Royal Furniture files bankruptcy It plans to continue operating in new Columbia location

Years in city ended badly

Retailing

May 22, 1998|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

Royal Furniture Co. Inc., which relocated to Columbia after more than a century in Baltimore, has filed for Chapter 11 bankruptcy protection, with liabilities of $2 million, and assets of about $1.5 million.

The furniture store left its city location on South Monroe Street with much fanfare earlier this year, saying it was difficult to draw customers to the Southwest Baltimore location.

Yesterday, Michael Meadows -- the former vice president who was named president of Royal three weeks ago as part of the company's reorganization -- said doing business in the city was also very expensive.

On Tuesday, in U.S. Bankruptcy Court in Baltimore, the fourth-generation family business filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

"The expenses of being downtown hurt our bottom line for a long time," Meadows said. "By the time we moved to Columbia, we had big cash-flow problems.

"Our downtown location was in a heavy crime area. We paid for security for the parking lot that cost a ton of money so our #F customers' windows wouldn't get broken. We had to over-advertise to bring in people to that section of Baltimore. And then there are a lot of expenses associated with having a big building downtown."

The 100,000-square-foot building where the company moved in 1971 was traded in for a 38,000-square-foot showroom in Dobbin Center in Howard County.

Most of Royal's more than 200 creditors are furniture suppliers, but the company also owes $32,678 in unpaid rent at its Columbia location and $155,798 to local media outlets for advertising, according to the bankruptcy filing.

Royal, which is a high-end retailer that made a name as a wholesaler catering to interior designers and customers by invitation, has estimated annual revenue of $10 million, Meadows said. None of the company's 45 employees will be laid off, he said.

The court will decide how the creditors will be paid, he said, but the company's first priority is its growing backlog of customer orders, for some of which deposits have already been received. Other customers have canceled their orders and are waiting for refunds, he said.

"This is a reorganization; we are not going out of business," Meadows said. "We've been in business since 1891. The outlook on being a strong viable company in Columbia is very, very good."

Under the reorganization, the company is planning to link with a "promoter." In the retail furniture business, a promoter is a larger furniture supplier with secure credit lines that will use its buying power to purchase inventory to fill customer orders for another company in financial difficulty.

The promoter will be paid a fee on top of a portion of the sales, Meadows said. The practice is atypical because it can be expensive for a business already in financial trouble, said J'Amy Owens, president of the Retail Group, a Seattle-based consultant to furniture retailers and manufacturers.

"It's not something a furniture retailer would do unless it felt it was absolutely necessary," Owens said. "It's usually a major hit to the gross margin.

"But, clearly, Royal feels that the relationship with its customers is worth saving. Maybe it will help it fulfill its promise and fill their orders."

Earlier this month, Robert Levenson, son of owner Joseph Levenson, relinquished the title of president and is now fulfilling the duties previously carried out by his ailing father, Meadows said. It's the first time the presidency has been held by someone outside of the family.

Four successive generations of the Levenson family have expanded the business over the years.

Royal, which began as Levenson and Zenetz furniture sales and manufacturing in 1884, took on its current name in 1891, when two Levenson sons, Charles and Samuel, joined the business and opened locations on Ostend and Frederick streets.

In 1950, when Charles Levenson became president and his son, Joseph, vice president, Royal moved to Lombard and Eutaw streets and expanded its headquarters.

Joseph Levenson became president of the business in 1965.

After the retailer moved to South Monroe Street, it brought in the family's fourth generation -- Joseph Levenson's sons, Aaron and Robert.

But in 1990, Aaron Levenson, 30, was shot and killed outside the store in a botched robbery. A security team had patrolled the customer lot since the shooting.

His half brother, Robert, has run the business since 1993.

"A four-generation family business is bound to incur some problems," Meadows said. "We're trying to overcome them because we want to be in business another 107 years."

Pub Date: 5/22/98

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