Loves Furniture points fingers over financial problems, bankruptcy
In new documents filed in the U.S. bankruptcy court, Loves Furniture said warehouse and delivery issues led to poor customer experiences, canceled orders, and ultimately the company’s financial distress.
Prior to the company’s January 6th Chapter 11 filing, Loves’ public statements largely disrupted industry-wide supplies caused by the COVID-19 pandemic, which left the company’s operations low in inventory during times of high consumer demand .
Loves Furniture is the newly founded company that took over many closed Art Van Furniture locations last summer after Art Van’s surprising bankruptcy in March 2020. Loves started with 34 stores in Michigan, Ohio, and Pennsylvania and approximately 500 employees. There will soon be 13 stores, all but one in Michigan.
On Monday, Mack Peters, CEO of Loves, told the Free Press that the supply disruptions caused by the pandemic were actually a main reason for the company’s problems. Without these disruptions, the company could have opened stores sooner than before.
“There were certainly many factors that had to do with what happened,” said Peters. “We had to postpone a lot of store openings because we didn’t have any goods.”
More:Loves furniture files for bankruptcy, new owner can look for remaining businesses
More:Loves Furniture took over many Art Van businesses. Now it is also about to fight.
In the new bankruptcy documents filed over the weekend, Peters highlights Loves’ storage and delivery problems. He says the company only got access to the former Art Van warehouse at 14 Mile in Warren in October because another company used the warehouse to sell Art Van liquidations.
This situation required Loves to use an expensive and temporary patchwork quilt of warehouses in Burton, Allen Park, and Lincoln Park, with costs ranging from 120% to 500% higher than original estimates.
Loves hired Penske Logistics Services, a subsidiary of Bloomfield Hills-based Penske Corp., to manage some temporary warehouses and move furniture between them and the Loves stores.
Peters says in the court documents that Penske Logistics struggled to find Loves’ inventory in the Burton warehouse and “sent goods to the wrong stores so one store could get two of everything and another store would not get goods.”
Despite the mix-ups, Penske Loves was still charging trips to the wrong stores, trips back to Burton warehouse, and trips to the right stores again, the records say. Penske also sent trucks that were less than half full and Loves still charged a flat rate.
Because the inventory tracking software for Penske and another warehouse operator was not integrated, some furniture was lost.
“As a result, hundreds of deliveries were delayed or ultimately canceled because the goods needed to fulfill a customer’s order could not be found,” the file said.
A Penske Logistics representative declined to comment on the story. Penske sued Loves this month in Oakland County Circuit Court over the $ 1.8 million the furniture company owes.
Penske Logistics was still struggling to find furniture even after Loves finally relocated inventory to the former Art Van warehouse on 14 Mile, Peters claimed in court documents.
The first Loves stores opened in late summer and initially achieved strong sales that exceeded forecasts. However, sales fell sharply due to difficulties in finding, sourcing and delivering goods to customers, documents say.
Many Loves furniture suppliers refused to ship more furniture, even for Loves customers who had made deposits. Soon negative online customer reviews overwhelmed previous positive reviews, the court records say.
When Loves decided to close nearly a dozen Michigan stores last month, “customer uncertainty as to whether Loves would continue to exist led to numerous cancellations, to the point where daily cancellations often exceeded daily sales,” said Peters in the court records.
Loves hopes to be able to hold major sales events in the remaining 13 stores soon. Since the goal of bankruptcy is to restructure rather than liquidate, according to recent court records, Loves’ only way to reopen stores is to turn unsold inventory into cash.
Loves “has too much inventory and too little cash to run its business,” the court records say.
On December 28, Loves ran out of money to pay Penske. The next day, Penske removed its employees and trucks, preventing Loves from completing some assignments. Those steps resulted in further order cancellations and refund requests, the records say.
Since its inception, Loves has ordered furniture and mattress stocks from 81 different manufacturers, valued at $ 60 million. Of this, the company received around $ 38 million, with the rest either canceled by the manufacturer for non-payment or, according to the records, sold to another retailer.
Loves currently has approximately $ 27 million unsold inventory.
ContactJC Reindl at the313-222-6631 or [email protected]. Follow him on Twitter @jcreindl. Read more about the business and subscribe to our business newsletter.