Popular Outdoor Outfitters intends to convert Ch. 7 to Ch. 11

Management at Popular Outdoor Outfitters, operating under an involuntary Ch. 7 filing since Dec. 23, 2004, has informed SNEWS® that it intends to file to convert the Ch. 7 into a Ch. 11 reorganization on either Jan. 24 or Jan. 25.

When SNEWS® first viewed the Ch. 7 court documents on Dec. 27, it became clear this was not intended as an attempt to force liquidation. The three companies that filed the petition with the court were Deckers (owed $63,855), VF Jeanswear (owed $59,641) and Terramar Sports (owed $8,973). Legal analysts informed us no company files a Ch. 7 over such relatively small debts. More likely, this move was designed to force a Ch. 11, or at the very least, make Popular open its books — which insiders familiar with the case confirmed as the intention.

“It is certainly not a preferred approach,” Jay Indyke, the New York-based lawyer representing the creditors in the Ch. 7 filing. “However, it became necessary.”

Popular had until Jan. 18 to respond to the Ch. 7 and Indyke told us that he had received notification by Popular’s attorney, Robert Shull, requesting a one-week extension so that a Ch. 11 filing could be organized. Indyke granted the extension.

Founded in 1952 by Norman Lipson as Popular Surplus, it changed its name in 1987 and is now owned and operated by Kirk Lipson. Four years ago, the chain operated 22 storefronts, according to management, in both Arizona and New Mexico. It’s been a progressive slide since, with five of the remaining 13 stores in 2004 closing doors after a 50 percent off sale just after Christmas.

Remaining inventory from the closed stores was spread among the remaining eight — two in Mesa, one in Chandler, three in Tucson, one in Flagstaff, and one more in Prescott.

The company has also trimmed its staff, keeping key employees and shifting them to the open stores as needed. A move to a new company headquarters is also being considered — possibly Tempe or possibly remaining in Scottsdale where the retailer has a separate warehouse facility.

SNEWS® View: Our eyes in the Tucson and Flagstaff area tell us that it does appear that Popular is making all the right moves and that the remaining stores are often busy and well positioned to remain healthy. Insiders tell us that the retailer has rid itself of all the dead wood and underperforming locations. Now, it just has to convince a long line of Ch. 11 creditors to go along with the plan for reorganization — something most folks we spoke with said was very likely.

Let this be a lesson to all retailers around the country, though — you have to talk to the credit managers, often, honestly and openly. No vendor wants a retailer to go out of business. And a Ch. 7 filing is an extreme measure, one that was forced, in this case, by Popular simply clamming up and leaving vendors guessing as to the health and future vitality of the company. Once a credit manager is left to guess, he or she will likely curtail shipments, handcuff reps and sales managers, and put a store in a situation that is, well, most uncomfortable. On the other hand, if you cozy up to credit managers, let them in on your intentions, challenges, hopes and fears, they will likely become very proactive friends willing to throw a lifeline, as long as you are also willing to make recommended changes to the business. No, they may not always make you feel good, but they have every intention of helping you stay in business (assuming that is possible), while at the same time protecting their company’s interests and level of risk too. We are glad Popular is making the move to reorganize. It is a well-respected name in the region and one that would leave a void in the market had it disappeared.