United Church of Christ in the Philippines

Gingoog Christian College

(former: Gingoog Institute/Central Mindanao Christian College)

Case Study of ABC Company Bankruptcy

Submitted by
BUFFY MARIE L. AGUILAR

Submitted to
MRS. LINDY P. VALDEVILLA
ABC Carpet & Home
Date: September 2021

Category/Product(s): High-end home goods

After 124 years in business, the high-end home goods retailer filed for Chapter 11 protection
with around $80M in unsecured debt and $8M in secured debt. Notably, the company initially
survived the onset of the pandemic — however, like others in its space, it ultimately succumbed
to decreased foot traffic and supply chain disruption. While the pandemic gave rise to new
complications, it also exacerbated existing issues for the company, such as flagship store
construction delays and the company’s struggle to establish a digital presence on par with its in-
store experience. At the time of filing in 2021, sales were down 50% from 2018, reaching just
$25M. The company announced that it would maintain regular operations and seek out a buyer
via auction by the end of October.

ABC Carpet & Home, the more than a century-old New York luxury home goods retailer, will
stay in business after winning court approval to sell itself to a group of investors.

The sale is valued at about $26 million, a lawyer for the retailer said in a hearing Wednesday,
though most of the consideration will come in the form of debt forgiveness. The company
received no other acceptable bids.

The buyer, called 888 Capital Partners, plans to invest $20 million into ABC and offer jobs to
more than 50 of the company’s existing employees, according to court papers. 888 Capital
expects the new ABC to break even in its first year and to be profitable thereafter, noting the
company will be debt free when it exits bankruptcy.

ABC filed for bankruptcy in September after Covid-19 cleared the city of many of its regular
customers. The company traces its roots to the late 1800s, starting as a pushcart on
Manhattan’s Lower East Side.

Paulette Cole, great-granddaughter of ABC’s original founder, will gain a minority stake in the
restructured business when the deal closes.

U.S. Bankruptcy Judge David S. Jones approved the sale in a virtual court hearing Wednesday.
He lauded those involved in the case for preserving a historic business and the associated jobs,
but emphasized the deal comports with the U.S. bankruptcy law.

“This is not a situation where I am weighing job preservation and economic impacts on the
community as a plus factor,” Jones said. “The results of the transaction are clearly in the best
interest of the estate as a whole,” he said, referring to ABC and its creditors.
The case is ABC Carpet Co. Inc., 21-11591, U.S. Bankruptcy Court for the Southern District of
New York.

History of ABC Carpet & Home Co. Inc.

ABC Carpet & Home Co. Inc.'s eight-story building in Manhattan's Flatiron district, with nearly
eight acres of selling space, is the largest rug and carpet store in the world, attracting about a
million visitors each year. The company's array of products include not only carpets and rugs
but also antiques, furniture, textiles, gifts and accessories, and bed and bath items. Because of
its inventive displays and eclectic offerings, ABC has been called "Disneyland for rich adults."

Reference for Business

Reference for Business Company History Index Retail and Wholesale
ABC Carpet & Home Co. Inc. - Company Profile, Information, Business Description, History,
Background Information on ABC Carpet & Home Co. Inc.

888 Broadway
New York, New York 10003-1204
U.S.A.
History of ABC Carpet & Home Co. Inc.
ABC Carpet & Home Co. Inc.'s eight-story building in Manhattan's Flatiron district, with nearly
eight acres of selling space, is the largest rug and carpet store in the world, attracting about a
million visitors each year. The company's array of products include not only carpets and rugs
but also antiques, furniture, textiles, gifts and accessories, and bed and bath items. Because of
its inventive displays and eclectic offerings, ABC has been called "Disneyland for rich adults."

Discount Rug Dealer: 1897-1983

ABC Carpet & Home traces its beginning to 1897, when Sam Weinrib, an Austrian immigrant,
loaded a cart with used carpeting and linoleum and pushed it through Manhattan's Lower East
Side. His son Max opened a store under the (since demolished) Third Avenue rapid-transit
elevated tracks at East 29th Street, and Max's son Jerry, who started selling carpets and rugs in
1947, moved the discount establishment to two floors on 881 Broadway, at East 19th Street, in
1961. This location put ABC at the right place at the right time when the neighborhood--once
known as Ladies' Mile for its late 19th-century department and specialty stores--returned to
fashion at the beginning of the 1980s.

