Bankrupt LL Flooring pivots to full liquidation, issues layoff notices for hundreds of local workers

The LL Flooring brand was created two years ago to replace Lumber Liquidators. (BizSense file photo)

LL Flooring is going completely out of business.

Two weeks after the Henrico-based retailer sought bankruptcy protection to shutter about a quarter of its stores and find a buyer that might keep the rest of the chain afloat, it has now pivoted into a full-scale liquidation.

This means the company formerly known as Lumber Liquidators will in short order close all of its nearly 400 stores and lay off its nearly 2,000 employees.

Layoff notices for much of its local workforce were issued last week for 300 workers at its Libbie Mill headquarters and for 119 employees at its massive distribution center in Sandston.

The company said in bankruptcy court and SEC filings in recent days that it expects store closing sales to begin this week with the hope of having all stores shuttered in 12 weeks.

In a letter to customers and vendors this week, the publicly traded company said, “this is not the outcome that any of us had hoped for.”

“We have been working hard to pursue a going-concern sale of LL Flooring. We have actively negotiated with multiple bidders, but these discussions have not resulted in an offer, with the necessary financing, that would maximize the value of LL Flooring. As a result, it is with a heavy heart that we must let you know that we are going to begin the process of winding down LL Flooring’s business and closing all of our stores,” it wrote.

The pivot isn’t a complete surprise, as the company had said some form of a sale of most of its assets was the plan all along. However, the speed at which it flipped to a full liquidation rather than selling to a buyer who might keep the brand and remaining stores intact took at least some interested parties by surprise.

Indeed, one of those potential buyers is protesting the liquidation plan. F9 Investments, a firm run by LL Flooring founder and former CEO Thomas Sullivan, filed a motion in bankruptcy court on Tuesday to try to put a stop to the process and allow time for F9 to make another bid to buy and salvage what’s left of LL.

“Instead of providing an open, transparent and meaningful opportunity for the evaluation of these going concern bids and an auction that would maximize value and save jobs, the Debtors proposed a flawed process that attempted to chill bidding and now seeks to liquidate the Debtors’ business without transparency,” F9 said in its filing. “The Debtors’ actions run afoul of basic principles of any bankruptcy process.”

F9 had initially sought an asset purchase plan valued at roughly $66 million, through which it would have kept 219 of the chain’s stores and retained 750-1,000 employees. However that offer was rejected by LL.

F9 is also LL’s largest landlord and shareholder, though the shares are now nearly worthless. They closed at $0.02 apiece on Tuesday, putting the company’s market cap at $462,000.

LL Flooring’s headquarters at Libbie Mill Midtown. (BizSense file photo)

If approved by the bankruptcy court, the liquidation would mark the end of a company that began in New England in 1994, when Sullivan started it as Lumber Liquidators. It went public in 2007 after being owned by a private equity firm and relocating its corporate headquarters to Toano, Virginia.

It again moved its home base several years ago to Libbie Mill in Henrico.

After its stock price peaked in 2013 at around $119 per share, the company’s troubles began in 2015, when it was the subject of a damning “60 Minutes” exposé related to claims of unsafe levels of formaldehyde in flooring it had imported from China. It also pleaded guilty in 2015 to federal environmental crimes related to its imports from the Russian Far East.

Those episodes harmed its reputation to the point that it sought to rebrand. The result was the LL Flooring brand, which was unveiled in 2022; however, the company said that name has been slow to catch on.

Its stock has been on a steady decline over the last two years as the company turned down several offers from prospective buyers. Earlier this year it revealed in its earnings statements that its ability to continue to operate was unclear due to a shortage of cash and a tightened borrowing ability.

Its initially bankruptcy filings listed total assets of $501 million, total debts of $416 million and only $8 million of cash on hand with which to operate.

The company also been affected recently by costly tariffs on its imported materials and a hold-up in its ability to import materials during forced labor concerns in the Uyghur region of China, where it sources some of its products.

It posted a loss of nearly $29 million in the first quarter of this year, on top of an annual loss of $103 million in 2023.

As it looks to plow ahead with the liquidation plan, among the company’s most valuable assets is its 1 million-square-foot distribution center at 6115 Technology Creek Drive in Sandston.

It had listed that property for sale earlier this year in an effort to drum up extra cash but had yet to close a deal prior to last month’s bankruptcy filing. Court filings this week show a deal is close to being consummated with a $104 million price tag.

The buyer is listed as an entity tied to what’s described as the largest landowner in White Oak Technology Park, which is where the distribution center is located. A search of local property records shows that landowner to be QTS, a giant of the data center industry that already has massive facilities in the area and more in the works.

The sale of the property is expected to close Sept. 30, court records state.

The post Bankrupt LL Flooring pivots to full liquidation, issues layoff notices for hundreds of local workers appeared first on Richmond BizSense.