Family Christian Stores Fails a Second Time, Closes All 240 Locations
Family Christian Stores announced yesterday that they are shutting down all 240 of their nationwide retail stores.
The news came nearly two years after Family Christian Stores nearly destroyed the Christian book industry by filing for bankruptcy.
Then, 27 Christian publishers sued Family Christian Stores over improprieties in Family Christian Stores corporate dealings. Among other questionable matters, Family Christian Stores claimed they did not have to return $20 million of inventory they had on consignment from Christian publishers.
In 2015, Family Christian Stores owed $50 million in secured debt and an additional $40 million in unsecured inventory to publishers and other Christian product companies.
At the time, representatives of Hendrickson Publishers told Christian Retailing they were, “very disappointed to receive the news of the bankruptcy filing by Family Christian Stores. FCS has been a valued customer for over 20 years. We were most disappointed that their proposal would result in our receiving no payment for either our consignment inventory or our receivable due from FCS. This will pose a very difficult financial burden. Christian publishers, as a whole, would lose $20 million for consignment inventory and $40 for receivables, a staggering burden for the Christian publishing industry.”
Overall, Christian publishers and others lost an estimated $127 million in the 2015 Family Christian Stores bankruptcy.
CEO Spiritualizes Failure
In his February 24, 2017 statement, Family Christian Stores CEO Chuck Bengochea tried to cover the failure of the chain with spiritual cliches.
He said, “The cornerstone of the Family Christian organization is a commitment to serve God – whether that is through our retail stores, or any one of our ministry initiatives.” Documents reveal that ministry initiatives were minimal and often self-serving.
Bengochea also said, “We have had two very difficult years, and after prayerfully looking at all possible options, and trusting God’s plan for our organization, we have made the difficult decision to close our stores. Family Christian will begin the closing process soon.”
Bengochea seemed to imply that God’s plan was for the company to fail, and that questionable business ethics had no part in the demise of the company.
In addition, Bengochea claimed they were closing partly because, “we were not able to get the pricing and terms we needed from our vendors to successfully compete in the market.”
That is no wonder since Family Christian Stores had previously betrayed the trust of their suppliers.
Why Did Family Christian Stores Fail?
Family Christian Stores was founded in 1931 and survived the Great Depression and other less dramatic economic down-turns.
There is some question about why Family Christian Stores failed.
Other retailers, like Sears and JC Penny are currently closing stores. However, other major retailers, like Walmart and Target are prospering. Many would say that leadership is the key to success, not just changing economic trends.
Troubles started when the bookstore chain was acquired by Atlanta businessman Richard Jackson. He bankrupted the company in 2015 and then attempted to buy it back at pennies on the dollar under a different corporate name.
The bankruptcy court denied his plan over allegations that it was an “insider deal.” Jackson would have been able to shed debt and retain inventory he had not paid for, and some publishers criticized the ethics of that kind of deal.
The court later accepted a similar plan that was less self-serving. Jackson appointed Chuck Bengochea as CEO. Bengochea’s background was in the food industry and he had no or little book-selling expertise.
Many publishers were happy when the bankruptcy was resolved even though they lost millions. They had hope that the company would succeed and continue as a profitable outlet of “brick and mortar” Christian book sales.
Those hopes were crushed when Family Christian Stores reported yesterday that they had failed a second time and were closing all their stores.
The immediate financial loss to publishers is unknown, but the closures will have long-lasting effects in the Christian publishing industry.