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Retailer Strouds to Liquidate

May 23, 2003|Karen Robinson-Jacobs | Times Staff Writer

Facing mounting losses and dwarfed by the competition, Strouds -- a pioneer in the specialty home linens industry -- has filed for bankruptcy for the second time in three years and plans to shut all 47 of its stores, the company said Thursday.

"Going out of business" signs were posted in stores Wednesday, one day after Strouds Acquisition Corp., the City of Industry-based seller of towels, sheets and other home furnishings, filed for Chapter 11.

The company, which has about 1,100 employees and had sales of about $160 million in 2002, plans to liquidate all inventory over the next 60 days, then close all stores, company officials and its bankruptcy lawyer said.

"The company's losses were too great for us to continue," said Susan Storey, who joined the two-decade-old firm in March as interim chief executive. "We were unable to generate the sales necessary to continue operations."

Marc Winthrop, Strouds' bankruptcy attorney, put liabilities at about $55.4 million. He said the inventory's book value is no more than $51 million.

Winthrop said Strouds chose Chapter 11 over Chapter 7 because it allows the company to keep operating while having an "orderly liquidation."

Founded in 1979 in Pasadena by Bill and Joyce Stroud, the company -- known for its "linens experts" tagline -- enjoyed a strong, loyal following in its core California market.

But in recent years, the company made some missteps and was overshadowed by mega-chains such as Bed Bath & Beyond, the nation's top seller of home textiles with about $3 billion in 2002 sales, and Linens 'n Things, the No. 2 such retailer with about $2 billion in sales.

"Strouds was one of the pioneers among specialty store chains," said Don Hogsett, business editor for Home Textiles Today. "It did a great job so long as it stayed in California.

"It got into trouble when it decided" to expand into Nevada, Minnesota and Arizona, he added. "That cost them a lot of money."

In 1994, Strouds went public, which Hogsett said diverted management's attention from store operations.

The company sought bankruptcy protection in 2000 and a year later went private. But the cash crunch continued.

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