Weinrib already had broadened his company's range in 1979 by buying Schumacher's area
rugs ("every mistake they ever bought," he later said). That purchase added more than 500,000
square feet of rugs to the company's stock, and there was not enough room in ABC's quarters
to house them. In 1980 Weinrib rented the basement and first floor of what had been the
quarters of the century-old former W&J Sloane department store, directly across the street at
888 Broadway. The following year he exercised an option to buy the building. In order to fill the
seven-story structure, ABC branched out in 1983 from floor coverings into the broader field of
home furnishings. At some point the company also filled adjoining 880 Broadway, which was the
original Sloane store.

Chic Home Furnishings Emporium: 1983-95

The ensuing transformation of ABC Carpet into a chic home furnishings emporium is credited to
Weinrib's daughter Paulette and her husband, Evan Cole. At this time, many established
suppliers would not sell to ABC because of its reputation for discounting, but in the mid-1980s
Paulette Cole began stocking the store with antiques and accessories she bought on her
travels. Soon she had won a reputation as a trendspotter who sagaciously anticipated the
growing importance of home life to aging baby boomers. Evan Cole was described as an astute
businessman and brilliant negotiator. By 1993 half of ABC's sales were coming from home
furnishings--half of that being furniture--and nearly half of this merchandise was exclusive to the
store. "Our customer is the $100,000 family that comes here to buy quality but save money,"
Evan Cole said that year.

Rugs and carpets continued, of course, to be a staple of the store. By 1988 ABC Carpet was the
nation's largest single-store floor coverings operation, with annual sales of $60 million. The floor
coverings division was broken down into carpets and area rugs, with the ratio, once roughly
equal, now about 75 percent rugs and 25 percent carpets. A 100,000-square-foot warehouse in
the Bronx held inventory valued at $3 million. Buying in volume and directly importing many
products, ABC was able to offer floor coverings for as little as $5 a square yard, yet its
customers included Katharine Hepburn, Meryl Streep, Diana Ross, Peggy Lee, and Keith
Richards. A company executive explained, "Everybody is interested in good value. Even people
who have tons of money want a good deal."

ABC Carpet & Home began selling furniture in 1988, starting with antiques and reproductions. A
year or so later, the company added high-end lines of domestic manufacturers, and in 1992
furniture sales came to about $25 million, or about one-quarter of total store sales. But Evan
Cole made no secret of his scorn for what he called the "how-many-suites-are-you-buying"
mentality of many furniture producers. "Our furniture business is a collecting business, it's a
piece business," he told a reporter in 1993. "People are not decorating, they're collecting. We
don't even sell the same chairs with a dining table these days."

Prominent among domestic suppliers of ABC's furniture in 1993 were Baker, Kindel, Hickory
Chair, and John Widdicomb. Shoppers were buying traditional shapes with what Cole called "a
high face--finishes, painted looks, unique effects, satinwoods, ormolu detailing--instead of flat
mahogany." A key element for sales, he said, was the store's ability to deliver 90 percent of its
furniture at once. As another ABC executive explained, "It's an old cliché, but everybody in New
York wants something yesterday."
ABC Carpet & Home's stylish home accessories and antiques were, in 1993, arranged in
vignette rooms that varied from cozy, crowded Victorian settings to a contemporary one filled
with natural, undyed cloths. Topical sections such as "White Trash Fifties" and "The Fairy
Kingdom" cross-sold various kinds of eclectic merchandise, including not only tablecloths,
lamps, and overstuffed chairs but even cookie jars.

ABC Carpet & Home added another 100,000 square feet of selling space during 1993-94 and a
number of leased departments, including in-store boutiques by Ralph Lauren and Estée
Lauder's Origins and an area for state-of-the-art consumer electronics (to entertain the men
while their wives shopped in other departments, according to Evan Cole). The main floor (or
"parlor") of the main store, formerly stocked with rugs, was now filled with a wide range of
merchandise the company had bought from an old English department store. Furniture, formerly
on two floors, was given a third as well.

