Home Goods Retail Chain the Latest to Consider Chapter 11 Bankruptcy

By: Sam Watanuki | Published: Jul 03, 2024

The furniture retail industry has been significantly impacted by rising interest rates and high inflation. These economic conditions not only affect sales directly but also influence related markets like real estate.

When consumers avoid purchasing homes due to high costs, they, understandably, also hold off on buying new furniture.

Historical Economic Trends

In January 2021, the 30-year fixed-rate mortgage fell to a record low of 2.65%. However, inflation began to rise mid-year, peaking at 9.1% in June 2022.

A close-up of a green stock market graph.

Source: Markus Spiske/Unsplash

To combat this, the Federal Reserve raised interest rates 11 times from March 2022 through July 2023.

Recent Mortgage Rates

The increase in interest rates pushed the average 30-year mortgage rate to 7.22% in November 2023, the highest in 20 years.


Source: Porter Gifford Corbis Via/ Getty Images

As of July 2, 2024, the rate slightly decreased to 7.07%, according to Bankrate. These rates have made financing large purchases like homes and furniture more difficult.

Impact on High-End Retailers

High-end furniture retailer Mitchell Gold + Bob Williams, which operated 27 stores in 14 states, closed all its stores in August 2023.

bankruptcy petition documents

Source: Melinda Gimpel/Unsplash

The company filed for Chapter 11 bankruptcy on September 6, 2023, unable to secure necessary financing, and subsequently filed for Chapter 7 liquidation.

Z Gallerie's Financial Troubles

Upscale furniture and home decor retailer Z Gallerie filed for Chapter 11 bankruptcy protection on October 16, 2023.

A photograph of numerous American bills

Source: Freepik

The company faced severe profitability and cash flow issues due to supply chain and import cost increases in 2021 and 2022, leading to financial instability.

Conn's HomePlus Considers Chapter 11

Now, Conn’s HomePlus, a discount furniture retail chain, is considering filing for Chapter 11 bankruptcy to reorganize its debts.

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Struggling with sales declines and challenges in integrating home goods retailer W.S. Babcock, Conn’s has hired financial advisers Houlihan Lokey and Berkeley Research Group for assistance.


Operational Challenges at Conn's HomePlus

Founded over 130 years ago in Beaumont, Texas, Conn’s HomePlus operates 170 stores in 15 Southern U.S. states and employs about 4,000 workers.

Conn's logo

Source: Conn's Inc./Wikimedia Commons

The retailer offers furniture, appliances, consumer electronics, next-day delivery, and personalized payment options, including an in-house credit program.


Economic Pressures on Conn's

Conn’s has faced economic difficulties over the last two years, reporting losses as its lower-income customer base struggles with inflation.

Several $100 U.S. bills are laid out on a table with a notepad and a pen, as well as a calculator that says “Inflation”

Source: iStock

The company’s financial woes highlight the broader challenges facing furniture retailers in the current economic climate.


Mitchell Gold + Bob Williams' Bankruptcy

Mitchell Gold + Bob Williams’ inability to secure financing and subsequent bankruptcy paints an uneasy picture of the difficulties high-end furniture retailers face in a high-interest rate environment.

A photograph of a spreadsheet with various numbers that says “Inflation” with an upwards arrow

Source: Shutterstock

The closure of its 27 stores in August 2023 marked a significant blow to the industry.


Z Gallerie's Struggles with Import Costs

Z Gallerie’s financial troubles were exacerbated by supply chain disruptions and increased import costs, leading to its Chapter 11 bankruptcy filing in October 2023.

An image of a large Chinese shipping vessel sailing out to sea.

Source: Wikimedia

These challenges reflect the broader supply chain issues affecting many retailers.


Conn's HomePlus and the Housing Market

The challenges faced by Conn’s HomePlus are partly due to the sluggish housing market.

An image of a couple standing outside of a home they recently purchased

Source: Pexels

With high interest rates discouraging home purchases, fewer consumers are in the market for new furniture, directly impacting sales for retailers like Conn’s.


Future Outlook for Furniture Retailers

The future for furniture retailers remains uncertain as they navigate high interest rates and inflation.

A digital illustration of inflation with hands surrounding stacks of coins and icons signifying percentage increases

Source: Freepik

Companies like Conn’s HomePlus may need to adapt their business strategies to survive, potentially through restructuring efforts under Chapter 11 bankruptcy protection.