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Art Van is out of money and is liquidating and closing all stores

Discussion pertaining to Detroit, Ann Arbor, Port Huron, and SW Ontario
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48125er
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Re: Art Van is out of money and is liquidating and closing all stores

Post by 48125er » Sun Mar 08, 2020 12:21 am

My parents wanted to get an exchange on a new mattress because the one they bought was hard as a rock and now Art van wont honor the exchange, so their stuck with a hard mattress.

Bob's in Grand Rapids floor models are disgusting, they're all stained.



innate-in-you
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Re: Art Van is out of money and is liquidating and closing all stores

Post by innate-in-you » Sun Mar 08, 2020 1:07 pm

MWmetalhead wrote:
Thu Mar 05, 2020 8:18 pm
A lot of the furniture in my house came from Art Van.

They are the middle-of-the road furniture store in terms of price point. Better quality merchandise than Gardner-White. Much more affordable than Gorman's. Not ghetto like La-Z-Boy. I am unfamiliar with Bob's Discount Furniture, other than their campy TV spots.

Bricks and mortar furniture shopping options have suddenly become much more limited around these parts. I like to examine the quality of what I'm purchasing when we're talking furniture-level price points. (By the way, IKEA does not appeal to me in the least.)

Art Van has made a number of strategic blunders in recent years. The one that really sticks out for me is their moronic decision to open a bunch of "Pure Sleep" stores. What, exactly, was the point? The long since abandoned "Paul's TV" was another blunder (very weak selection, no home audio, had to walk through the bowels of the store to get to what was hardly more than a kiosk).

The second is their complete failure to evolve the shopping experience. Instead of salesmen dressed in fancy suits descending on you like hawks the moment you step into the store, how about having your employees dress business casual instead? Design consultation? Missing in action! What about accent furniture, lamps, wall decor, etc.? Slim pickings, and the stuff that generally is available for sale is in the overpriced Clearance Center...err..."Outlet."

How about digital marketing and web presence? Every time I do a Google shopping search for furniture, Art Van NEVER appears in the results...EVER! In a world of Wayfair, Overstock.com, and Joss & Main, that is simply unacceptable.

Did anyone ever "LINE UP AT 9AM!!!!" to get freebies that were supposedly handed out to early bird shoppers? Those commercials were so outrageously tacky. I love how the retail chain whose employees wear expensive suits and neckties feature a prolifically pukey booth announcer who sounds like he worked at 103.5 The Blaze or 100.3 Pirate Radio in L.A. circa 1990.

The writing was on the wall long before Thomas H. Lee Partners took over. They thought for some reason making a shit sandwich with Art Van and a couple crappy chains out east would spell success. It was basically business-as-usual after Lee Partners acquired the chain. They should be faulted for not adapting the chain to 21st century shopping habits. I suspect any attempts to change culture & mindset were thwarted or simply were not attempted.
Paul's TV was Art Van's reaction to competing furniture/appliance stores who also started bundling flat-screen TV sets with furniture and/or home appliances.

Mass production of flatscreens and competition in the market drove prices down to the point where they started giving flatscreens away.

Art Van decided that since everyone else was including a flatscreen in their furniture or appliance deal, they had better throw TV into their product line, too.



brianp48093
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Re: Art Van is out of money and is liquidating and closing all stores

Post by brianp48093 » Sun Mar 08, 2020 4:17 pm

Well, this would explain why when I had Art Van come out to fix my broken recliner in JANUARY, they had to “order parts” and have been jerking me around ever since. I’d like to bring the chair to the store and throw it through their fucking window.



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TC Talks
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Re: Art Van is out of money and is liquidating and closing all stores

Post by TC Talks » Sun Mar 08, 2020 4:54 pm

The longstanding Pasquale's restaurant is empty
Damn, that was a late night haunt of mine 35 years ago.

Mickey Shore had been the car audio department of ABC since at least 2002. That was the first and last time I've been in one of those places...


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WOHO
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Re: Art Van is out of money and is liquidating and closing all stores

Post by WOHO » Sun Mar 08, 2020 7:27 pm

Brian wrote: "... I’d like to bring the chair to the store and throw it through their fucking window...."
Thanks for giving me a good laugh today Brian- the sad thing is, that's probably how you really feel and what Art Van customers have been screwed-over. I questioned when they built a monster store in the Toledo suburbs then followed-up with worthless understaffed Sleep Shops in Toledo.



