Harry & David facing possible bankruptcy.

 

Portland Business Journal - by Suzanne Stevens

Harry & David Holdings Inc. may have to put bankruptcy on the menu after months of declining sales.

The privately held Medford specialty online foods retailer announced in January that it hired Rothschild Inc. as financial adviser and the law firm Jones Day to explore recapitalization alternatives. Since then, however, Harry & David has failed to meet some requirements of its credit facility and indicated it may not be able to pay its bills.

Unless the financial covenants are renegotiated, Harry & David will not be able to borrow from the line and "will not be able to finance continuing operations ..." according to an SEC filing. While the company is actively negotiating with its lenders, the filing stated: "There can be no assurance that our efforts to obtain new capital and restructure our obligations will be successful, and therefore, there is substantial doubt as to our ability to continue as a going concern."

The company blamed weak holiday sales. For the quarter ended Dec. 25, sales dropped 1.8 percent to $262.1 million from the same period a year earlier. Profit plummeted, down 20.6 percent to $104.2 million and earnings were down to $30.2 million from $64.8 million.

As of Dec. 25, Harry & David had a cash balance of $66.9 million and accounts payable of $57.9 million, compared to a cash balance of $108 million and accounts payable of $32.5 million a year ago.

CEO Steven Heyer said in the filing that despite growth in Internet traffic and a major public relations push, sales and operations "fell well below expectations due to market and competitive conditions."

"Our focus from here will be on continuing to build our customer base, revamping our products to offer substantially more value to our customers in order to grow profitably, as well as pursuing options to recapitalize our business as we announced earlier," Heyer said.