It wasn’t a surprise. And it comes in the context of a string of similar events in the retail business, especially in the sector catering to the home furnishings market. But it’s still sad news.
Christmas Tree Shops – a nice store with a terrible name – filed for bankruptcy late Friday and this week the company, creditors, bankers, vendors and, oh yes, customers are trying to pick up the pieces The company says it expects to reorganize and come out of the other side of chapter 11, perhaps with 10 fewer of its 82 stores but with new financing and a fresh balance sheet. One hopes that’s true, even as that’s not always the way it works out for other retailers in similar situations.
We all know Bed Bath & Beyond – which owned CTS, selling it to the husband-and-wife team of Marc and Pam Salkowitz and their Handil Holdings in 2020 – is in the process of being liquidated. And Tuesday Morning, making its second trip to bankruptcy court, had hoped for a similar plan to emerge but instead is also being shut down completely. Other retailers like Party City and David’s Bridal are in bankruptcy as well though the latter is trying to stay in business.
So the CTS bankruptcy comes in a retail environment of higher interest rates and more expensive money while shoppers have turned their attention away from spending on their homes and towards travel, entertainment and out-of-home activities. In the context it’s not a shocker.
The Salkowitzes also no doubt had a lot less margin for error. Privately owned we never saw a lot of details on their finances but one has to assume they didn’t have a whole lot of working capital to help them ride this out. I interviewed Marc Salkowitz twice – once right after he bought CTS as part of Bed Bath’s shedding of marginal nameplates and then again about a year later when he was talking about expansion plans. Back then the home furnishings space was on fire and CTS was probably doing OK.
That’s despite one of the worst names in all of retailing, one that is easily misunderstood by many: Forbes made a lame joke about selling Christmas decorations year-round in reporting the news this morning. In fact, CTS was a combination of an off-price store, a dollar store, a home and gift retailer and, oh by the way, seasonal products including but not at all limited to Christmas merchandise.
The new owners wrestled with the name, working up a strategy that kept it in existing markets but transitioning to just CTS in areas where it was not as well known. Bed Bath had the same dilemma and its solution was to add an “And That” to the back end of Christmas Tree Shops…and in some cases just using that suffix by itself. It was not an elegant solution.
CTS isn’t in bankruptcy just because of its name, although it certainly didn’t help. Going up against off-price powerhouses like HomeGoods and the dollar store giants is rough retail territory, especially if you don’t have the financial support of a huge corporation behind you.
In those earlier interviews Marc Salkowitz was optimistic, indeed enthusiastic about what he bought and what he planned to do with it. You had every reason to believe it was possible. Of course, that was before home furnishings retailing hit the wall a year ago and has yet to recover. It’s hard to say if they can come out of the other side of bankruptcy court to live another retail day at this point. A lot is up to the creditors, but also the suppliers who have to be getting tired of all of this. You can’t blame them either.
Marc Salkowitz said “our operations are sound,” in announcing the filing. For its 5,700 employees, hundreds of suppliers and tens of thousands of customers who shop the store, let’s hope that’s true. The retail industry could use a little feel-good story right about now.
WarrensReport 