LL Flooring is closing all its just-over 400 stores after failing to find a buyer, adding to the crowd of retailers this year that have liquidated and shut down their brick-and-mortar locations.
The Richmond, Virginia-based flooring retailer on Wednesday said it was winding down its operations with store-closing sales beginning at all its remaining stores on Friday. That announcement comes almost a month after LL Flooring filed for Chapter 11 bankruptcy protection with plans to close just 94 stores. Now, about 430 stores total will go dark.
On its website, LL Flooring — once called Lumber Liquidators — said it had been working hard to pursue a going-concern sale of the company and actively negotiated with multiple bidders.
"These discussions have not resulted in an offer, with the necessary financing, that would maximize the value of LL Flooring," the retailer said. "Under Chapter 11 rules, the company is required to achieve the highest or otherwise best offer for the company’s business or assets and, in this case, it was determined that a sale of the company’s individual assets, holding closing sales at our stores and winding down the business will deliver the most value to its creditors."
As of August this year, announced U.S. store closings outpaced openings, according to Coresight Research. In some cases retailers are just closing some locations, and in others chains such as LL Flooring are totally liquidating and shutting all their stores.
The group that has wound down their operations includes 99 Cents Only, Sam Ash Music, Bob's Stores, Conn's HomePlus, Badcock's Home Furniture & More and Ted Baker. Companies are blaming the lingering impact of the COVID-19 pandemic and a slowdown in consumer spending for the downsizing of store fleets.
Wind-down kicks off
LL Flooring said the business wind-down will start this week. The retailer expects the store-closure process to be completed in about 12 weeks, with the timing of closures varying from store to store. Northbrook, Illinois-based Hilco Merchant Resources is acting as LL Flooring's exclusive agent to sell inventory at designated stores.
With its "liquidation pivot" and decision to close all its stores, LL Flooring will be putting about 3.2 million square feet of retail space on the market, according to Bill Read, an executive vice president at Retail Specialists.
LL Flooring is also selling an industrial property, an about 995,800-square-foot distribution center at 6121 White Oak Creek Drive in Sandston, Virginia.
The retailer has struck a deal to sell the property, located on a nearly 100-acre site, for $104.8 million in cash to a buyer it identified as SNA NE, according to a regulatory filing.
Under the terms of the purchase agreement, when the sale closes LL Flooring may enter into a limited-duration lease for "certain square footage of the distribution center," the filing said.
Troubled past
LL Flooring Chief Restructuring Officer Holly Etlin outlined the retailer's financial challenges in bankruptcy court documents.
She said while the company "has been historically successful ... given a changing market characterized by lower levels of home improvements, depressed discretionary spending, and the subsiding of the COVID-19 demand bubble for home renovation projects, LL Flooring has suffered multiple setbacks, ultimately constraining its liquidity to unsustainable levels and leading the company to commence these Chapter 11 cases," Etlin said in the court documents.
The highly fragmented flooring market has also grown more competitive, according to Etlin. She also discussed the company's past legal issues.
But LL Flooring, founded in 1994 as Lumber Liquidators Holdings, in 2015 was the subject of a televised "60 Minutes" expose regarding claims that the laminate flooring imported by the company from China had unsafe levels of formaldehyde, Etlin said. The segment coincided with a class action lawsuit against the company and a governmental investigation into the alleged violations.
In October 2015, the company pleaded guilty in federal court to charges stemming from the allegations, according to Etlin. It later reached separate settlements on several matters, including the lawsuit, relating to the formaldehyde. The company agreed to pay a $33 million criminal penalty over the sales, according to media reports.
The retailer changed its corporate name and rebranded its stores to LL Flooring Holdings, effective January 1, 2022, in an effort "to revive its reputation," according to Etlin.