Unable to grow, Dekor closes stores - Brief Article

Home Channel News, Oct 8, 2001

Plummeting summer sales sink this home decor start-up dealer

ATLANTA -- Nine months after making its grand entrance onto the home furnishings stage, Dekor shut its three stores and laid off its 400 employees on Sept. 17.

Ten days later, the dealer seemed to be functioning in a parallel universe. Telephone calls to Dekor's stores were answered with a business-as-usual message. On Sept. 25, NHCN spoke to Dekor's landlord, who said he hadn't heard from the company since he issued a notice of default the week before.

Dekor's downward spiral became obvious during the week of Sept. 9, when it ran newspaper ads with 50-percent-off coupons for store products. Those ads apparently were a last-ditch effort to bring in quick dollars.

Diminishing operating funds and the inability to open more stores quicker were the causes that ultimately led investors to call for Dekor's closing, said its two cofounders. Jim Inglis, Dekor's CEO, told NHCN that the stores' sales fell precipitously in the summer months, and there were not enough signs of improvement to justify keeping the stores open.

"We believe we opened very good stores, and based on the research we did, our customers felt so, too," said Inglis, the former executive vp-merchandising with Home Depot and former chief operating officer with Maxim Group. Dekor opened its first four stores in Georgia in November, and, while sales did not meet expectations, in the first six months of operation "we were seeing increases -- double-digit increases -- each month," he said.

Dekor opened at a time when dealers and suppliers were realizing that the economy had weakened and would continue to falter through at least the first half of 2001. The Sept. 11 terrorist attacks on the World Trade Center and the Pentagon only exacerbated this situation by deflating consumer confidence. But the economy didn't cause Dekor's failure, said Inglis.

"When we designed this store [format], our model was to open a lot more stores," said Inglis, who did not specify the number of stores Dekor planned to open. He said the company had based its expenses on the assumption that it would be operating a larger chain; when that didn't materialize, Dekor's cash flow shrank.

In July, Dekor closed its store in Douglasville, Ga., and placed on indefinite hold its plans to open in Nashville, Tenn. That same month, the company negotiated new financing from two of Europe's leading home improvement retailers, Hornbach in Germany and Kingfisher in the United Kingdom. The two European DIY retailers had been covering Dekor's customer deposits and open-project orders, Inglis acknowledged. He also confirmed a report in the Atlanta Journal and Constitution that Sears had been an early investor.

Inglis said when interviewed that Dekor's focus would be to "make sure our investors and customers are best taken care of." He added that the company would complete any outstanding projects with customers. Herb Biggers, Dekor's co-founder, told the Journal and Constitution that Dekor could cover its payroll, but it didn't have the cash to offer laid-off employees any severance. NHCN was unable to contact Biggers.

It is still unclear how Dekor's suppliers will fare now that the company is out of business. Executives at Kitchen Aid, one of Dekor's vendors, found out about the store closings a few days later at a staff meeting. "We thought [Dekor] had a lot of potential," said Brian Maynard, Kitchen Aid's marketing director. "It's always disappointing when a retailer goes out of business, but it's part of the realities of the marketplace." Maynard said Kitchen Aid wants to recover any merchandise and monies that Dekor owes the company, but thought it was too early in the process to determine what steps it would take to recoup its losses.

Rick Crossley, president of Jamestown Management, from which Dekor was leasing its 80,000-square-foot, two-story store in Atlanta's Buckhead district, did not expect the retailer to be able to pay the outstanding balance on its $2.5 million annual rent. "You can't squeeze water from a turnip," said Crossley, who noted Dekor's lease agreement was for at least 15 years. Crossley added that his company had been monitoring Dekor for months after seeing that its stores' sales weren't hitting the dealer's projections. Its closing, he said, "did not come as a complete surprise."

In July, the company revealed that it would remodel its stores to give more space to appliances. Inglis said, though, that only one store had been remodeled before they were closed and that changes would have been evolutionary. Areas that yielded space to appliances included soft goods and accessories as well as the store's framing department.

Dekor was launched on the premise that customers would seek out a shopping environment that was family friendly (its stores included areas where children could play), made home decor decisions easier by organizing products by color and materials; and provided the latest in interactive technologies. For example, its stores were wired with fiber optics that would allow homeowners using their own video cameras to transmit images to store employees who could provide real-time design consultation. Inglis conceded that Dekor never achieved the economies of scale to benefit from that technology.