Carpet Co-op acquires Flooring America

Home Channel News, Dec 11, 2000

Company believes it has strengthened its strategic plan for aggressive expansion with $13.25 million deal

MANCHESTER, N.H. -- Carpet Co-op of America has acquired the three franchises of Flooring America -- which was reorganizing under Chapter 11-bankruptcy protection -- for $13.25 million.

The 250 Flooring America and 100 GCO stores in the United States as well as the 100 Carpet Max franchises in Canada will now become part of Carpet Co-op's organization of franchisees and member-owned stores that includes Carpet One, Stone Mountain, Floor Expo, ProSource, America's Carpet Gallery and International Design Guild.

With this deal and the October acquisition of a majority interest in Floor Expo, which serves the residential builder market, Carpet Co-op believes it has strengthened its strategic plan for aggressive expansion.

"In this consolidating industry, we have to have the size and scale to secure our future," said Alan Greenberg, co-CEO of Carpet Co-op. He noted that the addition of the franchises would allow the 15-year-old floor-covering group to achieve higher efficiencies in key areas and an immediate reduction in distribution costs for its members.

"This will significantly strengthen our company," co-CEO Howard Brodsky said, adding that the marketplace where Carpet Co-op competes has changed dramatically. Home centers like Home Depot and Lowe's and specialty stores such as Depot's Floor Store and Expo Design Center and Sears' The Great Indoors will be "the real competition in the future," he said.

Much of Flooring America's management will remain on board after the transition and most of the current franchise members are ready to join Carpet Co-op, Brodsky said. The chain will also maintain "separate and distinct" advertising and marketing.

GCO will be merged with Stone Mountain to create a dominant outlet chain, Brodsky said, tripling the size of Stone Mountain and improving the company's ability to acquire "the right products for the outlets." The two store formats will maintain their own identities and management, but will increase back room efficiencies and eventually carry the same merchandise.

On June 15, Kennesaw, Ga.-based Flooring America filed its Chapter 11 petition, closed 35 company-owned stores and laid off more than half of the company's 300 corporate employees.

At the time, the company said it would close the majority of its 281 company-owned stores as it reorganized. At least 250 of those stores were unprofitable locations that Flooring America acquired from carpet supplier Shaw Industries in 1998.

Flooring America suffered a net loss of $71 million on sales of $763 million in fiscal 2000, more than triple the losses of the previous year.