LL Flooring, a specialty retail store previously recognized as a strong competitor to Home Depot under the name Lumber Liquidators, announced the closure of all 400+ stores just weeks after declaring bankruptcy. The company, which specialized in flooring, had initially stated it would shut down 94 stores nationwide.
In attempts to sell the business as a going concern, LL Flooring negotiated with potential buyers but failed to receive any bids. Citing Chapter 11 regulations, which mandate securing the highest or best offer for its business assets, the company found itself without any viable offers. Consequently, LL Flooring concluded that selling off its assets individually would yield the greatest return for its creditors.
Key Takeaways
- LL Flooring’s Bankruptcy and Closure: After 30 years, LL Flooring (formerly Lumber Liquidators) declared bankruptcy and shut down all of its 442 stores due to failed negotiations to secure a buyer.
- Financial Struggles: LL Flooring faced severe financial challenges, including reduced consumer spending and vendor issues, which led to its Chapter 11 filing in August 2023 with liabilities up to $500 million.
- Liquidation Efforts: The company liquidated its assets to maximize creditor returns, selling off its distribution center and conducting store-closing sales.
- Founder’s Acquisition: LL Flooring founder Tom Sullivan’s F9 Investments acquired 219 stores and the company’s intellectual property, with potential plans to revive the Lumber Liquidators brand, though about 1,000 employees will be laid off.
Image source
LL Flooring Shuts Down After 30 Years Following Bankruptcy and Unsuccessful Buyer Negotiations
LL Flooring, formerly Lumber Liquidators, ceased operations after 30 years in the market due to failed attempts to secure a buyer shortly after declaring bankruptcy. Based in Richmond, Virginia, the company operated 442 stores across the United States but has permanently closed its doors. This decision follows unsuccessful negotiations with several potential buyers, as disclosed on the company’s website. In August this year, LL Flooring began closing 94 of its stores.
LL Flooring entered Chapter 11 bankruptcy proceedings on August 11 at the U.S. Bankruptcy Court for the District of Delaware. At the filing of LL Flooring’s bankruptcy, the company reported liabilities between $100 million and $500 million and assets ranging from $500 million to $1 billion. It had secured $130 million in debtor-in-possession financing from its lenders led by Bank of America.
Court filings reveal that LL Flooring’s financial struggles were due to decreased consumer spending on home improvements, reduced discretionary purchases, and a general decline in demand within the sector following the pandemic’s peak. As financial pressures mounted, the company reduced payments to vendors and suppliers to preserve cash. In response, some vendors stopped or reduced shipments to LL Flooring, further complicating the company’s financial situation.
LL Flooring announced on its website that it had been diligently working to secure a going-concern sale by negotiating with various potential buyers during store closures. Despite these efforts, the retailer confirmed that the negotiations resulted in only a few financially viable offers to maximize the company’s value.
According to the provisions of Chapter 11, LL Flooring was obligated to obtain the highest or best possible offer for its business assets. Facing the absence of any viable offers, LL Flooring opted to maximize creditor returns by liquidating its assets. This included holding store-closing sales, managed by Hilco Merchant Resources, and winding down operations.
Charles Tyson, CEO of LL Flooring, expressed in an open letter at the time that, with regret, the company must announce the initiation of the process to close down LL Flooring and shut all its stores. This outcome was different from what anyone had anticipated.
More recently, regarding the liquidation efforts, LL Flooring has already sold its one-million-square-foot distribution center in Sandston, Virginia, to QTS Data Centers for approximately $104.75 million. As part of the deal, the company will lease back part of the facility for two years, paying over $8 million in rent.
Additionally, on October 1st, F9 Investments, led by LL Flooring founder Tom Sullivan, acquired 219 stores, the company’s intellectual property, and other assets, with possible plans to revive the Lumber Liquidators brand. However, about 1,000 employees not retained in the acquisition are expected to be laid off.
At the time of its bankruptcy filing and store closures, the company operated more than 440 stores and employed around 1,960 workers. Orders placed before September 6 will be installed within 30 days. After this date, the company discontinued installation services, making all sales final and no longer allowing cancellations or refunds.
Established in 1994, Lumber Liquidators became one of the top hardwood flooring retailers in the U.S. However, in 2015, the company encountered a major challenge when a CBS’s 60 Minutes report exposed that some of its laminate flooring from China had unsafe levels of formaldehyde. This chemical, associated with cancer risks, was detected at levels up to 20 times above the legal limit, breaching California’s Air Resources Board (CARB) standards and new federal composite wood emissions regulations.
The 60 Minutes report also featured hidden camera footage from Chinese factories where workers confessed to falsely labeling products to pass them off as compliant with U.S. standards. Additionally, it was revealed that these mills were using lower-cost core boards with high formaldehyde content to save 10-15% on expenses. Despite initial denials and claims that the report was influenced by short-sellers looking to impact the stock price negatively, the brand faced significant reputation damage.
In response to the findings, Lumber Liquidators was forced to plead guilty to federal environmental crimes and making false statements. The company also dealt with lawsuits, including class actions and state legal proceedings, which led to substantial financial settlements. In a move to shed its past negative image, the company changed its name to LL Flooring in 2022.
About LL Flooring Holdings
LL Flooring Holdings, Inc., along with its subsidiaries, is a retailer specializing in hard and soft flooring types and related products. The company’s product lineup includes waterproof vinyl plank, hybrid resilient flooring, laminate, solid and engineered hardwood, tile, bamboo, and cork. It also sells flooring accessories such as underlayment, moldings, tools, and adhesives. These products are available under brand names like Coreluxe, Bellawood, ReNature by Coreluxe, and Duravana.
Additionally, LL Flooring offers delivery and installation services and sells products through its website, catalogs, and physical stores. Previously known as Lumber Liquidators Holdings, Inc., the company rebranded to LL Flooring Holdings, Inc. in January 2022. Founded in 1993, it is based in Richmond, Virginia. On August 11, 2024, the company filed for Chapter 11 bankruptcy reorganization in the U.S. Bankruptcy Court for the District of Delaware.
Conclusion
LL Flooring’s downfall after three decades in the market highlights the significant financial pressures retailers face due to changing economic conditions. Despite attempts to find a buyer and continue operations, the company was forced into Chapter 11 bankruptcy due to reduced consumer spending and rising operational challenges.
Its efforts to secure a going-concern sale were unsuccessful, leading to liquidating assets to maximize creditor returns. While the company’s founder has acquired some of its stores and intellectual property, the closure of all its locations marks the end of an era for the once-prominent flooring retailer.
