Hoboken: Another One Bites the Dust
The current financial climate is certainly affecting industries far and wide. One of the more recent companies to fall in the face of tighter consumer spending and slower residential construction was the flooring distributor, Hoboken. The company filed Chapter 7 Bankruptcy in November of 2007. This occurrence was a huge shock to the industry that it had been a part of for 77 years. When the company revealed its dire financial situation, it was estimated that they had somewhere between 1,000 and 5,000 creditors awaiting payment. As it turns out though, Hoboken's troubles were not a complete surprise to all, as suppliers had begun to make claims against the company. The subsequent effect of the New Jersey based company closing was that suppliers now had to find new channels for their products. This is not an easy task to undertake, especially when sales are fairly flat. On the flip side of the coin, the retailers and contractors who relied on Hoboken were themselves faced with where to find the necessary products to complete the orders and jobs they had already accepted. As it is in many industries, the product/supply chain is so intertwined that when one part of the web experiences difficultly, the consequences can be vastly diverse.
Although the flooring business, just like many other areas of the economy, is struggling with the current absence of credit, this is not the only reason that Hoboken was prompted to file Chapter 7 Bankruptcy. The company underwent an ownership change two years ago that some partly attribute to its demise. Code Hennessey and Simmons, a private equity firm, became the owners of Hoboken and it is said that they changed the operating strategy, which in turn seemed to cause everlasting problems. In an effort to increase profits and margins, Code Hennessey and Simmons focused exclusively on the bottom line. While this may sound like a good idea, there has to be a balance between maximizing profits and preserving the fundamentals of the company. The added pressure on the bottom line might not have been as destructive if the industry were in better health, but with the climate as it is, the added pressure caused the company to collapse. Furthering the problem was Code Hennessey and Simmons’ attempt at expanding the company at a time when they could barely stay afloat as is. Within a short period of time after the acquisition of Hoboken by Code Hennessey and Simmons, the company merged with another flooring distributor based in Elkridge, Md. The new conglomerate was a product of Hoboken and Superior Products. During Hoboken's healthier days, it operated a total of 26 locations, which were spread across the country.
So one may wonder what is going to happen to what is left of Hoboken and Superior Floors. The answer is quite simple – LiquiTec Industries is responsible for liquidating what remains of the now defunct entities. With this, an estimated $50 million worth of product will be available for purchase. Included in this massive sell-off is tile, hardwood, finishes, carpet, tools and accessories.
Some in the industry say the writing was on the walls for some time prior to the actual bankruptcy filing. The departure of the CEO is the primary reason for the accusation. It seems that trouble was even more apparent when the CEO's brother also stepped down a few months later. Employees were notified of the company's closing in a letter from the then CFO, Lawrence Grossman. He stated that the company would be closing due to an "inability to acquire additional funding which we believe would have avoided the need for a facility closing." In June, Ira Lefkowitz, the longtime president stepped down. His brother Joel then took over at the helm but only for a short time before he too departed. In a last ditch attempt to save the sinking Titanic, a top executive with over 20 years experience in operations and manufacturing was brought in to lead the company. The task of preserving the 77 year old company was handed over to Mark D. Steele. As is now apparent, he was unsuccessful at turning things around, although it is hard to say if anyone could actually have saved Hoboken floors by that point.
Unfortunately, the ones who are really coming out at the bottom are all the smaller companies that had business relationships with the former Hoboken floors. It seems that the line is building for those seeking damages from the bankruptcy proceedings. Of course, the full extent of the losses will never be recouped and hopefully the industry will persevere without this flagship distributor. This is just one more reminder that business is in a constant state of change, and that we have to be prepared to deal with whatever the floors market will bare, or in this case, what it won’t.
- National Wood Flooring Association