Ernst Selling All Its Stores, Finally Going Out Of Business -- Seattle Chain Unable To Survive Competition
Seattle Times Business Reporters
The century-old Ernst Home Center chain of hardware and garden stores is going out of business.
The company, whose number of stores has dwindled from a peak of 95 in 12 western states to 53 in six states, today said it will sell off the remainder of its operations.
The first Ernst store, founded by Fred and Charles Ernst, opened in downtown Seattle in 1893.
Ernst said in a statement that its board "has authorized the company's officers to liquidate the company's assets. This decision was reached following a determination by the board of directors that an orderly sale of its assets is in the best interest of the company's estate and will maximize values."
"The rumor has been going on for the past several months, so it's kind of a relief to know. Everybody seems to be relieved," said Bill Tipton, an employee at the Ernst in Redmond's Bear Creek Village.
The store's 40 employees were given the news at a 7 a.m. staff meeting this morning, he said.
Jim Fox, company spokesman, said going-out-of-business sales would begin in late November or early December and continue through mid-January.
Because Ernst filed in July for protection from creditors under Chapter 11 of the federal Bankruptcy Code, the U.S. Bankruptcy Court must approve the sale. Nothing suggests the court would be opposed.
The Seattle-based company has been closing stores throughout the region this year. It presently has stores in Washington, Oregon,
Idaho, Montana, Wyoming and Utah, including 13 in King County, said Fox.
Fox said about 2,000 full and parttime employees would be affected by the liquidation. Just before its Chapter 11 filing, Ernst had more than 5,000 employees.
For decades, Ernst was a part of the Pay'n Save empire of retail companies. But Pay'n Save came under siege in the early 1980s and ultimately was sold to Julius and Eddie Trump in 1984. The Trumps sold off the units, with Ernst being acquired by a major creditor, MBL Life Assurance of New Jersey.
In 1994, MBL's management pumped new capital into Ernst by selling its shares publicly. The insurer retained 74 percent of the stock but sold the rest. Among Ernst's promises was rapid growth, including a goal of 120 stores by 1996.
But heightened competition from Eagle Hardware & Garden, Home Depot and others offering items for the home-do-it-yourselfer restricted Ernst's efforts.
In 1994 and 1995, the chain attempted to boost sales by building superstores. That effort was a disaster. Almost before the stores were completed, Ernst closed many of them. Eight new superstores were written off, accounting for most of a $34 million charge against earnings.
Then, Ernst attempted to switch its focus, restocking its stores to fit a "homestyles" motif.
Competitors and securities analysts hooted, saying the potential customers couldn't determine what business Ernst was in.
Business did not pick up. The stock, initially sold at $16 in 1994, placing the value of the company at $196 million, fell precipitously. The stock traded today at 12.5 cents, down from a low of 62.5 cents a share Friday. Investors, chief of which was MBL Life, lost $188 million in two years.
Alan Rifkin, an analyst with Dain Bosworth in Minneapolis, had estimated earlier this month that Eagle stood to pick up as much as $150 million in annual sales if Ernst closed all of its stores.
There was no word on what will happen to Ernst store properties.
Ernst already was planning to assign its lease at its store in downtown Bellevue to one or more other businesses, including possibly Bed, Bath and Beyond.
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