The space expansion included roughly 50,000 square feet added to the carpet-and-rug store at
881 Broadway, enabling the design-rug department to move across the street from the main
floor of 888 Broadway. This new three-level floor covering gallery included several new custom
services, including hardwood flooring and vinyl and ceramic tile. Personal shoppers were made
available to help customers select furniture, accessories, and fabrics to coordinate with their
area rugs. Decorative handmade rugs and Orientals remained in their loft space on the sixth
floor of the main 888 Broadway store. ABC also acquired Absolutely Rugs, a retail store based
in Boca Raton, Florida, in 1993.

Top selling rugs at this time, according to Weinrib, were flatweaves, including kilins, dhurries,
chainstitch rugs, and needlepoints. Natural looks and colors, such as sisals in beige and off-
white, also were selling well. Top suppliers included Karastan, Nourisan, Pande Cameron, and
Whitney. The bestselling size was 9′×12′. ABC Carpet & Home hung samples in
this size rather than the usual industry practice of showing 4′×6′ or
6′×9′ samples. As for carpets, the store had always skipped expensive showroom
decoration because the costs would simply be passed on to the consumer, preferring to roll out
carpets on the floor rather than show samples.

The second floor decorative home collection established in the main store in 1994 contained
what management believed to be one of the world's largest collections of home fabrics in one
location. It held about 1,000 bolts of fabric on the selling floor and about 4,000 hanging samples,
plus endless varieties of tassels, ropes, and trims, and a huge array of decorative hardware.
Racks were organized by fabric type and color. Customers could buy fabric alone or order it
made into a variety of textile products, including draperies, slipcovers, spreads, and pillows. The
floor also included bedroom displays, huge armoires used as display cases, and muslin-covered
sofas and chairs in popular silhouettes to help shoppers choose their own upholstery. Three
skilled artisans cut and sewed in a large open workroom in one corner of the floor.

By 1995 ABC Carpet & Home was pulling in out-of-towners beguiled by the company's eclectic
selection of merchandise, and these visitors were not necessarily from the suburbs; Los
Angeles was its biggest market outside Manhattan. "Browsing through ABC's cluttered floors is
akin to shopping in your grandmother's attic," one reporter wrote. "Much of the charm is that the
merchandise does not look as if it is for sale. Chandeliers of Venetian glass drip from exposed
pipes. Silk pillows are tossed willy-nilly across velvet sofas. Tall, antique secretaries are littered
with tiny picture frames, pretty boxes, stationery, perhaps an old ink well. Outrageously priced
Italian bedding is thrown across beds as if someone incredibly chic had just arisen from them."
The National Retail Federation had cited ABC in 1994 as Small Retailer of the Year.

By this time the Coles were giving most of their attention to creating new departments. They
planned to subdivide and relocate established departments in order to accommodate a larger
modern-furniture section, specialty goods, gourmet kitchen wares, and a bookstore specializing
in interior design and Eastern philosophy. "Paulette's into the spiritual thing right now," her
husband explained. Accessories, comprising about 10 percent of the entire business, remained
especially dear to her heart. Grouped casually on tables, tossed over counters, and stuffed in
baskets and armoires, they did not look as if they were for sale, but each item had a price tag.
"We really believe accessories are like little spokespeople--they're the soul of the store," she
told a reporter. Interviewed by another reporter, she said, "We've created a bit of romantic
fantasy and warmth in what is sometimes considered a cold, unfriendly city."

A visit in 1995 to ABC Carpet & Home's main building began with the 27-window display, filled
with fanciful and varied offerings. The first floor included fragrances; decorative and antique
accessories, including pillows and throws; stationery and books; and "Spirit East" (including
tatami mats and "meditation cushions"), "Things for Men," (including canes, sailboat models,
and antique pocket watches), and "ABC Baby." The lower mezzanine was divided into
Moroccan, Indian Teak, Indonesian, Stone Statuary, South American, and Pine imported
furniture, while the upper mezzanine housed art deco and 20th-century modern furniture and a
section for Herman Miller.

