Vann’s Inc. gave its Missoula employees 60-day layoff notices on Wednesday, signaling the end for the 51-year-old electronics and appliance store.
“We’ve been trying to restructure under Chapter 11 (bankruptcy rules) and we have an obligation to let the judge know that unless somebody is willing to put in $3 million to $5 million for inventory, we can’t do it,” Vann’s chief executive officer Jerry McConnell said Wednesday evening. “So we are requesting conversion to orderly liquidation under Chapter 11.”
The company employs about 150 people in six stores, including 85 in its flagship and On Store in Missoula. Its other operations are in Kalispell, Hamilton, Bozeman and Billings, plus a warehouse in Lolo. Missoula resident Pete Vann started the appliance store in 1961. It was sold to employees in 2005.
All Vann’s stores will be closed.
Federal law requires businesses to give a 60-day closure notice if they employ more than 50 people; thus, the formal layoff notices given to Vann’s employees in Missoula. McConnell said workers at the other stores will be laid off on the same schedule.
McConnell said the business needed additional investment to buy inventory and remain a going concern after losing a major line of credit in June. Although it secured some financing after filing for bankruptcy on Aug. 5, he said sales weren’t strong enough to continue.
“The industry in its entirety is in a huge state of flux,” McConnell said. “Two or three years ago, one-third of our sales were flat-screen TVs. Now, 80 percent of that market is saturated. Household incomes are back to 1995 levels. People aren’t splurging on things like they have in the past. Our appliance sales come because the washing machine broke and you need one, not because of new house sales.
“If the market was as it was five or six years ago, I think we could have enticed investors to provide that amount of money. But they’re concerned about their returns, too. Look at Best Buy and Circuit City. They’re struggling mightily, and they’re 20 times our size.”
Vann’s stores will remain open as usual while the company submits its liquidation plan to a bankruptcy judge. McConnell said he expects a decision by Oct. 2, after which it will begin winding down in earnest.
The preferred method would be for Vann’s employees to sell the remaining stock through the stores and the company’s online sales site, McConnell said. The judge also could turn the process over to an outside liquidation firm, similar to the way Missoula’s Kmart and Macy’s stores were emptied.
“We won’t be doing any big liquidation sale until we get through the process with the court,” McConnell said. “And we won’t do anything crazy. We’re still obligated to deliver certain earnings. We can’t go sell everything for $50 and get rid of it.”
If the court allows the company to manage its wind-down, McConnell said it would take until around the end of November to unload all the current inventory. He said he’d like to have enough to last through the Christmas season, but the bankruptcy rules wouldn’t allow him to bring in additional stock.
The layoffs should not affect the future of Vann’s online sporting goods outlet, BigSkyCountry.com. McConnell said that is close to being sold to an outside buyer and is not enmeshed in the bankruptcy.
The company’s Chapter 11 petition says it owes between $10 million and $50 million to between 1,000 and 5,000 creditors. It lists more than $17 million in company assets, including nearly $12 million worth of inventory at its Brooks Street headquarters.
McConnell joined the company in June after a series of bad investments and poor economic conditions prompted the departure of CEO George Manlove. McConnell’s consulting business, PSS Consulting Inc., recently helped Ronan-based Jore Corp. recover from bankruptcy and oversaw the eventual sale of Missoula-based Spectrum Products LLC.
Missoulian reporter Jenna Cederberg contributed to this story.