Crumbs Bake Shop, Inc., the largest cupcake specialty store chain in the United States, is closing all its stores. The move comes a week after the company was delisted from the Nasdaq.
“Regrettably Crumbs has been forced to cease operations and is immediately attending to the dislocation of its employees while it evaluates its limited remaining options,” the company said. Those options may include filing for Chapter 7 bankruptcy liquidation.
Crumbs was founded in 2003 and went public in 2011. The company opened to much fanfare, but more recently had been suffering from a steep decline in sales and income. Crumbs sustained a loss of $15,261,000 in the year ended Dec. 31, 2013, which compared with a loss of $7,695,000 in fiscal 2012.
In a May 29 filing with the Securities and Exchange Commission, Crumbs had warned that it “may be forced to cease or significantly curtail” its operations if it was unable to obtain the financing that it needed to fund future operations.
“In an effort to maximize overall profitability and stockholder value, management continuously evaluates store performance and the effectiveness of and outlook for Crumbs’ strategies,” Crumbs noted in the filing. “Management seeks to formulate and implement changes that it believes will correct weaknesses in store operations that could be causing declining sales results. Monthly operating performance at a number of Crumbs’ stores has continued to decline through March 31, 2014. Management has initiated the process of closing underperforming stores. To date, 23 such stores have been closed. Management believes that the future success of Crumbs is dependent, in part, on a shift in strategy from company owned stores to a franchising model as well as continuing to expand its licensing business.”
In January, Crumbs closed on a $5 million senior secured credit facility. At the time, Crumbs said the funding would pave the way for it to implement a new business plan that focuses on developing a licensing program, adding franchised stores to complement Crumbs’ company-owned stores and the ongoing initiative of closing or co-branding existing stores that are currently unprofitable. In mid-April, BJ’s Wholesale Club signed on to exclusively carry an assortment of items from Crumbs at all 201 club locations in 15 eastern states.
As of the end of last year, Crumbs listed about 165 full-time employees and about 655 part-time hourly employees working in its stores. As of March 31, 2014, there were 65 Crumbs Bake Shop stores operating in 12 states and Washington, D.C., including 17 stores in Manhattan, N.Y.