Garden Ridge reorganizes

DSN Retailing Today, Feb 28, 2005 by Debbie Howell

HOUSTON -- Eight store closures, renegotiation of above-market store-lease terms, and a $25 million investment formed the basis for home decor retailer Garden Ridge's plan of reorganization filed earlier this month with a federal bankruptcy court in Delaware.

The reorganization plan, which was pending court and creditor approval, came a little more than a year after the company filed for Chapter 11 protection, citing declining sales and a failed strategy to offer a reduced merchandise mix in smaller, high-rent locations.

Since the filing, Garden Ridge has shuttered eight stores and renegotiated leases at many of its remaining 35 stores in 13 states. A $25 million investment from prime shareholder Three Cities Research will provide exit financing for the company, pending court approval.

"This is the latest and most significant step toward Garden Ridge's emergence from Chapter 11," Don Martin, chief restructuring officer, said in a statement. "We believe we have completed our operational restructuring, and ... the company is ready to move forward with its plan."

Although Garden Ridge lost money the past two years and saw comparable-store sales plummet 16% from 1999 to 2002, results in recent months have been encouraging. Garden Ridge attorney Alan Kornberg told the bankruptcy court judge at a hearing Jan. 18 that December comps were up 5.4%, and January comps were running 10% above last year.

For the 11-month period between Feb. 4, 2004, and Dec. 25, 2004, Garden Ridge reported revenue of $379.7 million to the court. That compares with the last full fiscal year's sales tally of $460.5 million for the period ended Dec. 27, 2003, when the retailer operated 44 stores compared with its 35 now.

As part of its turnaround strategy, Garden Ridge has returned to its roots in offering a large assortment of home decor goods at a value in mammoth warehouse-style stores.