Enfield, Conn. - High costs, low margins and the protracted economic downturn in New England is what ultimately did in Bernie's, according to court documents and the company's attorney.
The family- and employee-owned A/V, majap and furniture chain, with 15 leased stores in Connecticut, Delaware and Massachusetts,
, and liquidation sales, to be conducted by Hilco Merchant Resources, are expected to begin later today pending approval by a U.S. Bankruptcy Court in Hartford, Conn.
The Chapter 11 sales will continue through February.
According to longtime
attorney Marc Needelman, the regional dealer had successfully competed against local CE chains like Crazy Eddie and The Wiz, and was able to fend off encroachment by national discounters until the recession ultimately took its toll.
"The company was the victim of the protracted economic downturn and challenging retail environment," Needelman said.
Indeed, court filings show that Bernie's losses ballooned from $234,000 in 2008 to $1.9 million last year on sales of $112.2 million. The losses stemmed from lower sales volume and reduced margins, the company said, and caused it to default on about $12.7 million in loans with its chief secured lender Citizens Bank.
Last month Bernie's hired a management consultant, Altman & Co., which considered a number of alternatives including reducing the number of stores and shutting its six-year-old central distribution center, here. The warehouse is part of a 185,000-square-foot, leased complex located on an 18-acre campus that also seats the company's headquarters and Enfield, Conn., store.
Bernie's also explored the sale of the business as a going concern without success, and brought in Hilco in early January to begin preparing for the store-closing sales.
The company's largest creditors include GE Money Bank, owed $730,767; Toshiba, owed $509,307; Monster Power, owed $298,140; and Haier America, owed $250,172.
Other industry creditors include OmniMount ($167,218); Bose ($67,642); Whirlpool ($62,059); and LG Electronics ($49,092).
Connecticut Attorney General Richard Blumenthal said Bernie's assured his office that it intends to honor consumer deposits and upwards of $200,000 in unredeemed gift cards.
Blumenthal said Bernie's will also seek court approval to honor any returns and to complete special orders awaiting delivery, or provide refunds if items are not in stock.
Company attorney Needleman added that extended service plans sold by Bernie's will continue to be honored by third-party providers.
According to a report in the Hartford Courant, CEO Milton Rosenberg told employees of the bankruptcy filing and plans to cease operations on a companywide conference call yesterday afternoon.
The retailer was founded as a gas station by Rosenberg's father Bernie in 1947. The five-store chain was bought by Newmark & Lewis in 1985, and was reacquired six years later by Rosenberg, who rebuilt the business from a two-store operation into a regional big-box chain with plans to expand into Boston and beyond.
According to industry observers, the loss of Bernie's, and before that Tweeter, leaves an entree into the New England market for multiregional chains P.C. Richard & Son and hhgregg. The former, which carries a similar mix of CE and majaps, already opened its first big-box store in Connecticut last year, while hhgregg is rapidly expanding along the East Coast with stores planned as far north as the Atlantic City, N.J., area.