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TC Talks
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Re: Art Van is out of money and is liquidating and closing all stores

Post by TC Talks » Sun Mar 08, 2020 7:45 pm

WOHO

A bit of advice: any business who yells at you and has sales every two weeks is probably not going to offer the best experience. That strategy is designed to create "Urgency" so you will buy now.

When I need a couch, I decide length, color etc and go online. Art Van didn't even show up in Google Shopping! How crazy is that?


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Rate This
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Re: Art Van is out of money and is liquidating and closing all stores

Post by Rate This » Sun Mar 08, 2020 8:19 pm

TC Talks wrote:
Sun Mar 08, 2020 7:45 pm
WOHO

A bit of advice: any business who yells at you and has sales every two weeks is probably not going to offer the best experience. That strategy is designed to create "Urgency" so you will buy now.

When I need a couch, I decide length, color etc and go online. Art Van didn't even show up in Google Shopping! How crazy is that?
That would seem to show a lack of an online marketing presence... inconceivable in 2020 but here we are...

"WHAT DO WE HAVE TO DO TO GET RID OF OUR EXCESS INVENTORY???????"

Now we know...



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Colonel Flagg
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Re: Art Van is out of money and is liquidating and closing all stores

Post by Colonel Flagg » Sun Mar 08, 2020 10:39 pm

TC Talks wrote:
Sun Mar 08, 2020 4:54 pm
The longstanding Pasquale's restaurant is empty
Damn, that was a late night haunt of mine 35 years ago.
Pasquale's still packed 'em in, but the kids were no longer kids, and wanted to retire. Sad.


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Mega Hertz
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Re: Art Van is out of money and is liquidating and closing all stores

Post by Mega Hertz » Sun Mar 08, 2020 10:48 pm

brianp48093 wrote:
Sun Mar 08, 2020 4:17 pm
Well, this would explain why when I had Art Van come out to fix my broken recliner in JANUARY, they had to “order parts” and have been jerking me around ever since. I’d like to bring the chair to the store and throw it through their fucking window.
I'd love to see this go down. Many retailers do say "Bring it back if you're not satisfied", but they made no specifications ;)


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proxima3
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Re: Art Van is out of money and is liquidating and closing all stores

Post by proxima3 » Sun Mar 08, 2020 10:55 pm

brianp48093 wrote:
Sun Mar 08, 2020 4:17 pm
Well, this would explain why when I had Art Van come out to fix my broken recliner in JANUARY, they had to “order parts” and have been jerking me around ever since. I’d like to bring the chair to the store and throw it through their fucking window.
You're thinking of Discount Tire. :razz



mmg
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Re: Art Van is out of money and is liquidating and closing all stores

Post by mmg » Mon Mar 09, 2020 6:58 am

Colonel Flagg wrote:
TC Talks wrote:
Sun Mar 08, 2020 4:54 pm
The longstanding Pasquale's restaurant is empty
Damn, that was a late night haunt of mine 35 years ago.
Pasquale's still packed 'em in, but the kids were no longer kids, and wanted to retire. Sad.
Big Boy will be taking over Pasquale’s

https://www.freep.com/story/entertainme ... 965268001/


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audiophile
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Re: Art Van is out of money and is liquidating and closing all stores

Post by audiophile » Mon Mar 09, 2020 7:18 am

I didn't realize Big Boy was sold. There new CEO sold their properties and now is leasing them back. Sound familiar?

https://www.crainsdetroit.com/restauran ... -ownership


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696lover
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Re: Art Van is out of money and is liquidating and closing all stores

Post by 696lover » Mon Mar 09, 2020 6:06 pm

MWmetalhead wrote:
Sat Mar 07, 2020 11:50 am
Thanks for taking the time to share some details, 696.

I'm a little confused, though. Was the structure you explained set up post-sale or was it instead concurrent with the sale to Lee Partners?

I do not quite understand the role of the "in between" entity. Is this a situation where the real estate owner leases the stores/land to the intermediate entity, who in turn subleases the store/land to Art Van Furniture? Art Van Furniture pays rent to the intermediate entity, who in turn pays rent to the real estate owner? If so, my guess is the equity percentages when comparing the intermediate entity to the real estate owner vary somewhat. Perhaps part of the rent paid to the intermediate entity funded dividends to its equity holders?

It's hard for me to envision a scenario where Citi would agree to release 1st lien mortgages from the real estate just from normal course loan amortization. Commercial real estate mortgages placed in the capital markets often have 20 or 25 year amortization schedules, which means very little of the original principal balance would have been repaid by now. That is, of course, unless a bunch of excess cash flow from operations was used to prepay the loan.

