Southern Season looks past its debts to future growth

Chapel Hill-based Southern Season, the gourmet food retailer that is reorganizing its business after filing for bankruptcy, is looking to boost its online sales as part of its effort to rejuvenate its struggling operations.

Brian Fauver, the company’s chief financial officer, said in an interview Monday that the retailer expects to have a revamped e-commerce site offering dramatically more items and an enhanced online experience up and running late this fall – in time for the crucial holiday season that accounts for about 40 percent of annual sales.

He noted that Southern Season’s e-commerce site is focused on gift baskets and sells about 2,000 items online, a far cry from the 80,000 items that are sold in its stores over the course of the year – a number that includes seasonal items that are sold for limited periods of time. The revamped site will offer all the products available in the store.

“Our customers shouldn’t have to drive to our stores to have access to the wonderful products we sell,” Fauver said.

Southern Season filed for Chapter 11 bankruptcy Friday. Its reorganization plan calls for its 60,000-square-foot store in Chapel Hill to remain open along with much smaller A Taste of Southern Season stores in Cameron Village in Raleigh, Asheville and Charleston, S.C. It also plans to open two more of the smaller stores in Southern Pines and Wilmington over the next few months.

However, it is closing a 44,000-square-foot store in Mount Pleasant, S.C., a move that falls on the heels of the April closure of its 53,000-square-foot Richmond, Va. store. It also has pulled the plug on plans to open another large store in Atlanta.

“We are completely changing the growth strategy of the company,” Fauver said.

Southern Season was founded in 1975 by Michael Barefoot, who built the specialty food store into a mecca for foodies and wine lovers which, along with its vibrant mail-order business, generated more than $30 million in annual sales. Barefoot sold the company in 2011 to TC Capital Fund, a company led by entrepreneur Clay Hamner, who became Southern Season’s CEO.

The change of ownership was accompanied by expansion into new markets, but the success of the large Chapel Hill flagship store hasn’t been replicated.

Fauver said that the Chapel Hill store, which has become a destination not only for local customers but for many who travel long distances, built up its following over decades. By contrast the Mount Pleasant and Richmond stores attracted “extremely passionate, loyal fans in those markets” from the outset – but not nearly as many as the Chapel Hill store.

“The stores themselves proved too expensive to keep operating,” he said.

Southern Season listed $9.8 million in assets, including $3.6 million in inventory, and $18.3 million in liabilities. Those liabilities include $4.6 million owed to creditors whose debt is secured by property and $13.7 million in unsecured claims.

Local companies that are among the 20 largest creditors in court documents are Durham-based Counter Culture Coffee, which is owed $100,123, and Chapel Hill Toffee, which is owed $27,799.

“While we hate to be in this position, we hope the community will continue to support Southern Season as they work to recover from this,” Chapel Hill Toffee said in a statement. “We hope to be paid in full once they complete this restructuring in December.”

Sam Sellars, co-owner of cheese straw maker Ashter Baking Co. in Beaufort, said he began seeing signs of stress about a year ago, which is when Southern Season started paying its bills later and later. He feels fortunate that, after he pushed hard for payment, the company settled up its large bill for Christmas merchandise about two months ago.

Southern Season placed a much smaller order several weeks ago and, according to court documents, owes Ashter $2,333.

Despite that outstanding debt, Sellars said: “We are very proud to be part of the Southern Season experience. We’re really sad they have experienced this turbulence. We hope that this (reorganization) plan is a successful plan.”

Fauver said that the Chapel Hill store and the smaller A Taste of Southern Season stores have been profitable, but not enough to overcome the losses racked up by the Mount Pleasant and Richmond stores.

In addition to offering many more products, Southern Season’s new e-commerce site will also be “a place to learn about the artisans that created the product, to learn more about how to use the item,” Fauver said. “It will be an interactive site that will have that same immersive experience you have in the store, but in a digital form.”

Today online sales account for “well less than 10 percent” of the company’s total sales, Fauver said. “We ought to have a much higher percent of our overall sales coming through the digital channel.”

This story was originally published June 27, 2016 at 5:48 PM with the headline "Southern Season looks past its debts to future growth."