Tattered Cover lost $340K in January, expects February losses

Tattered Cover lost $340,000 last month and expects to remain in the red this month, a fiscal shortcoming that arrives as the bookseller is trying to chart a course to profitability.

The bankrupt company took in $630,000 in January — more than it had projected it would — but spent $970,000, according to a monthly update it filed Feb. 21 with the U.S. Bankruptcy Court. That same report projects a $110,000 loss for February.

“This is a seasonal business,” CEO Brad Dempsey said in an interview Monday. “Our sales essentially double in December and then in January we have to pay the bill for that, when it comes to sales taxes” and rent that is tied to inflated December sales numbers.

“You get kind of a pig in the python mentality: You end up having to survive the entire rest of the year based on your big wins in November and December. I think it’s fairly customary to have some negative net cash flow during this period. We’re minimizing that.”

The company’s early-year losses come at a time when its leaders and lawyers are trying to craft a roadmap for reorganization, as required in Chapter 11 bankruptcies. That plan was expected in January but the company received extensions from a bankruptcy judge, so it is now due in March. The plan could include a change of addresses for the venerable company.

“Tattered Cover continues to evaluate its commercial lease options, including whether to keep its four existing retail stores or move some operations to more advantageous locations,” the company announced in a press release Feb. 19. “…Tattered Cover has been in productive communications with all its landlords and negotiations are still in progress.”

The company, which paid $70,000 in rent last month, has already slimmed from seven locations to four and from 103 employees to 71 since going bankrupt in October. Those cost-saving measures initially cost it some money in January, when it paid a $3,000 settlement to its former MacGregor Square landlord and made $16,700 in severance payments.

“Rather than let our employees go in October, we kept a number of them on as seasonal employees for the holidays and they didn’t get paid their severance until they finished that role in January,” Dempsey said. “So, some of these January expenses are not customary.”

The company spent another $332,000 on book inventory and $230,000 on payroll. It paid $93,000 in taxes, an unusually high amount, according to its monthly report.

The down-on-its-luck company was also a crime victim. In November, a catalytic converter was stolen from a truck that it leases. Tattered Cover’s insurance company wrote a $8,900 check that the company then paid to Penske, the truck’s owner, in January.

As he reflected on his company Monday, Dempsey harkened back to its dark days of 2022 and 2023, when it lost more than $1 million per year. Dempsey said he isn’t sure the company can avoid annual losses in 2024 but instead is aiming for a return to profitability in 2025.

“We are appreciative of Denver’s support and could use more every day as we work out of this situation,” the CEO said. “You see a lot of restaurants and retail closing in downtown Denver but we’re taking a very positive approach, not complaining about the situation but working and battling through it. We are doing everything we can to get this company right-sized.”

This story was reported by our partner BusinessDen.

Tattered Cover lost $340,000 last month and expects to remain in the red this month, a fiscal shortcoming that arrives as the bookseller is trying to chart a course to profitability.

The bankrupt company took in $630,000 in January — more than it had projected it would — but spent $970,000, according to a monthly update it filed Feb. 21 with the U.S. Bankruptcy Court. That same report projects a $110,000 loss for February.

“This is a seasonal business,” CEO Brad Dempsey said in an interview Monday. “Our sales essentially double in December and then in January we have to pay the bill for that, when it comes to sales taxes” and rent that is tied to inflated December sales numbers.

“You get kind of a pig in the python mentality: You end up having to survive the entire rest of the year based on your big wins in November and December. I think it’s fairly customary to have some negative net cash flow during this period. We’re minimizing that.”

The company’s early-year losses come at a time when its leaders and lawyers are trying to craft a roadmap for reorganization, as required in Chapter 11 bankruptcies. That plan was expected in January but the company received extensions from a bankruptcy judge, so it is now due in March. The plan could include a change of addresses for the venerable company.

“Tattered Cover continues to evaluate its commercial lease options, including whether to keep its four existing retail stores or move some operations to more advantageous locations,” the company announced in a press release Feb. 19. “…Tattered Cover has been in productive communications with all its landlords and negotiations are still in progress.”

The company, which paid $70,000 in rent last month, has already slimmed from seven locations to four and from 103 employees to 71 since going bankrupt in October. Those cost-saving measures initially cost it some money in January, when it paid a $3,000 settlement to its former MacGregor Square landlord and made $16,700 in severance payments.

“Rather than let our employees go in October, we kept a number of them on as seasonal employees for the holidays and they didn’t get paid their severance until they finished that role in January,” Dempsey said. “So, some of these January expenses are not customary.”

The company spent another $332,000 on book inventory and $230,000 on payroll. It paid $93,000 in taxes, an unusually high amount, according to its monthly report.

The down-on-its-luck company was also a crime victim. In November, a catalytic converter was stolen from a truck that it leases. Tattered Cover’s insurance company wrote a $8,900 check that the company then paid to Penske, the truck’s owner, in January.

As he reflected on his company Monday, Dempsey harkened back to its dark days of 2022 and 2023, when it lost more than $1 million per year. Dempsey said he isn’t sure the company can avoid annual losses in 2024 but instead is aiming for a return to profitability in 2025.

“We are appreciative of Denver’s support and could use more every day as we work out of this situation,” the CEO said. “You see a lot of restaurants and retail closing in downtown Denver but we’re taking a very positive approach, not complaining about the situation but working and battling through it. We are doing everything we can to get this company right-sized.”

This story was reported by our partner BusinessDen.