Tattered Cover Book Store Takes a New Direction: Files for Chapter 11 and Announces Store Closures

After years of financial turbulence that was often hinted at but seldom clarified, Tattered Cover Book Store has taken a decisive step. According to Publisher’s Weekly, The company’s ownership recently submitted a voluntary Chapter 11 Subchapter V reorganization petition to the U.S. Bankruptcy Court in Colorado. If the court gives the green light, the bookstore could secure up to $1 million in debtor-in-possession financing. This financial lifeline is set to be extended by a newly formed entity, spearheaded by current investors Leslie Rainbolt and Margie Gart.

Immediate Changes and Staff Impact

Starting October 23, the company plans to shut down three of its seven locations—recent additions in Denver’s McGregor Square, Westminster, and Colorado Springs. The closures are expected to wrap up by early November. This move will result in the elimination of at least 27 jobs out of a total of 103. However, some affected employees might be offered seasonal roles. Consequently, any store events planned for these locations in October and November 2023 will be either rescheduled or moved to the remaining stores.

Utilization of New Funds

The fresh capital infusion aims to address several pressing needs:

• Stocking up on inventory for the crucial 2023 holiday season
• Fulfilling customer orders
• Upgrading technology
• Maintaining operational costs and staff salaries during the restructuring

The bookstore has been on a credit hold with major publishers, but there’s a glimmer of hope. CEO Brad Dempsey has been in constructive talks with several major publishers about resuming shipments and reestablishing credit terms.

A Glimpse into the Leadership’s Mindset

Brad Dempsey, who stepped in as interim CEO in July after serving as an advisor, candidly admitted that the company’s issues were more complex than he initially thought. He told the Denver Post, “Operating seven stores is not sustainable without significant additional capital, which is currently not on the table from investors.” On the topic of layoffs, he expressed his regret, stating, “It’s a tough call to make, but it’s necessary for the company’s survival.”

The Pandemic and Previous Strategies

The pandemic wreaked financial havoc on the bookstore. Former CEO Kwame Spearman had earlier revealed that the company was already on shaky financial ground when he took over. His strategy of opening more stores to increase revenue has now officially been abandoned, marking a significant shift in the company’s approach.

Financial Woes in Numbers

Court documents reveal that Tattered Cover is in a precarious financial state, with losses exceeding $660,000 this year alone. The company owes over $1 million to publishers and an additional $375,000 to Colorado’s Office of the State Auditor for unclaimed gift cards.

Final Thoughts

The bankruptcy filing and subsequent restructuring mark a new chapter for Tattered Cover Book Store. While the road ahead is fraught with challenges, the company seems committed to turning the page and starting anew. Only time will tell if these changes will write a success story for this iconic bookstore.