Fruit basket and gift seller Harry & David filed for Chapter 11 bankruptcy protection Monday, brought down by a weak economy and a proliferation of competitors.
The Medford, Ore., company agreed with a majority of its senior creditors on a reorganization plan that will eliminate "substantial" debt and provide financing to restructure its balance sheet, according to court documents.
Harry & David Holdings Inc., which grew out of an orchard business about a century ago, has been struggling as businesses slashed corporate gift budgets and consumers cut spending in the weak economy. It relies on discretionary spending that's often the first to get cut from household and business budgets.
In addition, online competitors have grown significantly. Harry & David grows or makes about 85 percent of its products, but online competitors were able to source products from cheaper places, lowering costs. Also stores like Wal-Mart and Target have begun offering more edible gifts, increasing competition.
The retailer expects to continue operating during the reorganization process.
Its biggest creditor is Wells Fargo Bank, which it owes about $198 million. It also owes $27.4 million to its pension plan. Other top creditors include Convergys CMG, FedEx and Google.
As of December, the company had $304 million in assets and $361 million in liabilities.
The company ships fruit, nuts, baked goods and other snacks to customers around the world under brands including Wolferman's, Cushman's and Harry & David. It operates stores in 38 states and a website. It closed 52 unprofitable stores before filing for bankruptcy protection and now operates 70 stores.
