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Date: April 29, 1992

Location: Princeton

Title: H. Gross & Co. Outfitters Files for Chapter 11 Bankruptcy

Author: Mukul Pandya

Subject: A retailer who seemed immune to the recession saw his sales fall by $100,000 last year.

An old limerick tells of the lady from Niger, who smiled as she rode on a tiger. Princeton merchant Henry Gross II has often seemed like her–smiling as he rode the Princeton University Tiger to apparent success. The mascot is a key theme for his Palmer Square store, H. Gross & Co. Outfitters, which is stocked with orange-and-black sweatshirts, ties and other Old Nassau paraphernalia. For years, Gross claimed the approach worked. While the recession was clobbering other retailers, he said his sales were growing 10% to 15% a year.

The joyride may now have ended. At 2:00 p.m. on April 8, the company”s directors met in the offices of Teich, Groh and Frost, a Trenton law firm, and decided to declare bankruptcy under Chapter 11. When the petition was filed the next morning, H. Gross had $300 in its cash box, $1,500 in the bank, accounts receivable worth $17,500, some office equipment and supplies, $200,000 in inventories–and lots of debt. Court documents list the company”s assets at $253,164.00; it owes creditors $406,438.58.

The biggest creditor is Woodbridge”s National State Bank, to whom H. Gross owes $400,000. Others include Palmer Square ($26,222.58), Princeton University ($14,580) and Aztec Graphics ($26,042.32). Gross asked the court to let him use his inventory, equipment and accounts receivable–cash collateral against which the bank may hold liens–for his business. Otherwise, he said, the bankruptcy might have to be converted to Chapter 7, liquidating the business. The court has agreed. A hearing has been set in Trenton for May 11.

This bankruptcy marks the second of Gross” ventures to run into trouble. The Lobster Pound, a restaurant he opened in 1990 in the Princeton MarketFair on Route 1, fared disastrously and was closed. The apparel store was much more profitable. Documents show Gross ran a high margin business, with a mark-up of almost 100%. Example: Gross projects sales during May of $120,000, for which his cost of goods sold is $66,000. During the past two years, monthly sales have averaged more than $100,000. The main problem, however, was a terrible 1991. Sales dropped by $100,000, leaving Gross with high inventories.

Gross refuses to discuss his future plans–“I”m too busy running my business,” he says–but the numbers speak for themselves. Sales dropped from $1.4 million in 1990 to $1.3 million in 1991. The company”s statement of income from August 1, 1990 to April 30, 1991, puts net loss at $121,185.69. H. Gross has been trying to stanch the red flow in part by asking customers–often unsuccessfully–to pay up front. Says a local retail expert: “Gross was a master marketer, but he didn”t change his merchandise.”

The coming months will be crucial for Gross and his wife Nancy, who own 35% each of the company, and Edward Kahn, a Princeton businessman, who owns the other 30%. If the company fails to achieve the targets of $100,000 and $120,000 that it has projected for April and May, things could get dangerous. Anyone who rides a tiger should be used to that. u