One day after announcing it was closing all 50 of its stores, Earth Fare filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
The Fletcher, N.C.-based natural foods retailer, which filed in U.S. Bankruptcy Court in Delaware, is the third significant U.S. food retailer to have filed for Chapter 11 so far this year—and, like predecessors Fairway Markets and Lucky’s Market, it did so after acknowledging an effort to sell itself as a going concern proved unsuccessful.
Earth Fare in court papers said it filed for protection in order to conduct store-closing sales at retail locations, realize potential value from the balance of its assets and minimize additional obligations. Charles Goad of FTI Consulting has been appointed chief restructuring officer and was expected to detail additional background on Earth Fare’s financial and competitive condition that led to its Chapter 11 filing.
Earth Fare is owned by the Texas-based private equity firm Oak Hill Capital Partners, which acquired it from another private firm, Monitor Clipper Partners, in 2012 in a transaction valuing the company at $300 million. At that time, Earth Fare had 25 stores.
Earth Fare grew rapidly in recent years and was said to have had as many as 100 new-store projects in its development pipeline late last year. However, sources said Earth Fare suffered from relatively low store volumes and, in many cases, substandard retail locations. A concurrent move among better capitalized competitors who improved pricing and assortment in fresh and organic foods in recent years also appears to have impaired Earth Fare’s ability to adequately differentiate.
First-day motions filed in the case include a proposal to immediately reject leases of eight retail stores that the company had closed in recent months.
Wholesale distributor United Natural Foods Inc. was identified as Earth Fare’s largest unsecured creditor, with a $9.6 million trade debt. UNFI’s Albert’s Organics subsidiary is separately listed with a $5.9 million trade debt. Trade vendors Inland Seafood (owed $6.2 million); Crosset Co. ($5.3 million) and Gourmet Foods International ($2.3 million) round out Earth Fare’s largest prepetition trade creditors.
Earth Fare said its board of directors established a committee Nov. 5 of last year to evaluate strategic alternatives, including a reorganization, restructuring or sale. That committee, along with the chain’s management, recommended the Chapter 11 filing.