The headlines in the newspaper constantly remind us that we’re in tough times.
Today, there were two stories that made me wonder when this will end. One was of a long time furniture retailer, Plunkett Furniture, in the Chicago area. They are just one in a series of significant businesses that have called it quits, or have had it called for them in the past few years.
Plunkett’s is (was) a very nice retailer of upscale products. The high end has been particularly hard hit by this recession. These are people who tried to run a business the right way and just ran out of cash. They are not the exception.
There are a lot of nice people who have had to close their doors after decades in business. What used to be a reliable way to make a nice living, put your kids through school, pay some taxes, and give something back to the community, has now turned into the tourniquet yoke that chokes them into submission. And, it’s happening too often.
The second story is the announcement that Simmons Bedding produced a $492.2 million loss for their prior fiscal year on sales of just over $1 billion. This is the antithesis of what happened at Plunkett’s.
It seems that Simmons has been bought and sold and bought and sold and bought and sold like it was some sort of house being flipped after a remodel. Only, these guys never remodeled, except on the balance sheet. All they did was show cash flow and profits and try to make a killing.
Instead of bringing innovation to their product line with some of the profit, these schemesters took all of the profit to inflate their balance sheet without reinvesting in the company. They were milking the cow, but deciding not to feed it.
The banks had cash to loan and profits to make. And bankers needed to make deals under any circumstances. These guys saw dollar signs. This was a deadly combination.
Today, Simmons is mired under a pile of debt that makes the federal government look miserly. Most of that $492.2 million is the inflated value (all borrowed) of the company being erased to bring their balance sheet back in order. The only problem is, they owe and they owe it now.
There are real victims here, the employees that showed up for work everyday and gave the only assets they had, their sweat and their time. These are the people that put their flesh against the product with pride for a paycheck. And now, that seems in jeopardy.
Expect to see Simmons right next to GM, in front of a judge, asking to have their debts released.