After a three-year sales slump, Z Gallerie files for bankruptcy

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Eclectic home furnishings retailer Z Gallerie has filed for bankruptcy protection after a ‘severe drop in sales.’

The Gardena-based chain, which has 57 stores in 18 states, said it would continue to operate all of its locations during the Chapter 11 filing.

Z Gallerie said the economic recession, plus widespread markdowns and going-out-of-business sales at its competitors, had hurt its business.

“The debtor experienced uninterrupted sales growth through 2006 when sales peaked at $236 million out of 74 locations nationwide,” the bankruptcy petition, filed on Friday, read. “Since 2006, the debtor has experienced a severe drop in sales, with this decline accelerating in the last quarter of 2008 and continuing unabated in the first quarter of 2009.”

Z Gallerie said in a statement that it hoped to reorganize its operations and to unload leases from 21 stores and an Atlanta distribution center that the company began closing in February. Those stores were either underperforming or in markets the company decided it would no longer serve.

“In light of current economic conditions, our company has had to make some difficult decisions,” said Mike Zeiden, co-founder and chief financial officer.

Founded in 1979 as a small poster shop in Sherman Oaks, Z Gallerie specializes in items such as furniture, artwork, lighting, tabletop items, textiles and decorative accessories from around the world.

-- Andrea Chang