Woodbury-based Independent Pet Partners Holdings, the parent company of Chuck & Don's and several other high-end pet supply stores, filed for Chapter 11 bankruptcy protection.
The filing will mean that 66 pet-supply stores under the Chuck & Don's and Kriser's Natural Pet (IPP) store banners will be sold. About 100 other stores will eventually close, including the Chuck & Don's in downtown St. Paul, according to court papers filed Sunday.
The Lowertown store is the only Minnesota store on the company's list of closing stores. IPP has a goal of completing the liquidation process by the end of February.
The other pet supply stores to close will be under IPP's other flags including Loyal Companion and Natural Pawz. IPP will continue to operate under Kriser's and Chuck & Don's banners.
"We intend to use these proceedings to reorganize our operations and focus on our core markets where we have the strongest foothold including Chuck & Don's stores" in Minnesota, Wisconsin, Kansas and Colorado, said Julie Maday, recently appointed IPP chief executive, in a statement to the Star Tribune.
"This was a very difficult decision," Maday said. "We worked diligently to explore all alternatives to keep all brands and markets going; however, in the end we concluded that the right path was to apply our focus to those markets and stores where we have the strongest market position today."
IPP will sell the 66 remaining stores to a group of lenders including Main Street Capital Corp., Newstone Capital Partners and CION Investment Corp., which are providing a stalking horse bid that includes including a $60 million credit bid, the court papers said.
The company operates 160 pet care locations across a dozen states. Its stores included Chuck & Don's, Kriser's Natural Pet, Loyal Companion and Natural Pawz. The stores not only advertise high-quality pet food, toys and accessories but services such as grooming.
IPP also owns private-label pet brands Roosevelt, Attachment Theory and Wild Saint.
IPP currently employs about 850 full-time and 450 part-time workers.
Backed by San Francisco based private-equity firm TPG Growth, IPP formed in 2017 and worked to acquire premium pet-store chains.
In early 2019, the private equity-backed firm acquired Mahtomedi-based Chuck & Don's. At the time, New York City-based IPP said it would create a co-headquarters location in the Twin Cities as it worked to grow the other pet-store brands in its portfolio.
In documents filed Sunday in U.S. Bankruptcy Court, IPP representatives explained that several challenges in the last few years pushed the company into dire financial straits.
In summer 2019, the Food and Drug Administration announced an investigation into whether certain kinds of dog food led to a fatal heart disease called dilated cardiomyopathy (DCM) in dogs after it had received reports from consumers with dogs largely on grain-free diets. IPP stores, which stocked predominantly grain-free, high-protein dog food, had a direct negative impact from publicity of the investigation.
"While the FDA has yet to identify a specific dietary link between grain-free diets and DCM, the publicity surrounding the investigation had a significant and negative impact on the debtors' business, as many of their customers immediately changed their buying habits," IPP attorneys said in court filings. "This left the debtors with a significant amount of unsold inventory and required them to reserve additional retail space in their stores for new varieties of dog food, including 'traditional' dog food, which has lower margins."
IPP believes the publication of the FDA study caused about $10 million in lost sales, court papers said.
The next year, the COVID-19 pandemic forced IPP to temporarily close stores across the country, which severely affected its business that was highly dependent on in-store sales. From 2019 to 2020, net sales fell an additional $10 million, the filing said.
Last year's decades-high inflation, which elevated costs for IPP as well as pushed customers to buy cheaper, lower margin pet food, did more damage.
In 2022, IPP generated about $220 million in net sales, according to court papers. However, as of this week, IPP had total assets of about $182 million and liabilities of about $215 million.
Late last year, IPP attempted to attract buyers for its businesses but wasn't able to secure the right offers, so leaders decided to file for bankruptcy and pursue the sale of the company's profitable businesses, the papers said.
Chuck & Don's operates 50 stores in Colorado, Kansas, Minnesota and Wisconsin, and appears to be the company's most successful arm, earning $477 in sales per square foot, court papers said.
