HOUSE2HOME FILES FOR BANKRUPTCYALL STORES, INCLUDING SR SUPERSTORE, TO CLOSE AS HOMEBASE EFFORT TO REINVENT ITSELF STUMBLES ON FLAGGING SALES

House2Home, which tried to convert its chain of HomeBase hardware stores

into home decor superstores, filed for bankruptcy protection this week and

announced plans to close all of its outlets, including its Santa Rosa store.

The company, which undertook a massive campaign to reinvent itself just as

the economy slowed, saw sales plunge more than 25 percent following the Sept.

11 terrorist attacks and concluded it could not survive a prolonged downturn.

''The dramatic and sustained drop in sales that immediately followed the

terrorist attacks put an extraordinary strain on cash flow, from which we

could not recover,'' said Herbert Zarkin, chief executive officer.

The Irvine company filed for bankruptcy Wednesday, prompting the New York

Stock Exchange to suspend trading of its shares.

House2Home is the latest casualty in an increasingly bloody year for home

decor and furnishing chains. Over the past seven months, Krause's Furniture

Inc., Sear's HomeLife and Heilig-Meyers have called it quits.

On Thursday, the shock was palpable at the House2Home store in Santa Rosa,

which opened in August.

House2Home employs approximately 140 workers at its Santa Rosa store. All

will lose their jobs when the store closes following a liquidation sale, which

could take up to 13 weeks.

As small clusters of employees speculated on how much longer their jobs

would last, shoppers discovered the store on Stony Point Road would soon be

shuttered.

''It's such a shame. I don't want to think about the mob scene when the

closing sale starts. They've already got all their Christmas things out,''

said Adrienne Sopinski of Sebastopol, who came in to return several small

decorative pillows, only to be told there were no returns or exchanges in

light of the bankruptcy filing.

House2Home was a relatively new entrant in the market for home furnishings

and decor.

Its predecessor, HomeBase, decided to reinvent itself late last year when

it found itself unable to compete effectively against home improvement giants

like Home Depot and Lowe's.

In March, HomeBase dropped its power tools and picked up color palettes to

take on home decor chains like Bed Bath & Beyond, Ikea and Restoration

Hardware. The chain sold off 25 of its 67 stores and laid off an estimated

2,600 employees during the transformation.

The company characterized the selling of stores and firings as necessary to

fund a war chest to help it ride out any bumps in the road on the way into a

new market.

''We had high hopes for House2Home and still believe that the concept would

have been successful under different macroeconomic circumstances.

Unfortunately, several pivotal external factors were working against us,''

Zarkin said.

Sluggish sales following the Sept. 11 terrorist attacks left the company

with little cash to pay its bills, Zarkin said. The company owed $228 million

to creditors and had nearly tapped out its credit after completing a costly

program to convert its hardware stores to the House2Home concept in August.

The vast majority of its stores had opened just a short time before the Sept.

11 attacks.

''We never had the opportunity to build a solid customer base that might

have otherwise sustained the business through a difficult period,'' Zarkin

said.

The company filed for Chapter 11 bankruptcy in federal court in Santa Ana.

The company plans to seek the court's approval to liquidate all 42 stores,

eventually firing some 4,700 employees in California, Arizona and Nevada.

For Adrienne Sopinski, a customer in the middle of redecorating her living

room, the pending closure of the House2Home store in Santa Rosa left her at

loose ends.

''I bought a bunch of different pillows to try them out. A few didn't work.

I'd like to return them and try others. But I won't buy more, because I can't

return or exchange them,'' she said.

You can reach Staff Writer Rayne Wolfe at 521-5240 or

rwolfe@pressdemocrat.com.