Ernst Home Center Inc. filed for Chapter 11 bankruptcy protection Friday and announced plans to close more than two dozen stores in its nine-state regional chain.
“The restructuring will allow us to concentrate on the core group of stores that have historically been among our most profitable,” Hal Smith, Ernst president and chief executive officer, said in a news release.
The company did not say which of its 86 stores had been tagged for shutdown.
“The employees have not been informed yet and I think it would be very uncomfortable for them to hear it from some other source than us,” Fox said. In addition, he said, the plans have not yet been approved by U.S. Bankruptcy Court.
“I can tell you they’re pretty much scattered throughout the nine states” - Washington, Oregon, California, Idaho, Montana, Utah, Nevada, Colorado and Wyoming, said Ernst spokesman Jim Fox.
Ernst operates four stores in Spokane: Lincoln Heights, Northpointe Plaza, Shadle Center and the Spokane Valley. In North Idaho, Ernst has one store in Coeur d’Alene near the Silver Lake Mall, and one store in Moscow.
Inventory from the shuttered stores will be transferred to other stores or sold, and affected employees reassigned when possible, the company said.
“This decision was a very difficult step for us to take,” Smith said, but “on balance this was the best course available to us.”
Inventory difficulties have been apparent at Ernst’s Spokane stores, where shoppers have found a number of empty or near-empty shelves.
Spokane-based Jensen Distributing Services Inc., Ernst’s principal supplier in Washington, said earlier this week it was no longer distributing to the chain because the company couldn’t pay its bills.
The company’s stock plummeted to 87-1/2 cents Friday morning - a 56-1/4-cent drop from Thursday’s NASDAQ listing of $1.43-3/4 and well below the high for the year of $3.62-1/2 on March 29.
The retailer and its wholly owned subsidiary EDC Inc., a distribution center, each filed voluntary petitions for protection under Chapter 11 of the U.S. Bankruptcy Code in the court’s Delaware district, the company release said.
Under Chapter 11, a company is freed from the threat of creditors’ lawsuits while it reorganizes its finances. The reorganization plan must be accepted by a majority of its creditors. Unless the court rules otherwise, the company remains in control of the business and its assets.
Ernst’s filing lists assets of $252.2 million and liabilities of $257.6 million.
The company has arranged an $80 million loan from Congress Financial Inc. (Northwest), subject to court approval. The money will be used to meet inventory needs and for working capital.
Ernst, which opened its first store in downtown Seattle in 1893, went public in 1994 in a bid to raise $50 million to open 55 “superstores” over the next three years. The company had hoped to revamp and expand - it then had 77 stores in eight states, and has since branched into California.
But Ernst has struggled with union problems and attempted to snag a share of the market increasingly dominated by warehouse-style chains such as Seattle-based Eagle and Atlanta-based Home Depot.
Lately, Ernst has sought to focus on home improvement and decor as well as its stock-in-trade hardware and garden supplies. Recent ads have promoted more and better-informed store staff.