Bankrupt Smith’s To Close Five Stores Citing Overzealous Expansion, Retailer To Pull Out Of Spokane Sept. 5
Smith’s Home Furnishings, known for copious advertising and cut-rate prices, filed for bankruptcy Tuesday and announced that it will close five furniture and appliance stores, including two in Spokane.
Smith’s, a Wilsonville, Ore.-based retailer, filed for Chapter 11 bankruptcy reorganization Tuesday in Portland. Officials blamed overzealous expansion for the bankruptcy, which will cost 81 Spokane employees their jobs.
“We as a company expanded more quickly than we had capital to support. We’re going to retrench those stores where we’re making a profit and close those that aren’t,” said Glen Grodem, Smith’s chief executive officer.
Spokane was a big part of that expansion. Smith’s opened a store in 1991 at Northpointe Plaza and another in the Valley last year. But sales have languished, Grodem said, and both of those stores will be closed Sept. 5.
“Spokane is at the outer reaches of where we’re making a profit, so we’ve decided it will have to close,” Grodem said in a telephone interview. Two Smith’s stores in Seattle and a distressed-merchandise store in Eugene, Ore., will also close.
Consumers with extended warranties on Smith’s products should not have trouble servicing merchandise at other stores, Grodem added. Thirteen Smith’s stores will remain open, including those in Portland, Tri-Cities, Bremerton, Olympia, Tacoma and Boise.
Smith’s bankruptcy declaration comes five weeks after a Washington state court ordered Smith’s to pay $450,000 to settle a deceptive advertising lawsuit. The settlement, the largest ever granted in Washington for deceptive advertising, followed 200 consumer complaints and a 1993 lawsuit filed by the attorney general.
Local furniture and appliance retailers said the lawsuit may have contributed to the store’s financial woes. But a bigger factor probably was a regional slowdown in furniture sales due to the soft housing market and generally weakened economy.
“It’s common knowledge that sales aren’t as high as they have been in the past. We’d all like to be doing better,” said Alan Munns, assistant store manager of Sylvan Furniture Co., 227 W. Riverside.
Housing-related industries such as hardware retailers, general contractors and home builders have also felt the slowdown as the region’s real estate market cools from the heated sales of recent years.
Munns also cited increased overhead costs and Spokane’s highly competitive furniture market as reasons for Smith’s bailout.
In addition to hundreds of employees at five Smith’s sites, the bankruptcy will be a financial sting to the media. Smith’s is a prodigious buyer of newspaper and television advertising, and its pullout will likely impact media budgets throughout the Northwest.
Smith’s is “one of a handful of top advertisers” in The Spokesman-Review, often running six or more pages of full-color center spread displays, smaller ads and inserts, said Shaun Higgins, director of marketing and sales.
“Clearly when a major advertiser of this magnitude goes into bankruptcy, we’re concerned. We’ll feel a pinch because of this,” Higgins said.
“The short-term effects will be painful, but after that, competitors and replacement advertisers may see this as an opportunity to compete for a market share.”
Smith’s is also a heavy advertiser in other newspapers and television stations throughout the Northwest, Higgins added.
The last retailer of Smith’s advertising girth to pull out of Spokane was Frederick & Nelson department store, which closed in 1992 after filing for Chapter 11 bankruptcy.