing financial difficulties. Many firms that rode the retail expansion wave in the '90s are still suffering from an industry-wide downturn. Store fixture sales fell an estimated 6 percent to 8 last year, after an 11 percent drop in 2001, says Steven Keith Platt, managing director of S. K. Platt & Co., a Hinsdale, Ill.-based merchant banking firm that specializes in the in-store fixture industry. The National Association of Store Fixture Manufacturers is more optimistic, estimating a 3 percent drop last year after a 2 percent drop in 2001.

The problem is that the fastest-growing retailers — discounters like Arkansas-based Wal-Mart Stores Inc., one of RHC/Spacemaster's biggest customers — spend less on shelves and merchandise displays on a per-square-foot basis than do other types of retailers, Platt told Crain's.

That doesn't bode well for companies like RHC/Spacemaster. “Walk into a Costco — they're spending nothing on their stores,” Platt says.