Irvine-based Ritz Interactive Inc., one of the country’s larger Internet-only retailers, has filed for bankruptcy protection.
The company, which sells cameras, electronics, golf clothes, boating gear and other products through a network of company-run websites, filed for Chapter 11 protection this month with the U.S. Bankruptcy Court in Santa Ana.
The petition lists less than $1 million in assets and about $7.2 million in debts for Ritz Interactive, which had close to $107 million in revenue and was profitable as of 2008.
It has seen a string of losses amid a dip in sales to about $91 million last year, according to court documents.
Ritz Interactive ranks as the 171st largest Internet retailer, according to industry trade magazine Internet Re-tailer.
The company runs 16 websites, with five of them related to cameras and photography. Others sites include BoatersWorld.com, which sells boating supplies and clothes; FishingOnly.com, which offers fishing gear; and ShopatShark, which sells equipment and apparel endorsed by professional golfer Greg Norman, who is on Ritz Interactive’s board.
The company employs 27 people in Irvine and another four outside California.
It got its start in 1999 as the online site of Ritz Camera Centers Inc., a Maryland-based chain of brick-and-mortar photography shops that has operated under the Ritz & Wolf Camera & Image name since a late 2009 corporate restructuring.
David Ritz, chairman and cofounder of Ritz Interactive, owns Ritz & Wolf Camera & Image.
The two companies are run separately.
Difficulties
The bankruptcy filing by Ritz & Wolf Camera & Image’s predecessor in early 2009 appears to have been one of the factors in Ritz Interactive’s own financial difficulties.
Ritz Camera was the primary supplier of camera gear to Ritz Interactive.
Ritz Camera’s bankruptcy came amid the shift to digital cameras. After the restructuring, the slimmed-down retailer’s inventory then limited the amount of cameras and other gear that it could send to Ritz Interactive for online sales.
Inventory “has been below appropriate levels from mid-2009 to the current date,” Ritz Interactive said in court filings last week.
One camera manufacturer, Canon U.S.A. Inc., refused to do business with Ritz Camera and its affiliates after the 2009 bankruptcy, citing the loss of “significant funds” in that restructuring, according to court filings.
Canon products historically accounted for more 15% of the Ritz Interactive’s sales, generating $16.4 million in 2008 revenue.
Ritz Camera also liquidated its chain of brick-and-mortar Boaters World stores and warehouses in the 2009 bankruptcy.
As a result, Ritz Interactive lost its main supplier for BoatersWorld.com, which in 2008 accounted for 13% of its sales, generating revenue of about $13.5 million with a gross profit margin of nearly 40%, the company said.
Those factors, along with the effects of the last recession, have resulted in Ritz Interactive posting operating losses in 2009, 2010 and so far this year, the company said in court filings.
In Default
The company is now in default on a $10 million promissory note issued by America Online, originally made in 2005.
Ritz Interactive also said it has been unable to fund the purchase of inventory on a continuing basis since late 2009.
This month’s bankruptcy isn’t the first financial hurdle that Ritz Interactive has faced.
Chief Executive Fred Lerner and David Ritz started Ritz Interactive in 1999 at the height of the dot-com boom.
The company pulled through the Internet crash by following standard business practices such as minding cash flow, Lerner told the Business Journal in 2008.
The company saw seven consecutive years of profitability from 2002 through 2008, and at one point was the country’s 32nd largest Internet-only e-commerce website, according to trade reports.
In 2005, Ritz Interactive filed plans to go public with the Securities and Exchange Commission but pulled back on the $34.5 million offering as the market for IPOs began to soften.
The company said in court filings last week it had been involved in “significant discussion and investigation of several alternatives” before deciding to file for bankruptcy.
The company expects to lose money on sales of between $665,000 and $685,000 per week from now until mid-November, according to projections made with the bankruptcy court.