Usually, when a company is suffering from financial deterioration, creditors look to increase collateral rights, not decrease them. My guess is the Credit Agreement must have contained some sort of asset coverage test, and that if a certain level of collateral coverage could be demonstrated, collateral deemed excess collateral would be allowed to be released. Any releases of real estate collateral must've occurred when the real estate loan borrower was still in good standing under its Credit Agreement.

If Thomas H. Lee walks away with any type of significant proceeds here, it means the senior secured creditors were all deemed unimpaired.

Let's face it. The family wanted to bring in private equity in 2017 for a reason. They saw the writing on the wall. Unfortunately, private equity's involvement in this case evidently made things worse, not better. The revolving door in the CEO's office and other distractions prevented the Company from overhauling its business model to adapt to modern shopping habits.
Main reason used to be to game the Michigan SBT tax. In addition to this use in the Art Van case, you can allocate passive income easier--plus in Michigan very long term leases, longer than 30 years, count as long term capital gains instead of passive income.* (*State dependent)



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MWmetalhead
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Re: Art Van is out of money and is liquidating and closing all stores

Post by MWmetalhead » Mon Mar 09, 2020 6:17 pm

Tax avoidance - I should've known. :)

I appreciate the explanation.

TC Talks wrote:
Art Van didn't even show up in Google Shopping! How crazy is that?
Exactly. Their digital marketing strategy was pathetic. I don't even know if they had one. The web site, at least from what I remember a few years ago, in & of itself was decent. However, the retailer seemingly did *very little* to direct traffic to the web site!


Caroline Beasley is ruining WRIF. What a bitch!!!

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MWmetalhead
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Re: Art Van is out of money and is liquidating and closing all stores

Post by MWmetalhead » Mon Mar 09, 2020 6:33 pm

Here's an article posted today at detnews.com; the writer apparently doesn't understand how a Borrowing Base line of credit works:

https://www.detroitnews.com/story/news/ ... 998571002/
A November 2019 adjustment to Art Van's asset-backed loan with Wells Fargo increased that credit line from $60 million to $82.5 million. That loan would lead to the unraveling of the company through liquidation and, now, bankruptcy.

Just two months later, in January, Art Van saw a reduction in its "borrowing base," or the collateral required for the loan.
A Borrowing Base reduction means the Company is able to borrow less. Sometimes, it follows a release of collateral, but usually it is caused by a deterioration in the value of existing collateral.

If a company is witnessing declining sales, for example, it will carry fewer accounts receivable on its balance sheet. The decline in AR means a decline in collateral for lenders. Borrowing Base value is tied to collateral value, and is governed by a lending formula - usually a percentage of "good" accounts receivable + some percentage of "good" inventory.

If uncollectable accounts grow or if the company is behind on payments to inventory suppliers, the Borrowing Base will shrink.

The Detroit News article indicates Art Van was hit pretty hard by the tariffs on imported goods from China, which I thought was interesting. I always assumed most furniture sold in its stores came from North Carolina.

Vendors obviously knew Art Van's financial picture was looking increasingly bleak. Some key vendors evidently cut off trade credit (probably because Art Van was already past due big time on a bunch of open invoices) in recent days. That, combined with an eroding borrowing base, left Art Van with minimal to no borrowing availability to fund day to day operations.

When February 28 came, Art Van apparently was "overformula" on its Borrowing Base, meaning collateral value shrunk to a number less than its outstanding Senior Secured revolving loan balance. The company evidently had insufficient cash on hand to be able to pay down the deficiency and still operate as normal.

Oh, did I mention who the lead arranging bank was on Art Van's Senior Secured revolver??

Wait for it....wait for it........


WELLS FARGO!!!

I'm not shocked at all that those pieces of shit underwrote Art Van's Senior Secured credit facility.

The fact Wells Fargo underwrote the transaction as an Asset Based Line of Credit (which usually requires monthly or more frequent Borrowing Base reporting, exhaustive field audits, at least an annual appraisal on all inventory, etc.) suggests to me Art Van's cash flow wasn't so hot in 2017, which has been my theory from the get go.

Well-established companies with great brand recognition who have solid cash flow and a stable earnings outlook don't need Asset Based Lines of Credit. They can get credit on much more lenient terms.


Caroline Beasley is ruining WRIF. What a bitch!!!

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