Olsson's Braces For Chapter 11 Filing
Saturday, June 28, 2008
Olsson's Books, one of the oldest independent booksellers in Washington, plans to file for Chapter 11 bankruptcy protection, founder John Olsson said yesterday.
Pressed by creditors who have filed claims against the company's inventories and by rising overhead costs, Olsson's is closing at least one store and will evaluate its ability to operate its remaining five properties, an attorney for the company said.
"The book business is getting a little soft. It's not selling as much as it used to," Olsson said. "Our music sales went from 50 percent of our business to maybe 15. We lost a lot of revenue, and at the same time rents went up and real estate taxes went up. I don't know what we would have done differently. It's a killer."
Olsson's yesterday closed its Penn Quarter store, which opened 15 years ago. Olsson said rents and taxes had risen beyond affordability at the store and acknowledged falling behind on payments to booksellers.
Last week, two of its biggest publishers, Random House and Penguin Group, as well as Hachette Book Group petitioned the U.S. Bankruptcy Court in Greenbelt to place Olsson's in involuntary Chapter 7 bankruptcy, which would force the company to liquidate.
Two other creditors hold claims on the company's book and music inventories, Olsson's attorney Richard H. Gins said.
Olsson, 76, began selling books and records in the District 50 years ago and has battled the economic forces of big-box competition and Internet sales. But ultimately his business is being strained by forces close to home.
"We sort of helped make the neighborhood what it is. And it's a great neighborhood, but we can't afford the rent," Olsson said. A few years ago, the store's rent in the renovated Lansburgh department store building was $30 a square foot. Now, it has risen to $50 to $60 a square foot.
A British noodle shop, Wagamama, will take over the space once occupied by the bookstore, Olsson said.
In their court filing, the publishers say Olsson's owes them $386,541. Gins said that Sony and Ingram Books also hold claims to Olsson's music and book inventories.
Gins said he plans to convert the Chapter 7 filing to Chapter 11 bankruptcy protection, which will give the company time to reorganize its business and keep creditors at bay.
"It's hard to compete against megastores like Barnes and Noble," Gins said. "We're looking at it positively, and we're hoping to come out of it. It depends on how many stores we can have."
Over the years, Olsson's has battled to maintain profitability, selling alongside its books and CDs such impulse items as Beanie Babies.
It has also built a loyal local following with book signings, cooking events and other activities. Al and Tipper Gore, for example, have signed their books at the Penn Quarter Olsson's. Tenor Luciano Pavarotti signed CDs at the Dupont Circle store.
The closing leaves Olsson's with five stores, down from the nine the company operated around 2002.
"I think there's probably a bigger profit margin in noodles these days," Gins said.