ABC Carpet & Home filed Chapter 11 after a slow e-commerce shift and pandemic slump

ABC Carpet & Home began in 1897, when the founder — great-grandfather of Paulette Cole — sold rugs from a cart on Manhattan's Lower East Side. It grew into a 'chic home furnishings emporium' on Broadway; by 1988 its carpet division alone booked $60 million in revenue, and the 888 Broadway flagship came to account for the majority of revenue.

The 2010s brought downsizing and store closures, including the Florida location. Revenue was $100 million in 2017. CEO Aaron Rose acknowledged in court papers that the retailer was slow to transition to e-commerce, and construction disputes with landlords left roughly $3.5 million in back rent plus delays at the flagship. From January to July 2021 the company posted negative EBITDA on less than half the revenue of the same period in 2017.

ABC had searched on and off for a buyer since April 2020 without finding takers, and filed for Chapter 11 in September 2021. It arrived with a stalking-horse bid from 888 Capital — controlled by financial firm Regal Investments, with a minority interest held by Cole — worth about $15 million as a credit bid plus $300,000 in cash, subject to a planned auction by October 22 and a closing no later than October 31.

Revenue in Jan-Jul 2021 was less than half of 2017's $100M with negative EBITDA; ~$3.5M in back rent; sold via a ~$15M credit bid in Chapter 11.

The retailer was slow to transition to e-commerce as consumer preferences shifted — a lag CEO Aaron Rose himself acknowledged in the bankruptcy filing.

After downsizing, the company depended on one flagship: the 888 Broadway store accounted for the majority of revenue, so a shock to that store hit everything.

Construction disputes with landlords delayed work at the flagship and left about $3.5 million in back rent.

When the pandemic closed stores and snarled supply chains, a buyer search running since April 2020 had produced no takers, leaving a court-supervised sale as the way out.

A single-flagship retailer that lags a channel shift has no buffer: when its one store stops producing cash, the whole company becomes a distressed asset.

The Chapter 11 was filed with a plan to sell as a going concern. The stalking-horse bid from 888 Capital included a credit bid of about $15 million and $300,000 in cash for assumed liabilities, and would face any higher qualified offers at auction. The company hoped to hold an auction by October 22, 2021 and close a sale no later than October 31, with CEO Aaron Rose saying the goal was to keep ABC 'a viable business.'