What 3 problems drove Classic Brands out of business?

COLUMBIA, Md. – One of the early pioneers in the bed-in-a-box category, Classic Brands has closed its doors and its assets are being liquidated, a victim of the pandemic, anti-dumping measures and tariffs.

In November, the company’s board of directors entered into an allocation in favor of creditors – an alternative to bankruptcy. A trustee working to liquidate the company’s assets and claims attributed the closure to a combination of a changing business environment in the mattress category.

Steven Victor, senior director of DSI Consulting, an independent consulting firm managing the liquidation of Classic Brands’ inventory — currently at less than $10 million — and accounts receivable, told Furniture Today that the closing will take several months. He attributed the company’s demise to a combination of the company’s low-cost import business model, supply chain problems exacerbated by the pandemic, anti-dumping and import duties.

Victor said he is in the process of selling off available inventory to increase payments to creditors. The company’s intellectual property, which was used as collateral for loans, is not part of the liquidation.

The company, founded in 1971 as waterbed supplier Classic Corp., had sales of more than $350 million in 2019, according to industry insiders. The company built partnerships with e-commerce giants such as Amazon and Wayfair, 100 largest retailers, and through its portfolio of private label businesses, and was known for its innovative use of materials and design.

According to a petition filed in Delaware Court of Chancery on Nov. 25, the company was in default as of March 1, 2021. The filing said Classic Brands owes at least $18.72 million.

In the fall of 2017, private equity firm A&M Capital Opportunities invested in Classic Brands. At the time, neither party wanted to disclose the terms of the transaction.

The court petition indicates the company hired an investment banker last spring to explore a sale to “maximize asset value.” However, “banking efforts did not result in a going concern or other transaction” acceptable to the company’s board of directors or lenders.

Classic Brands used to source products from China, but in 2019 it shifted production to Malaysia, Indonesia and Vietnam to avoid tariffs on Chinese goods. The following year, a group of US manufacturers filed an anti-dumping petition with the International Trade Commission that resulted in tariffs on mattresses imported from seven countries, including Malaysia, Indonesia and Vietnam. The ITC ruled in favor of the US manufacturers.

In addition to the company’s leased headquarters in Maryland, Classic Brands has leased warehouse and distribution space in Long Beach, California.

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