The second floor included tapestries, curtains, draperies, trimmings, custom upholstery, and
hanging fabric samples. The third floor included bedding and bath, two Ralph Lauren shops,
and lighting and fixtures. The fourth and fifth floors carried furniture, upholstery, formal
reproductions and antiques (including an eight-foot folk art birdhouse), and another Ralph
Lauren section. The top floor, a loft with 25-foot ceilings, held decorative handmade rugs,
among them antique Aubussons from France, and Oriental carpets.

Expansion to Other Sites: 1996-98

In 1996 ABC Carpet & Home opened a cafe in a dormer display space in the back of the first
floor of the main building. Presided over by the chef at former mayor Edward Koch's official
residence, the breakfast to dinner menu was contemporary American, with bagels and muffins,
pancakes, salads, sandwiches, and simple entrees, all for less than $10. Evan Cole said he
planned to add a food shop and housewares department before the end of the year.

The year 1996 also brought other innovations. On Memorial Day weekend, ABC Carpet & Home
held its first "On the Road" promotion in a Morristown, New Jersey, armory, offering a combined
clearance sale and special price purchases. It featured 2,000 pieces of furniture, 2,000 rugs,
and 20,000 sheets. In July the road show moved to the fashionable Hamptons on Long Island,
and two further such events were being lined up for later in the year. ABC also launched a
60,000-square-foot outlet store in Delray Beach, Florida, with "no white Florida furniture,"
according to Evan Cole. The company decorated this white, cinder-block building with a 330-
foot trompe l'oeil mural of the fa&ccedile of 888 Broadway. In December the company formed
HomeBrand, a joint venture with Trade-Am founded to sell home furnishings to retailers.

With the expansion completed in 1994, ABC Carpet & Home had more than 350,000 square
feet of selling space, including three floors at 881 Broadway holding 35,000 rugs and thousands
of broadlooms. It opened another 50,000-square-foot store, entitled ABC Home on the Road, in
1997 in The Source, an enclosed mall in Westbury, Long Island. In addition, the company
maintained 200,000 square feet of warehouse space and a factory store outlet in the Bronx. In
1998 ABC opened ABC Carpet at Harrods, an 8,000-square-foot area on the third floor of the
famed London department store, offering more than 20,000 handmade rugs.

The pandemic has dealt a significant blow to ABC Carpet & Home, leading the luxury retailer to
file for Chapter 11 bankruptcy.

The filing was made late Wednesday night, with the company listing $50 million in assets and
$100 million in liabilities, according to Bloomberg. Under Chapter 11, ABC Carpet & Home can
continue to operate, have some of its debts wiped out and make a plan to repay the rest.

As a New York-based seller of luxury home goods, the company struggled when many of its
regular customers fled the city to ride out the pandemic. But the coronavirus wasn’t the only
cause of ABC’s troubles. The retailer also failed to develop much of an e-commerce operation.
Additionally, delayed renovations have hampered efforts to bring customers to its Union Square
store.

A private-equity sale of the business previously fell through. ABC Carpet & Home is working
with several financial advisers on finding either a buyer or financing.

Bloomberg reported prior to the filing that bankruptcy could be a disaster for ABC Carpet &
Home employees. WARN notices were sent this week, a required 60-day notification required
by state law when more than 50 employees at a 100-person plus company in New York will lose
their jobs.

Bloomberg also reported prior to the filing that the retailer would receive a debtor-in-possession
loan from 888 Capital Partners, a potential buyer of the company.
ABC Carpet & Home was started as a pushcart business by Austrian immigrant Samuel Weinrib
in the 19th century. Great-granddaughter Paulette Cole was responsible for creating the
company’s store at 888 Broadway in Union Square.

ABC Kitchen, which is housed in the same building, is owned separately and not involved in the
bankruptcy filing.

BUSINESS
ABC Carpet customers are fuming over undelivered goods
By Lisa Fickenscher

December 19, 2021 | 7:39pm

The chichi store looks the same from the outside but big changes loom within.
Daniel William McKnight
ABC Carpet & Home is struggling to recover from the pandemic, with customers claiming they
shelled out cash for orders that never arrived and the retailer haggling with its landlord over its
flagship Manhattan space, The Post has learned.

