Car Toys, an auto-parts-and-accessories retailer, plans to sell most of its store fleet after joining the growing group of chains that are seeking bankruptcy protection.
The 38-year-old Auburn, Washington-based company on Aug. 18 filed for voluntary Chapter 11 and is looking to sell 35 of its 47 brick-and-mortar retail locations. The buyers are "five different parties consisting of highly tenured employees and regional competitors," Car Toys said in a statement. It also plans to close stores, according to court filings.
The Chapter 11 and asset sale is set to maximize Car Toys' "business value for the benefit of its creditors, preserve and maximize job opportunities for its employees and support business continuity for its customers," according to the retailer. The combined purchase price is roughly $14 million.
Car Toys, billing itself as the largest U.S. independent car audio and electronics retailer, blamed its financial woes on vehicles now coming equipped with complicated audio systems, diminishing the demand for after-market gear. The chain is part of a cadre of retailers seeking Chapter 11 protection this year as consumers tighten their purse strings and tariffs loom. There have been 24 major U.S. retail bankruptcies, including Car Toys, year to date, according to Coresight Research. Last year, it tracked a total of 51 retail bankruptcies.
While Car Toys is "in a less-than-ideal chapter," its brand "will continue in all of the markets that we serve,” founder and Chairman Dan Brettler said in a statement. He also outlined Car Toys' problems as its market changed in an affidavit filed with the court.
"The rapid pace of technological advancement in car audio and infotainment systems has in recent years altered and eroded customer demand for after-market audio sales and installation services," Brettler said. "Modern vehicles now typically come with complex, factory-installed infotainment systems that require specialized knowledge and tools to interface with or upgrade."
Those developments "have required ongoing investment in enhanced online and digital presence, training, certification programs, and diagnostic equipment as well as the diversification of its after-market goods and services, for instance, detailing, window tinting and vehicle upfitting accessories, according to Brettler.
Car Toys' revenue has not been able to keep up with its expenses, he said.
Subject to bankruptcy court approval, Foss Audio and Tint will be purchasing six of the 10 Car Toys stores in northern Colorado, eight of its 12 stores in western Washington and an upfitting facility in Portland, Oregon. Upfitting is the process of adding, replacing, or augmenting a vehicle's body, equipment or accessories.
Two Car Toys veterans, Troy Parcels and Chris Pritts, plan to acquire eight of the chain's 12 stores in the Dallas-Fort Worth market and all four stores in the Houston area. Another pair of Car Toy alums, Don Longworth and Raul Shakarov, seek to buy five of the six stores in the Oregon market.
In addition, Drive-In Autosound is set to pick up the Colorado Springs North Car Toys location, and Selway Sound — doing business as Aspen Sound — plans to purchase both locations in Spokane, Washington.
For the record
Cairncross & Hempelmann as Car Toys' legal counsel, while SierraConstellation Partners was chief restructuring officer and financial adviser.