Honk’s $1.00 bankruptcy reflects competitive dollar store landscape

The owners of Honk’s $1.00 chain of discount scores have filed for bankruptcy, with unsecured debts of almost $700,000. In their Jan. 11 Chapter 11 petition with the U.S. District Court, Darrell and Sharolyn Cox listed assets of $1.7 million in personal property and liabilities of $4.2 million.

A Chapter 11 generally means the owners want to continue running the business through a plan of reorganization and are willing to use future income to pay back creditors. Secured creditors can get the full amount of their collateral paid out over time. But unsecured creditors often get relatively little.

More than 100 creditors are listed in Honk’s petition. The top amounts are for a commercial loan, merchandise, equipment and tax obligations.

The Bank of the Cascades is Honk’s sole secured creditor, with an outstanding claim of at least $1.1 million.

Honk’s owes its top 20 unsecured creditors a combined $693,405, mainly for merchandise. This amount also includes $19,722 for money due for a lease in Utah and $27,206 in past due sales tax for that state.

An Idaho company on this list, Double K Greeting in Kimberly, is owed $23,102 for merchandise. The owner of Double K declined to comment.

Honk’s also owes state and federal taxing authorities $72,476 and $5,552 for accrued vacation time for more than two dozen employees.

The bankruptcy comes at a time when dollar stores have generally done well. According to a 2012 report from Deloitte Research, dollar stores have gained in popularity with consumers due to the economic recession and higher food and gas prices. Consumers are “purchasing lower-priced products, making fewer trips to food stores, purchasing fewer food products overall, purchasing more private-label products, going to discount stores more often, and purchasing more smaller-size products.”

A Bellevue, Wash., firm that tracks consumer behavior believes dollar store customers like to hunt for bargains. Laurie Demeritt, The Hartman Group’s president, said in an August news release, “The desire for American consumers, across all income brackets, to frequent dollar stores lies in a quest for shopping experiences featuring surprise and discovery.”

But Honk’s competes with much larger chains that have grown aggressively in the past few years. For instance, Family Dollar operates 7,475 stores across the U.S., including 36 in Idaho, according to its 2012 Annual Report.

In this report, Family Dollar executives detailed the highly competitive nature of the industry.

“We compete for sales and store locations in varying degrees with international, national, regional and local retailing establishments, including discount stores, department stores, variety stores, dollar stores, discount clothing stores, drug stores, grocery stores, convenience stores, outlet stores, warehouse stores and other stores. Many other large U.S. retailers have stores in areas in which we operate.”

According to its website, Honk’s runs 14 stores, primarily in Idaho and Utah. All of the stores are leased, as no real property is listed in the bankruptcy filing.

Calls to Honk’s owners and their lawyer were not returned.