Annette Gallo purchased a $6,000 sectional couch from the swanky home-furnishings retailer in
April and was told to expect the delivery within six months. A design consultant herself, Gallo
did some investigating: She contacted the manufacturer of the couch, which told her the original
order was never placed.

Gallo said ABC apologized, offering her a free brunch at ABC Kitchen. She declined because
she said it felt like “a slap in the face. It’s not cool they are relying on customers’ banking
institutions to foot the bill.”

Dozens of other customers, meanwhile, say they could only dream of getting any such attention
from ABC.

“Can someone please call me!!! I ordered my couch last November and it has been a mess,”
one angry customer posted on Oct. 28 on ABC’s Facebook page. “Now no one is answering.
Stealing my money and not giving me anything in return!”

The 124-year-old retailer – known to generations of New Yorkers for its pricey rugs, trendy
furniture and far-out light fixtures – was bought out of a COVID-driven bankruptcy in October by
a consortium that mainly deals in Persian rugs, sources told The Post.

Nevertheless, ABC is now sitting on deposits and payments in full for furniture and carpets –
many of them worth thousands of dollars each – that were placed as far back as a year ago,
customers claim. Instead of delivering the goods, ABC has reportedly been ducking angry
queries and has even removed its telephone number from its Web site.
Meanwhile, the landlord of ABC’s flagship store at 888 Broadway in Manhattan’s trendy Flatiron
District is putting pressure on the retailer’s leaseholder, asking a judge to force it to either catch
up on rent or clear out of the space, according to recently filed court documents.

The cavernous storefront appears to be in disarray – with all but the ground floor and basement
blocked off to customers and mainstays like high-end linens and antique furniture largely
missing from the store.

“The restored antiques are largely gone and there are hardly any lamps in the store,” observed
Kenneth Rosen, a bankruptcy attorney who’d purchased a chandelier from the store a few years
ago.

What’s more, there is no explanation for the changes to the store – leading some to wonder if
the space is being prepped for a new tenant altogether.

“It looks like the landlord is trying to release the space to someone else and is asking the court
to force” ABC out, bankruptcy expert Adam Stein-Sapir said of the owner of 888 Broadway.

An ABC Carpet spokesperson said in a statement to The Post that the company has a long-
term lease at 888 Broadway and “is committed to maintaining” the location as its flagship —
even adding back additional floors “in the near future.” ABC said it was “engaging with the
landlord” on the space. A representative for the landlord didn’t respond to a request for
comment.

And amid complaints from customers, ABC’s spokesperson said the retailer’s new owners are
“focused on delivering a great shopping experience to customers.” The spokesperson said the
new ownership group wasn’t obligated to make good on orders placed by customers with the
old owners before the bankruptcy, but is doing so voluntarily.

“This includes one-on-one engagement with valued clients to satisfactorily address open orders
and working closely with supplier partners to ensure completion of all orders as soon as
possible in light of continued pandemic-related supply chain delays affecting the entire industry,”
the spokesperson said, adding that the retailer’s phone number “remains” on the company’s
Web site.

ABC was burning through $500,000 a week before its holding company – controlled by the
Weinrib family that had run the storied retailer for more than a century – declared bankruptcy in
September as coronavirus lockdowns walloped store traffic and its bulky furniture pieces failed
to move on the Web.

Now, ABC’s new owners continue to blame the pandemic and related supply-chain problems for
the delays in delivering orders already paid for. The store has pushed back delivery dates
multiple times, including for items that customers said were on the showroom floor or listed as
in-stock, according to social media posts and interviews with customers.
ABC Carpet has responded to some of the complaints on Instagram and Facebook, conceding
that its “lack of communication is inexcusable” and that it’s “working around the clock to reach
out to all customers with unfulfilled orders.”

Some customers were also told on its social media accounts: “We’re sincerely sorry for any
frustration we have caused. We assure you this is not our intention and we are committed to
honoring every purchase. We are working against global supply chain challenges from the
pandemic as well as an internal transition of ownership.”

For some longtime customers of ABC, its latest mea culpa is too little, too late.

