Price Busters plans rebound
by Andrew Gomes
Advertiser Staff Writer
The chief executive of Price Busters said it's too early to say whether any of the company's stores will close as a result of its bankruptcy filing, but added that no employees should lose their jobs in the upcoming reorganization.
The local discount retail chain with nine stores filed for Chapter 11 bankruptcy protection this week to reorganize its debts and continue operations that employ 272 people.
"I wish it didn't have to happen, but it did," said Price Busters CEO Beth Tom, who founded a costume jewelry and hair-accessory wholesale business in 1985 and turned it into one of Hawai'i's largest locally owned retail chains with more than $24 million in annual sales.
Tom said her two newest stores — a Price Busters that opened in September at Kapolei Commons and a Let's Party Hawaii that opened in October at Windward Mall — created financial strain that led to the bankruptcy.
Sales at the two stores have been lower than projected, but a larger problem stemmed from the financing it took to open the stores.
Leases for the two stores were signed in July 2008, before the financial market crisis roiled the economy. After the meltdown, no one was willing to lend money she needed to outfit the stores with fixtures, inventory and other necessities typically financed with loans, Tom said.
As a result, Tom resorted to funding the expansion herself, including taking out a second mortgage on her home. "It was unbelieveable," she said of the lack of financing available to open the stores. "We (nearly) pulled it off."
Tom said business had been pretty good, as Price Busters benefited somewhat from economically struggling consumers choosing to shop at her stores to save money. But sales weren't strong enough to satisfy a bank obligation that came due, triggering the need to file Chapter 11. A roughly 2-year-old warehouse distribution facility also added to the company's financial stress.
Price Busters in its bankruptcy filing through parent company, E.R.T. Sales of Hawaii, said it has between $1 million and $10 million in debts. The company's 20 largest creditors with debts not secured by Price Busters assets are owed a combined $2.5 million, mostly for unpaid rent, merchandise and shipping.
The company also owes American Savings Bank $3 million under a secured loan and line of credit.
Tom said her vendors and landlords have been extremely supportive, and that the company is in a good position to repay debts as the economy recovers.
Price Busters in its bankruptcy petition said it will re-evaluate its store locations and its centralized distribution system. Rejecting leases is a possibility. The company also aims to reduce debt service payments.
Price Busters is asking for U.S. Bankruptcy Court approval to hire local consulting firm Business Consulting Resources Inc. to help restructure operations.
Tom said a sale of the company shouldn't be necessary to exit bankruptcy, and that she expects the chain will emerge stronger than before. "I believe that whatever doesn't kill you makes you stronger," she said.