HEILIG-MEYERS GIVES UP BANKRUPT FURNITURE CHAIN TO QUIT CALIFORNIA.

Byline: Pam Park Staff Writer

Heilig-Meyers, the nation's largest furniture retailer, is pulling out of California as part of a Chapter 11 bankruptcy reorganization.

In connection with a restructuring plan filed Wednesday, the Richmond Va.-based company said it would close 302 stores nationwide and cut 4,400 jobs, including 81 stores and 1,200 jobs in California.

``The cost of operating the Heilig-Meyers format, we determined, was greater than what was economically feasible . . . so we made the decision to exit the state of California in its entirety,'' said spokesman Barry Brockwell.

The company is also pulling out of Oregon, Montana, Washington and Idaho and closing other scattered locations around the country. After the closings, Heilig-Meyers will have 596 stores and 12,900 employees in 29 states.

Analyst Joel K. Havard of BB&T Capital Markets in Richmond, Va., said the furniture retail industry has seen growth from the low single digits at the start of the year to the mid-single digits, and on top of a higher interest rate environment, that's a pretty solid performance. The loss of some Heilig-Meyers stores won't change the picture much, he said.

``They're the largest furniture retailer in the country, but I'd say it doesn't mean much at all except to Heilig-Meyers. There are about 25,000 furniture retailers in our country, so Heilig-Meyers might represent 2.5 (percent) to 3 percent,'' Havard said.

The company was founded in 1913 and had some stores that needed relocating worse than they needed remodeling, he said. Shutting down whole divisions to concentrate in other areas is not an uncommon retail strategy, but changing the credit product is a massive departure for Heilig-Meyers, Havard said.

Brockwell said outsourcing its in-house installment credit program is a key part of the reorganization. It's a fundamental change in the way the company does business, but it will eliminate the need to finance its $1.3 billion in customer receivables. Part of those receivables had already been sold to third parties, but Heilig-Meyers was still servicing them, he said.

The company is claiming assets of $1.35 billion and liabilities of $868 million. It reported a net loss of $15 million for the quarter ended May 31.

Subject to court approval, some $215 million in financing committed by a group of lenders, cash raised by liquidating stores and inventory, and lower operating and infrastructure costs after store closings will enable the company to support its ongoing operations, Brockwell said.

Heilig-Meyers is asking the bankruptcy court to allow it to continue all services to customers, including delivery of current orders. Some inventory issues could arise, but if the item is in stock, delivery would just be a matter of court approval, Brockwell said.

The company plans to liquidate its inventory and close its stores within 60 days.

Heilig-Meyers expanded into the West in 1994 and 1995, but business didn't go as well as expected, Brockwell said.

Jack Kyser, chief economist with the Los Angeles County Economic Development Corp, said the California furniture retailing market is very competitive and quite fragmented.

Chains come in and flourish, then suddenly file bankruptcy, Kyser said. Furniture inventory moves slowly, and it's very difficult for a chain to tweak it to appeal to different tastes, he said.