Maryana Grinshpun, who runs a design business, bought a side table and credenza for $5,000
for a client two days before ABC Carpet filed for bankruptcy in September. The tables were
sitting on the showroom floor and were supposed to be delivered in October, she told The Post.
ABC later told her they were “sold out” of those tables.

Like dozens of customers who tried to call the retailer in October and November, Grinshpun
found the phone numbers were “disconnected.” She managed to get a refund from her credit
card company – and told The Post that she’d “never” purchase from ABC Carpet again.

Another customer wrote on Facebook last month: “I paid in full for a sofa and ottoman in
February.” The customer was told by her credit card company to contact ABC, but she noted
“ABC took their phone number off their Web site.”

The iconic retailer had been headed before its bankruptcy by Paulette Cole, a great-
granddaughter of founder Sam Weinrib, who retains a minority stake in the new ownership
structure.

The lease for ABC is held by a separate company owned by Cole; that company, AMMA421,
remains in bankruptcy and has said in court filings that it can’t pay rent.

Already shrunk from six to three floors and the basement, the store recently closed the second
and third floors and the balcony on the first floor where it had sold lamps and furniture.

The carpets have been moved from the upper floors to the basement and the ground floor,
where they were never displayed previously. The elevator bank and staircase by the Broadway
entrance have been boarded up and a new, modern elevator bank was installed at the back of
the store.

“There’s no sign saying ‘Watch for the grand reopening of the second and third floors,'” Rosen
pointed out. “I had the feeling that the building was – or has been – renovated in contemplation
of it being leased to another retailer.”
The coronavirus pandemic has driven numerous retailers into bankruptcy, and that generally
hasn't been good news for real estate investors. While a bankruptcy filing doesn't always lead to
store closures, it can. And at a time when commercial landlords across the country are
grappling with vacancies, the word "bankruptcy" can trigger some pretty negative thoughts.

In early September, famed New York City retailer ABC Carpet & Home filed for bankruptcy. But
in this case, there are several reasons why the news isn't all bad.

Why investors don't need to panic

New York City has been exceptionally hard-hit by the pandemic. Early on in the outbreak, the
city was declared the outbreak’s epicenter, and both residential and commercial landlords have
had to grapple with sky-high vacancy rates. Meanwhile, many New York City retailers have
seen their revenue decline since the crisis began. And during the pandemic, ABC fell behind in
its rent by more than $1 million.

But the news on ABC isn't as negative as it might seem. For one thing, there are already
investors on hand to bail the legendary retailer out of its financial distress. As of its filing, ABC
had assets worth up to $50 million and as much as $100 million in liabilities. The store plans to
continue operations while the bankruptcy process plays out. Talks of closures aren't on the
table.

Furthermore, the reason ABC wound up filing for bankruptcy is actually good for real estate
investors. ABC is a purveyor of luxury home goods -- think high-end rugs, accent pieces, and
decor. Most of ABC's products run from several hundred dollars to the $1,000 mark. Therefore,
they're not the sort of items consumers might buy on a whim or without seeing them in person.

This has been ABC's disadvantage during the pandemic. At a time when other retailers were
able to more seamlessly shift to e-commerce, ABC has not had the same success. After all, it's
doubtful that someone would be willing to drop $1,400 on a single vase or picture frame without
coming into the store and seeing what that item looks like.

But while ABC may have been hurt by the pandemic, its need to retain a physical presence
should give real estate investors comfort, because it shores up the idea that e-commerce
cannot take the place of brick-and-mortar stores. For years, even before the pandemic, real
estate investors have feared that a boom in digital sales would drive more stores into extinction,
leaving commercial landlords with an impossibly large number of vacancies and forcing malls
further into distress.

ABC's recent woes only drive home the message that e-commerce has its limitations. And that
fact could be the very thing that prevents a full-blown retail apocalypse.
At this point, ABC is a New York City institution. Founded in the 1800s by Samuel Weinrib, an
Austrian immigrant, the business started with a pushcart on Manhattan's Lower East Side. It
then evolved into a high-end home goods hub.

ABC's flagship store is located in Manhattan's Flatiron District, and it also maintains an outlet
store in Brooklyn. Once it emerges from bankruptcy, it will, ideally, continue to welcome its usual
array of customers, only with a smaller debt load holding it back.