Housewares Retailer Struggles In Downturn

Mark Giarrusso never thought Christmas was going to save him. Sales at his Massachusetts-based Bowl & Board housewares stores had been down for months, especially at the Brookline store, but Giarrusso did think that with a little more cash, and a little more time, the store might survive.

He spent most of December and January pushing new merchandise into the store and slashing prices to try to gin up business. But nothing seemed to work.

"At midday, [sales] are at like $70 in Brookline," he says. "It's insane."

That's hardly enough to pay the store's heating bill, let alone the rent, he says, which increased some 30 percent 1 1/2 years ago.

'Going Up In Flames'

Now, six months behind with his rent, Giarrusso is trying to get his landlord to agree to a reduction. But the two sides are at a stalemate. The landlord won't talk about a deal until Giarrusso pays off some of his back rent. Giarrusso won't pay the back rent until he knows he has a deal for the full five-year lease.

Feeling stuck, Giarrusso starts to prepare his Brookline staff for the worst.

"D-Day comes Tuesday," he says to his stunned staff. "In a perfect situation, we will stay here. In another situation, we could be closed up as soon as next week, or next month."

In the meantime, Giarrusso continues to hack away at every expense he possibly can: both at work and at home.

At home in his kitchen, Giarrusso and his three kids huddle around a fireplace. Tossing wood into the fire, Giarrusso can't help but laugh at the irony that he is using some old wood paneling that he pulled from the walls of what was once his flagship store in Cambridge.

"How's business?" he jokingly asks. "We're going up in flames — literally!!"

Trouble Paying Rent

Giarrusso gets some sympathy from his dad, William Giarrusso, who founded Bowl & Board more than 40 years ago. He ran the store through multiple recessions, several devastating building fires and countless student protests. But that, he says, was easy compared to dealing with rental costs that have been soaring now for years.

"You just can't do it," he says, shaking his head. "You're just working for the landlord. It's so frustrating."

Finally, convinced he can't keep throwing good money after bad, Giarrusso reluctantly gets ready to call it quits. He hires a truck to help him move. But at the last minute, an uncle, who is a big real estate guy in New York, gives him second thoughts.

"He's telling me don't pull out! Don't let it come to that!" Giarrusso says.

The uncle convinces him that landlords everywhere are worried about their buildings sitting empty and are slashing rent, preferring to take something rather than nothing. The uncle himself agreed to a 50-percent reduction on some of his own properties in New York. So, newly optimistic, Giarrusso resolves to try negotiating one last time. He calls off his trucks and drafts a new offer to give his landlord 30 percent of his gross receipts.

"That way, as the economy gets better, and my sales go up, my rent will go up, too," he says. "And eventually we will land right back where we are now. I think it's a win-win."

Giarrusso calls and e-mails his landlord, but he can't seem to get a return call.

"It's just driving me nuts; it's stressful," he says. "It's killing me."

Frozen Bank Accounts And Lawsuit

Giarrusso often works out the stress on the ice. Later that week, playing hockey, he body-checks another player, slamming the guy's head into the boards. Feeling bad, he goes to apologize, and explains he is having a really hard time at work.

"And the guy looks at me," Giarrusso says, "and he's like: 'Tell me about it! My company just went Chapter 11!' It's like, we're all in this."

On some level, it's a little comforting to know he's not alone. But if he felt a little better, it wouldn't be for long.

Coming off the ice, Giarrusso finds seven urgent voicemails from his bookkeeper. All five of his bank accounts are suddenly empty and he has no idea why.

Giarrusso's mind races. Despite several frantic calls to the bank, all they will tell him is that the money has been put on hold by court order and he should call attorney Rosemary Macero.

He calls her first thing in the morning and finds out she represents his landlord. His accounts have been legally frozen by a court because of his failure to pay rent.

"You owe your landlord money," she says. "The bottom line is that you didn't make any payment at any time."

"The position you've taken now is to put Bowl & Board out of business," Giarrusso retorts.

"Well," she says, "When you're nonresponsive ..."

"Nonresponsive?!" Giarrusso interjects. "I was calling you guys all last week!"

The conversation is beginning to spiral down into angry yelling, when Macero, just in passing, happens to mention "the lawsuit."

"Huh?" Giarrusso blurts out. "Was I notified of this lawsuit? You say there is a lawsuit in place. Why wasn't I notified of this?"

"You've been served," she replies.

"With what?" he demands.

Within a few more minutes, Giarrusso learns that his landlord started legal proceedings against him more than a month ago. But all the documents were mailed to an old address, and Giarrusso had no idea.

"I never got anything," he says. "They were ducking my phone calls for weeks. Now it all makes sense."

Exploring Bankruptcy

Giarrusso sighs and calls his attorney, his older brother Roy Giarrusso.

"I'm basically a hiccup away from being bankrupt right now," Mark Giarrusso says.

His brother agrees that may be the only option.

"I'm thinking I need to have you talk to my buddy who does bankruptcy law," Roy Giarrusso says. "I mean, we got to at least think about that option. I don't want you throwing good money after bad."

But first, Mark insists, he wants to try to reach a settlement with the landlord. Roy Giarrusso sends Macero an e-mail, offering to pay most of the back rent and to vacate the space immediately. But the lawyer e-mails right back.

"I don't know if that will have much traction. I have sent the proposal along [to the landlord]," she wrote.

"Also, I have not done the bankruptcy calculation," she continues, but given the past due amount plus the rent that would be due for the 3 1/2 years left on the lease, "I cannot say that we will not get more ... if bankruptcy occurred.

"I frankly do not think that [offer] will do," she concludes, "but that is just my opinion. I will let you know."

And so begins Giarrusso's agonizing limbo.

Frantic Phone Calls

While his brother handles the negotiation, Giarrusso and his bookkeeper, Polina Paunova, start calling the dozens of vendors who are about to try to cash checks from his frozen accounts: In many cases, they are too late.

"We just sent you a check for the full amount that we owe," Puanova begins to explain to a supplier, who, at first, is delighted. "No, it's not really excellent!"

One desk over, Giarrusso is on the phone with a furniture maker: "Please you have to sit on [the check]!" he implores. "There is trouble in our accounts!"

But Giarrusso is already too late.

"I gave it already to [our bookkeeper] to deposit."

Giarrusso groans, thinking the penalties he'll face for bounced checks will only add insult to injury.

Then, adding to the pressure even more, Giarrusso gets a call on his cell phone from his other landlord in Providence, R.I., who is also looking for rent. Giarrusso had the money to pay that, but it is now tied up in the frozen accounts.

"I have a situation on hand right now," he tries to explain. "It's a long story. I know you hate stories."

Squeezed now from all sides, Giarrusso desperately needs cash.

Even if the Brookline location has to close, he doesn't want that store to take his other two down with it. He gets his Brookline staff on the phone and tells them to get ready to launch a big sale.

"It's deal time," he says. "Everything is on sale. Just make a deal."

Still, Giarrusso knows even the best bargains may not entice buyers in this economy.

So after everything that has happened, he has actually come full circle. Like so many retailers everywhere, he is desperately scrambling to figure out a way to get shoppers in the door.

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