The Tattered Cover filed for Chapter 11 bankruptcy protection on Monday, a somber financial admission for one of America’s most beloved independent book chains.
The 52-year-old bookstore will close three locations by November, the company’s chief executive officer, Brad Dempsey, said in an interview: the McGregor Square store across from Coors Field and recently opened outlets in Westminster and Colorado Springs.
At least 27 of Tattered Cover’s 103 jobs — more than one-quarter — will be eliminated through the store closures, he said.
“This structure of seven stores is not sustainable,” said Dempsey, who is also a Denver bankruptcy attorney. “It’s very difficult to be profitable without a substantial amount of additional capital that investors were not willing to provide right now.”
Once approved by the court, Tattered Cover’s Chapter 11 filing will give the company access to $1 million in special financing from existing investors and board members, Dempsey said. That money will be used to obtain books in time for the 2023 holiday season — the most critical and highest-volume time of the year for bookstores.
Store closures are expected to begin next week and be completed by early November. Some of the impacted employees from these locations may fill temporary seasonal positions at the chain’s remaining four stores during the busy holiday season, the company said. Severance packages will be provided.
“Our employees are part of what makes Tattered Cover special,” Dempsey said. “It’s really hard to do this. These people are dedicated booksellers; they are community builders; they’re terrific people. I wish we didn’t have to make this decision, but it’s in the best interest of the company.”
Court documents filed in the U.S. Bankruptcy Court for the District of Colorado show Tattered Cover ran more than $660,000 in the red between January and September. The business owes more than $1 million to publishers, including Penguin Random House, MacMillan and Simon & Schuster. The book chain also owes more than $375,000 to Colorado’s Office of the State Auditor for abandoned gift cards, filings show.
When Dempsey took over the top job in July, he said had some idea of the company’s economic woes.
“I discovered the range of issues, the breadth and scope of the issues, were deeper and wider than I had originally understood,” he said.
Tattered Cover remains on a credit hold with most publishers, Dempsey said. This month, the CEO flew to New York to meet with senior management at the five major publishing houses to negotiate terms. Their advice: Close stores and focus on quality over quantity, he said.
“We just can’t afford a 45,000-square-foot footprint,” Dempsey said.
The bankruptcy filing comes less than a year after the death of the Tattered Cover’s pioneering former owner, Joyce Meskis.
She purchased the original 950-square-foot bookstore in Cherry Creek in 1974 using a small loan from her uncle. Within 12 years, she had taken over the 40,000-square-foot former Neusteter’s department store building on the corner of Second Avenue and Fillmore Place with half a million books in stock.
Meskis over the decades built the bookstore into a national sensation. Over the years the business hosted presidents, athletes and TV stars among a cadre of celebrity authors marketing their memoirs.
A local investment team purchased the book chain in 2020 from Len Vlahos and Kristen Gilligan, pledging to revitalize the floundering business that had comforted legions of Denverites over the years with its cushy chairs and homey feel.
Kwame Spearman, one of the lead investors who served as CEO until April, acknowledged in interviews that his group purchased Tattered Cover on the brink of bankruptcy. In a recording of a town hall last year obtained by The Denver Post, he told staff that the bookstore wasn’t profitable, and hadn’t been for a long time.
This left the company with two options, the chief executive said: dramatically cut costs or try to expand in order to increase revenue.
“I’d be lying to you… if I told you this was an awesome situation,” Spearman told his employees on Jan. 21, 2022, as he announced the company’s community team — including co-owner Alan Frosh — would be laid off. “It’s not. We’re in the fight of our lives.”
Frosh, who remains a co-owner despite not being involved in the day-to-day business, told The Post on Monday that he learned about the bankruptcy through news stories.
“It’s disappointing to not be made aware of this,” he said.
Under Spearman’s leadership, Tattered Cover opened stores in Westminster, Colorado Springs, Denver’s McGregor Square and Aurora. But his tenure also was marred by allegations of workplace bullying and ageism that led to a third-party investigation. (Spearman vehemently denied the allegations). More than a dozen employees told The Post last year that morale was flagging, with staff complaining of being overworked and belittled, promised job growth that never materialized.
In an interview Monday, Spearman — who remains a co-owner — noted the Westminster and Colorado Springs leases were signed before the COVID-19 pandemic, which devastated the already struggling local business.
“The world has changed significantly since then, particularly in downtown Denver,” the former chief executive said. “This move reflects the reality of the world we’re living in today.”
He urged the community to continue to rally behind the Tattered Cover, which isn’t going out of business.
Spearman has attempted to use the bookstore as a springboard for a nascent political career. He briefly ran for Denver mayor this year in a crowded Democratic field before dropping out.
In April, Spearman stepped down from his CEO role with the bookstore to run for an at-large seat on Denver Public Schools’ Board of Education.
Get more business news by signing up for our Economy Now newsletter.
