Dawahare's of Lexington is closing its remaining 22 clothing stores and going out of business because it has been unable to raise the cash it needs to continue operating.
The 101-year-old family-owned company said in a filing Thursday in U.S. Bankruptcy Court in Lexington that it expects to run out of money by October.
The company said it has been unable to get loans “from shareholders and third parties to support its effort to complete the restructuring” proposed in its late May bankruptcy reorganization filing.
Dawahare's said it expects the liquidation of its 22 Dawahare's and Cat Bird Seat stores statewide to begin July 14 and to end by Sept. 30.
About 400 employees are affected in addition to the 107 who lost jobs in the first round of store closings that involved seven locations.
“Our goal was to produce and to implement a plan which would allow the company to keep the 22 stores open, and ultimately to be able to satisfy our secured, and possibly some other creditors,” said President Harding Dawahare in a written statement.
“Unfortunately, after a month of trying to make this plan work to the satisfaction of our bank (Fifth Third) and other creditors, we realized our only option was to take this action,” he said.
“We are distressed — for our employees, our family, and for the thousands of loyal customers who have relied on Dawahare's stores for clothing for their entire family for up to three generations. However, we hope to be able to exit the retail arena in Kentucky the way our family entered it a century ago — with dignity.”
The company filed for chapter 11 reorganization on May 30, declaring nearly $9.3 million in debts and about $10 million in assets. Its largest creditor is Fifth Third Bank, which was owed nearly $5 million when the filing was made.
The court immediately approved the closing of seven stores that were not meeting the company's sales goals.
Concerning the remaining 22 stores, “the debtor (Dawahare's) has determined that sale of the stores as going concerns will not bring enough cash to come near paying the bank in full,” the company said in Thursday's filing.
Dawahare's said its inventory of clothing is “not correct” for continued business and that it would need “substantial cash” from Fifth Third “with no reasonable chance of recovering such cash” to fix the problem.
The company also said the value of its stores would be “impaired” if they are sold without the necessary merchandise for the upcoming Christmas season.
“The national outlook and all economic indicators project that retail sales will remain flat or stagnant for the next two quarters, thereby impairing the values of the stores as going concerns,” Dawahare's said in the filing.
Those same economic conditions also led to the closing of Goody's Family Clothing stores in Lexington, Nicholasville and Paducah under a bankruptcy reorganization filed in June by the Knoxville-based retailer. Goody's is closing 103 of its 355 stores in 20 states.
Dawahare's was founded in 1907 by S.F. Dawahare, a native of Syria, who began as a peddler in the coal camps of Eastern Kentucky.
He opened his first store about 1911 in East Jenkins. The company is now operated by the third and fourth generations of the Dawahare family.