Strouds Puts Nine Stores to Bed

Strouds, the City of Industry, Calif.-based home-linens retailer, has filed for Chapter 11 bankruptcy protection. After struggling for some time, the company also decided to close nine of its 70 stores.

Chairman and ceo Charles R. Chinni said that by availing itself of the Chapter 11 process now, Strouds expects to be able to obtain sufficient inventory for the critical holiday season. “A successful holiday season is crucial to the company's ability to compete effectively, now and in the future,” he said. “By taking this action prior to the start of the holiday buying season, we will assure the continued flow of merchandise to our stores.”

The competition in the domestic product category – especially bedding and towels, which is Strouds'focus – is fierce, according to chairman and ceo Charles R. Chinni. Discount stores like Target and Wal-Mart tend to saturate the market, along with a few niche companies like Bed Bath & Beyond and Linens 'n Things.

Success stories have become rare in the world of specialty retailing for soft, domestic merchandise. Strouds'most accomplished competitors generally sell more than just linens, adding kitchen goods like small appliances and cookware to the mix. Analyst David Ricci of William Blair & Co. adds, “You can't make it just selling linens because people just don't think about their beds that often.”

As of July 1, Strouds claimed $80.9 million in debt and $107.8 million total assets. The company stated it has received commitment for up to $50 million in financing from CIT Group Inc. and Foothill Capital Corp. Second-quarter net losses reached $225,000 on sales of $54 million. Strouds will close four stores in Illinois, three in California, one in Minnesota and one in Nevada.