Art Van does early layoffs, ends health insurance amid coronavirus

Mar. 20--Newly bankrupt Art Van Furniture says it is laying off its workers and cutting their health insurance much earlier than planned due to fallout from the coronavirus -- even as stores remain filled with unsold inventory.

In a memo to employees Friday, the Warren-based retailer says the mass layoffs, once planned to occur May 5, will instead happen Friday because the pandemic prompted the company to shutter all of its retail stores early.

Art Van's liquidation sales had been expected to run for many more weeks as the stores are still filled with millions of dollars in furniture inventory.

But the enormous customer lines that characterized the start of the liquidation sales on March 6 disappeared this week as the coronavirus crisis spread. It soon began costing more money to staff the stores than the sales were bringing in.

"We have faced tremendous pressure from government officials and associates to close," the memo says. "As much as we want to continue the pay and benefits of our associates who experienced job loss due to COVID-19, the reality is that we are an organization with extremely limited resources that cannot afford to do so with no cash coming in from our liquidation sales."

The layoffs affect about 720 Michigan employees, according to past company memos. Art Van initially planned to pay those workers until May 5, but now their paychecks and health care benefits end immediately.

A small, undisclosed number of workers at the Warren headquarters will stay on for a period of time to help the company wind down.

Bounced paychecks

The memo says that some workers' paychecks have bounced since the company's stunning March 5 announcement that it would close and liquidate all 169 stores in multiple states.

Those checks bounced "because our account was temporarily frozen," the memo says, and new checks were mailed Thursday.

Art Van filed for Chapter 11 bankruptcy on March 9 and it is an open question whether Art Van stores will ever reopen.

One potential deal in late February to save the company from bankruptcy would have involved the Van Elslander family and others, but the deal fell victim to the coronavirus when a group of investors got spooked.

The bankruptcy came three years after the company's $612.5 million sale by its founding Van Elslander family to Boston-based private equity firm Thomas H. Lee Partners. Art Van Furniture was profitable at the time of the sale, according to company insiders.

The deal was contingent on a flurry of sale-leaseback transactions for Art Van stores that the retailer had owned outright, which saddled the company with new rent payments and left less financial room to maneuver changes in the furniture retail business and recover from expansion decisions that proved unwise.

A Detroit-based attorney for Gary Van Elslander, one of the founder's sons and a former president of Art Van Furniture, has made appearances during the bankruptcy proceedings and there is speculation that the family may still be interested in buying back some of the company. The attorney did not return a message seeking comment Friday.

Contact JC Reindlat 313-222-6631 or [email protected]. Follow him on Twitter@jcreindl. Read more on business and sign up for our business newsletter.

___

(c)2020 the Detroit Free Press

Visit the Detroit Free Press at www.freep.com

Distributed by Tribune Content Agency, LLC.