BIG UPDATE: Struggling Home Depot rival files for Chapter 11 bankruptcy
The home improvement retail industry has faced significant economic challenges over the past two years, driven by inflation, high interest rates, and the aftermath of the Covid-19 pandemic. During the pandemic, demand for home renovations surged as millions of people spent more time at home, leading to a temporary boom in home improvement projects. However, as normalcy returned, many retailers found themselves grappling with financial realities.
The Closure of Kelly-Moore Paints
One notable casualty of this shifting landscape is Kelly-Moore Paints, a historic paint retailer that shut down all 157 of its locations in January 2024. Founded in 1946, the Irving, Texas-based company cited a heavy financial burden from approximately $600 million in asbestos claims settlements, the risk of future claims, and longstanding supply chain issues exacerbated by the pandemic. Kelly-Moore opted for an out-of-court wind-down of its operations rather than pursuing Chapter 11 or Chapter 7 bankruptcy, citing a lack of capital for continued operations.
LL Flooring Files for Chapter 11 Bankruptcy
Another major player in the home improvement sector, LL Flooring, filed for Chapter 11 bankruptcy protection on August 11 in the U.S. Bankruptcy Court for the District of Delaware. The company aims to sell its assets after facing significant headwinds in the housing, repair, and remodeling markets post-pandemic. In its filings, LL Flooring also requested permission to close and liquidate 94 of its 442 stores across the nation.
The company’s liquidity constraints have become unsustainable, and previous attempts to market its distribution center in Sandston, Virginia, for sale failed to yield the needed funds. LL Flooring’s Chief Restructuring Officer, Holly Etlin, indicated that the company needed to file for bankruptcy to facilitate a sale as a going concern.
If LL Flooring is unable to find a buyer through the bankruptcy process, it may resort to liquidating its assets and closing its retail stores. In its bankruptcy petition, the company reported assets between $500 million and $1 billion and liabilities ranging from $100 million to $500 million, including $109.6 million in funded debt.
To stabilize its finances during the bankruptcy proceedings, LL Flooring seeks approval for $130 million in debtor-in-possession financing from lenders Bank of America and Wells Fargo, which includes a letter of credit sub-facility and roll-up of prepetition letters of credit.
Established as Lumber Liquidators in 1994 by Tom Sullivan, LL Flooring changed its name to LL Flooring Holdings in January 2022 after settling securities fraud allegations for $33 million. As of April 2024, the company was recognized as the top U.S. hardwood flooring retailer by U.S. News and World Report, operating 442 locations across 46 states.
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