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Dive Brief:
- Bended Page, parent company of independent bookstore Tattered Cover, said Monday that it voluntarily filed for Chapter 11 bankruptcy. Court documents indicate that the Colorado-based company owes a total of more than $1 million to book publishers, including Simon & Schuster, Penguin Random House, and MacMillan.
- As part of the reorganization, Tattered Cover plans to close three of its seven stores by next month and lay off about 27 of its 103 employees. The company plans to offer severance to those being let go and said some employees may have an opportunity to fill temporary holiday positions.
- If the court approves, the company said it will gain access to about $1 million of new financing that will enable the company to obtain inventory and maintain operations during the critical holiday season.
Dive Insight:
Investment group Bended Page acquired Tattered Cover in late 2020. In a statement, the company said the COVID pandemic and changing market conditions caused “substantial financial issues” that affected the company’s liquidity.
The company’s 2022 gross revenue was about $10.5 million, generated mostly from the sale of books, gifts and related items. Five lenders hold secured debt of about $820,000. The retailer reports owing at least 200 creditors. Tattered Cover also reported a loss last year of about $1.2 million and said it’s lost $667,882 during the first eight months of this year.
“[Bended Page] is in immediate need of the DIP Loan funds to purchase inventory because Debtor is on a credit hold with its primary publishers,” the company said in court documents. Two current investor board members are contributing to the debtor-in-possession financing.
The holiday shopping season is Tattered Cover’s busiest time of year. But faced with substantial debts owed to publishers, parent company Bended Page said it’s currently on cash-on-delivery terms with them and it “does not have the cash necessary to purchase sufficient inventory to meet anticipated holiday demand.”
Founded in 1971, although it is one of the largest independent booksellers in the U.S., its revenues have remained largely flat since March 2020, while competition from online sellers has grown, the company said, adding that the opening of new stores also increased overhead costs.
Brad Dempsey, who was appointed interim CEO in July and permanent CEO this week upon the company’s Chapter 11 filing, told The Denver Post that the structure of a seven store footprint was unsustainable.
Tattered Cover plans to close stores in Denver’s McGregor Square, Westminster and Colorado Springs starting Oct. 23 and concluding by early next month.
According to data from the Association of American Publishers, the industry overall is essentially flat versus a year ago, Peter Hildick-Smith, president of publishing research company Codex-Group, told Retail Dive in an email. That suggests “that Tattered Cover’s troubles are very localized.”
The association said consumer books revenues were up 8.9% in August, rising to $785 million, while year-to-date revenue for the industry was up .6%.
Tattered Cover said it had been purchasing limited inventory on a wholesale basis for several months this year. But that increased its cost of goods by 25%. The margin on inventory purchased at wholesale “is likely not sufficient to sustain operations,” the company said.
The company said it is using a special provision of the bankruptcy code that is intended to streamline the reorganization process for qualifying small businesses. Subchapter V of Chapter 11, for example, does not require debtors to get creditor approval for their reorganization plan.
In a statement, Dempsey expressed confidence Chapter 11 will help Tattered Cover regain its financial footing.
“Our objective is to put Tattered Cover on a smaller, more modern and financially sustainable platform that will ensure our ability to serve Colorado readers for many more decades,” Dempsey said. “Restructuring for long-term viability requires managers to make very difficult business decisions that affect people and business partners, and we intend to do what we can to minimize these impacts.”
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