Harvey Electronics will close its five remaining stand-alone stores in May, and will look to open five to eight in-store shops in New Jersey this year as the A/V specialty retailer shifts to a custom install-only strategy.
The store closures will leave the beleaguered New York-area business with two stores-within-stores, located at ABC Carpet & Home, a Manhattan home furnishings emporium, and in a nearby Bang & Olufsen showroom. The company shut its flagship store in midtown Manhattan in February.
Harvey left the Progressive Retailers Organization (PRO) Group buying organization as of April 1 as a result of the restructuring. “Our business model no longer fits their profile,” said COO Michael Beck. But he added that the retailer will consider membership in another buying group going forward.
The store-liquidation sales, conducted by Clear Bid and Hudson Capital Partners, were approved last week by the U.S. Bankruptcy Court for the Southern District of New York and Harvey’s creditors. The five stores comprise substantially all of the company’s assets, court documents indicated, and Harvey’s name and other intellectual properties may also be sold. Proceeds will go to YA Global Investments, Harvey’s principal secured lender; to a trust for unsecured creditors including Bang & Olufsen America, Monster Cable and D&M Holdings; and will be used to pay the liquidators and various legal and administrative fees.
Harvey filed for Chapter 11 bankruptcy in December.
“This court order allows us to move towards the conclusion of our restructuring efforts,” said Michael Recca, Harvey’s interim CEO and chief restructuring officer. The company had originally intended to reject the leases as a way of jettisoning the stores, he told TWICE, but instead chose liquidation to accelerate the process as professional fees began “climbing out of control.”
Recca said the expense of maintaining retail space had become a “yoke” as custom installation grew from between 20 percent and 30 percent of Harvey’s business to upwards of 80 percent of sales. Once the restructuring is completed at the end of May, the company, operating under the Harvey brand, will “immediately begin to open store-within-a store locations” primarily in New Jersey, he said. The five to eight new shops will measure 2,000 square feet or smaller — “All of them would fit inside our Paramus, N.J., store,” Recca said — and would receive just-in-time deliveries from a central warehouse.
The product assortment would remain essentially unchanged, noted COO Beck, and the showrooms would focus on home theater and whole-home controls.
Recca said the shops would be located “in places where consumers go who are considering renovating their existing houses,” including a forthcoming home design center in Holmdel, N.J., and that Harvey would target custom install jobs ranging from $15,000 to $100,000. The company will draw from a large local pool of custom installers who are seeking an exit strategy or could benefit from the company’s administrative infrastructure, he said.
In the interim, Harvey will draw upon YA Global’s cash collateral for the next eight weeks.
One of the last remaining A/V independents in the New York metro market, Harvey saw its fortunes sour in recent years as national big-box chains began saturating its trading area and local players Sixth Avenue Electronics and Electronics Expo honed their custom install businesses. Last year’s failed attempt to acquire MyerEmco, a last-ditch effort that would have extended Harvey’s footprint to Maryland, cost the company more than $1.2 million and the distraction of management. The cash hit, plus its inability to raise new equity capital, triggered the delisting of its common stock from Nasdaq, which led to loan defaults and its eventual Chapter 11 filing.
“The company’s been around since 1927,” Recca said. “There have been a lot of changes over the last 80 years. This is just another one.”