Furniture Chain Closing All 328 Stores Amid Parent Company's Bankruptcy

It feels like there are no shortages of companies filing for bankruptcy or closing stores in 2024. Between popular restaurant chains like Red Lobster and Rubios filing for bankruptcy to retailers shuttering hundreds of locations across the country, 2024 is set to have more overall store closures than openings, according to data from Coresight Research. This means that 2024 will have the most store closures than in any year since 2020 when the pandemic severely impacted the retail industry. While this can not only make it difficult, as a consumer, to know what stores will still be around the next time you need to shop for something specific, it also makes it feel like the economy is much worse than most economic indicators suggest.

It's also worth mentioning that retail behemoths like Walmart and Amazon increasingly cut into the sales, growth, and overall success of more medium-range retail chains. As Michael Brown, a partner at the management consulting firm Kearney, explained to ABC, "All these large chains are putting pressure on smaller players. They lack the scale to get lower pricing. They lack the capital to be able to reinvest in the stores and the business to be able to be relevant." This, combined with increased interest rates and general inflation, forced many consumers to reevaluate their shopping habits. This has led many Americans to steer clear of big-ticket purchases like furniture, appliances, and even vehicles. One victim in particular of this pullback from big-ticket spending is American Freight, which is officially going out of business.

The first thing to know about this specific bankruptcy is that it's actually American Freight's parent company that has filed for Chapter 11 protection. This parent company, Franchise Group Inc., also operates Pet Supplies Plus, The Vitamin Shoppe, and Buddy's Home Furnishings. However, the company has stated that these brands will remain in business despite the current bankruptcy proceedings.

Franchise Group also stated that the decision to close the American Freight brand specifically was due to both sustained inflation and the economic challenges surrounding the furniture and large goods industry. Prolonged high interest rates also definitely contributed to the company's profitability issues with fewer consumers willing or able to borrow large sums of money in order to purchase big-ticket items like furniture and appliances — mainstays of American Freight's offerings and business model.

While the retail chain had stores across 41 states, most of those stores struggled to remain profitable. This, unfortunately, made American Freight the better choice for closure ahead of Franchise Group's other store brands. Franchise Group's chief restructuring officer, David Orlofsky, explained, "The debtors concluded that American Freight's limited amount of profitable store locations could not support the rightsizing of its business through a plan of reorganization." This, unfortunately, made American Freight the victim of a larger bankruptcy strategy to keep Franchise Group's other brands successful and operational. American Freight began its store closing sales at all 328 locations (as well as online) on November 5, 2024.

While interest rates are finally being lowered, there is still a lot to know about what can happen in the wake of interest rate cuts. While many economic indicators show a return to more normal inflation, it's important to remember that consumer costs are still up 21.4% compared to 2020, according to Bankrate. This means consumers are not going to be rushing back into big-ticket purchases anytime soon. This could lead to continuing financial struggles for retailers that primarily sell large items with higher price tags.

Another consideration for 2025 is the possibility of blanketly imposed tariffs (if you're curious about what, exactly, tariffs are and who pays for them, we have a guide). If President-elect Trump follows through on his plans to impose a 10%-20% tariff on all imported goods, with a minimum 60% tariff on goods from China, consumers could face even higher prices than before as importers pass the costs of those tariffs onto consumers. It's worth noting that the U.S. is the largest goods importer in the entire world, with China being the country's largest import supplier. This means that tariffs (and the subsequent price hike they will cause) could affect almost every single industry across the country.

Some companies, like Steve Madden, have preemptively begun to sever ties with manufacturing in China ahead of these proposed tariffs. However, other companies might be unwilling or unable to change over their manufacturing production, which could lead to increased prices and even an increase in bankruptcies in 2025 and beyond.