The Paper Store Files for Bankruptcy

The Paper Store, an 86-store Hallmark Gold Crown chain in the Northeast specializing in gift retail, has filed for Chapter 11 bankruptcy Tuesday after trying to manage a liquidity crisis due to COVID-19-related store closures.

“The impact of COVID-19 on [The Paper Store] cannot be overstated,” said Van der Wiel, managing director at G2 Capital Advisors, who pointed to lost sales for Easter, Mother’s Day, graduation and year’s end teacher gifts, all of importance to the retailer. “Store closures have significantly contributed to missed sales targets, unsold inventory, and have depressed profit margins.”

To maintain liquidity, earlier in the year, The Paper Store furloughed most employees and implemented reduced salaries for those still working in the corporate headquarters and distribution center, waiving salaries for the founding family and pushing out rent and vendor payments, however the financial strain caused by closing all its stores for weeks at a time became too much to bear, leaving the company without the cash on hand it needs to buy millions in inventory for its busiest season, Christmas.

“This is not an attempt to liquidate the company at all,” said Paul J. Ricotta, the Mintz Levin lawyer representing the company in a telephone interview Tuesday with USA Today. Ricotta added that the hope is a new owner will be able to continue to operate the stores.

The company is aiming to sell by late August in order to get the cash necessary to purchase inventory. It filed a number of motions Tuesday that would allow it to continue operations during the process.

The company was founded in 1964 by Bob Anderson in Maynard, Mass. It began as a small newspaper and magazine shop. It started selling convenient gifts and cards in 1987 and began expanding to multiple locations in 1990. By 2012, The Paper Store officially became the largest family-owned group of Hallmark Gold Crown stores in the U.S., employing more than 3,000.