Dive Brief:

• Regional retailer Loves Furniture filed for Chapter 11 bankruptcy protection last week following multiple shipping problems and a dispute with a logistics provider, according to court papers.
• Penske Logistics has filed a lawsuit for its due balance and a restraining order to prevent Loves from moving items in its warehouse.
• Loves filed for Chapter 11 under an agreement with another furniture specialist to liquidate excess inventory and restructure around a smaller footprint after deciding to liquidate 13 stores in December.

Dive Insight:

Multiple shipping and logistics issues facing the new retailer made success hard, if not impossible, from the beginning.  

The issues snowballed into a disaster early into the new retailer's life. "While initial sales were strong as compared to the projections, sales fell significantly in light of Loves' difficulty locating, obtaining and delivering merchandise to its customers," interim CEO Mark Peters said in court papers. "Many of Loves' suppliers refused to ship further product, much of which had been ordered in May and June, so that items that were expected to be received on which customer deposits had been taken were not longer expected."

After another company won rights to Art Van's former Michigan warehouse until October, the new retailer was without a permanent logistics hub. Loves contracted with Penske Logistics Services to provide warehouse and cartage services for goods moving from warehouse to stores. Peters said that multiple shipping issues with Penske that followed hurt the stores' readiness to open and then the retailer's ability to get products to customers once they did.  

The issues were complicated by Loves' decision in the fall to close some of its recently opened stores, which led some customers to believe the retailer was closing all of its stores, according to Peters. 

Loves and Penske have terminated their agreement, but Peters said the retailer, lacking cash, has fallen behind on owed payments to the logistics provider.

Peters said that Loves currently has "too much inventory and too little cash" to operate its stores. To fix that, it has entered an agreement with Planned Furniture Promotions to liquidate excess inventory and cover its operating expenses in hopes of moving forward with a smaller footprint of 12 stores.

Real estate veteran Jeff Love created Loves Furniture last year after two financial firms approached his company about starting up a new furniture retailer to fill spaces vacated by Art Van in its liquidation last spring.

As recounted by Peters in court papers, the firms pointed out that Art Van still had significant sales at the time of its bankruptcy and would be leaving a void in some local markets. 

The plan was for Loves to take over 26 properties, the majority of which were in Pennsylvania, Ohio, Maryland, Virginia and Illinois. The retailer hired former Art Van Vice President Matthew Damiani as its CEO in April and soon after filling out its management team.