Z Gallerie files for bankruptcy; pins hopes on finding buyer

Z Gallerie has filed for Chapter 11 bankruptcy protection and is hoping to find a buyer to avoid liquidation.

It’s the third bankruptcy filing for the LA-based home furnishings and décor retailer, which previously filed in 2019 and 2009. In the new filing, Z Gallerie noted “severe liquidity constraints” resulting from “underperforming retail stores, adverse macroeconomic trends, and industry specific headwinds.”  The retailer, which one had nearly 60 stores, currently operates 21 locations in nine states and an e-commerce site.

Z Gallerie plans to retail Stump & Company to market its assets for a sale. If the retailer can’t find a buyer willing to invest in its stores, it will close all its stores  and its warehouse by the end of the year, CFO and interim CEO Robert Fetterman said in court documents.

“Additionally, the debtor also intends to file a motion proposing an efficient, public and flexible auction process in connection with its sales efforts,” the company said in filings. “If the debtor is unable to implement a going-concern transaction, the debtor will turn to an orderly liquidation of its remaining assets, close its stores in the coming months.”

Z Gallerie’s filing comes as a slowing of the real estate market and new home sales have taken a toll on the home furnishings sector. In its filing, the company cited high mortgage rates and a resulting pullback in home sales as slowing demand for its products.  It also cited higher import costs and negative cash flow in its stores.

In its filing, Z Gallerie listed liabilities and assets of between $50 million and $100 million each.

In 2019, home furnishings buying club DirectBuy acquired Z Gallerie through a bankruptcy auction. (Direct Buy is part of CSC Generation, whose other brands include One Kings Lane and Touch of Modern.)

Z Gallerie has secured a $1.1 million debtor-in-possession financial facility from ZG Lending SPV, its existing secured lender.