Employees who worked Christmas Tree Shops final days to be paid after budget dispute

WILMINGTON, DELAWARE — Christmas Tree Shops employees who worked until the stores' final closure on Aug. 12 should be getting paid, as an attorney for the company, and its debtor, argued over payroll owed for the last days of the liquidation sale.

The Christmas Tree Shops in Warwick closed on July 30 while the stores in Middletown and North Attleboro, Massachusetts, closed with the remaining stores on Aug. 12. Everything in the stores was on sale, including the shelves and other store infrastructure.

During a bankruptcy court hearing on Aug. 16, Judge Thomas Horan ordered that Christmas Tree Shops' bankruptcy case be immediately converted from Chapter 11, where reorganization is the purpose, to Chapter 7, where the point is to entirely liquidate a company.

More: Last RI Christmas Tree Shops store to close on Aug. 12. Here's how deep the discounts are.

The bankruptcy proceedings had been moving toward the closure of the company and liquidation after a hearing on June 29, when Christmas Tree Shops attorney Harold Murphy said the retailer started running into new problems in early June, when it was unable to quickly refill its shelves as sales outstripped projections, and it defaulted on a debtor in possession, or DIP, loan.

"I want this case converted today," Horan said during the hearing. "It's clear to me that there's been a complete breakdown, and we need to get a trustee in place."

Murphy said during the hearing that Christmas Tree Shops followed the instructions of Hilco Capital, which was brought in to liquidate the company, including how much to discount goods, whom to lay off and which stores to close early. The liquidation fell $14 million short of Hilco's projections, and employees were owed $1.3 million, while Hilco argued it didn't have to pay more than the $600,000 it budgeted for payroll for the last days of the liquidation sale.

"To come in here this morning and have it sprung on me that people who have been working for this company for the last two weeks are in danger of not getting paid today is absolutely mind-boggling to me, why this issue cannot be resolved," Horan said.

Hourly employees not being paid would be "unacceptable," and if they weren't paid, no professionals, including the attorneys, would be paid, Horan said.

"We're going to work on the employees first, get that solved," Horan said.

After a recess, the lenders agreed to pay a little over $1 million to settle the outstanding payroll for the store employees.

Many store employees were also told they would receive bonuses, which were only authorized for the first 10 stores that were closed early. The other employees at stores that remained open until the final liquidation on Aug. 12 will not receive those bonuses, attorneys in the case said during the hearing.

It all started on Cape Cod

In the 1950s, Mark and Alice Matthews launched The Christmas Tree Gift Shop in Yarmouth Port, Massachusetts, which was open from May to October each year. In 1970, Charles and Doreen Bilezikian bought the store and expanded over the next three decades, opening 24 additional locations in New England and New York.

In 2003, Bed Bath & Beyond bought and expanded the franchise to 20 states. In November 2020, it sold the company to Middleboro, Massachusetts-based Handil Holdings.

Bed Bath & Beyond, which also has stores in Warwick and Middletown, was going through its own bankruptcy proceedings. The name was then purchased by Overstock.com, which is rebranding to Bed Bath & Beyond but without a physical presence.

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Reach reporter Wheeler Cowperthwaite at wcowperthwaite@providencejournal.com or follow him on Twitter @WheelerReporter.

This article originally appeared on The Providence Journal: After debtor dispute, Christmas Tree Shops employees to be paid