The worst recession in decades has prompted one of the oldest and best-known floor-covering retailers in the central San Joaquin Valley to seek refuge in bankruptcy court.
A&M Carpet Inc., which operates as A&M Flooring America and Big Bob's New and Used Carpet, filed Thursday for voluntary Chapter 11 bankruptcy protection in federal court. The move enables the company to continue operating while reorganizing its finances.
A 45% drop in revenue over the past 18 months prompted the move, said president Lee Horwitz. The second-generation family-owned business has been around since 1940, and Horwitz said he has no plans to close, although two of its four stores were shuttered.
"Our never-ending desire has been, and always will be, to represent our industry professionally and our company honestly," he said. "This reorganization effort is a right-sizing measure that is intended to preserve our family legacy."
The company's flagship store at Highway 41 and Bullard Avenue and Big Bob's New and Used Carpet showroom at Blackstone and Dakota avenues will remain open. Two stores on West Shaw Avenue in Fresno and on Clovis Avenue in Clovis will close.
Four employees were laid off with the closure of the two stores. That was in addition to 20 others who were let go in May. The company employs 48 after the cuts.
Horwitz, unsure of where the economy is headed, said he is preparing the business for even more deterioration. "I don't think [the economy] has bottomed out," he said. "We won't bottom until the early part of next year."
A&M Carpet isn't alone. This recession, fueled by an unprecedented drop in home values and an increase in foreclosures, has hammered flooring retailers, said Matthew Spieler, senior executive editor of Floor Covering News, a trade publication.
"You are looking at an industry that as a whole has given back everything it gained in the last 10 years," Spieler said. "There is no new construction. People lost their equity or their jobs or got a cutback in salary or are delaying expenditures."
Spieler said floor coverings represent the third-largest single purchase behind a home and vehicle. In a tough economy, families delay replacing them or go with something cheaper. "They live with it," he said. "They use an area rug or a cleaning service. "They'll scrape it, clean it or replace it with lower-priced goods."
That's if they can get credit to do the work. The rejection rate by financing agencies has increased from 2% to 14%, said Horwitz.
In 2008, sales of floor covering fell 11.6% to $19.7 billion, the first time that figure fell below $20 billion since the start of the millennium. That was on top of a 9.6% fall in 2007, Floor Covering News reported.
All segments of floor coverings -- especially wood, which is used heavily in new construction -- are hurting. Sales of wood flooring fell almost 25% in 2008, while laminate and tile slid 19.1% and 16.3% respectively.
"I would normally do 30 to 40 jobs per month, and now I'm down to 15," said Ernie Seita, a salesman at A&M for 32 years.
"We'll be OK," he said. "We are the best at floor covering in the Valley."
Spieler called Horwitz a stalwart. "They're one of the best in the industry."
An increase in volume at Big Bob's New and Used Carpet, which offers lower-cost alternatives to home buyers, failed to offset declines in other parts of the business, including commercial accounts.
Horwitz said first-time home buyers and purchasers of bank-owned businesses helped give Big Bob's a boost.
Riley Walter, the company's bankruptcy attorney, said the goal is to reorganize the company and exit bankruptcy court quickly. "My hope is to get in and out," he said. "As a retail company, you want to assure customers you'll get back to normal as quickly as possible."