Fulcrum shuts its doors

On July 29, less than a month after founders Michael Lederman and Scott Budoff resigned, $80 million multititle children’s apparel cataloger Fulcrum Direct shut its doors, leaving 700 workers without jobs. The next day, the Rio Rancho, NM-based company filed for Chapter 11 bankruptcy in Delaware, where it was incorporated. Fulcrum, which had folded its Sunskins and Little Feet catalog titles earlier in the year, also published the After the Stork, Storybook Heirlooms, Playclothes, Discount Direct, and Zoe catalogs.

Management told staffers that a bank had foreclosed on Fulcrum and work could no longer continue, according to an article in the Albuquerque Journal. Also according to the Journal, employees received the news on the evening of July 29, when an unidentified man came into the call center, telling employees-some of whom were in the middle of taking orders-to get off the phones.

Fulcrum Direct bought its first title, After the Stork, in 1994. Soon after, Fulcrum developed a reputation as an aggressive acquirer, buying five more catalogs in all.

The company reported 1996 sales of $36.5 million, according to SEC filings, up from $28.6 million in 1995. Last year Fulcrum launched Zoe, a catalog of apparel for teen girls, and bought $30 million Storybook Heirlooms. But while Fulcrum’s net income rose to $614,000 in 1996 from $320,000 in 1995, its continuing expansion nonetheless emptied the coffers.

The well went dry “Fulcrum made many acquisitions and tried to integrate a lot of moving parts,” says Nick Holland of Boston-based investment firm Ulin and Holland. “It was a bit undercapitalized given the plans it had. It just ran out of money.”

Fulcrum tried twice to go public, in 1996 and ’97, in the hopes of raising more than $20 million. But the company had yet to demonstrate a consistent track record of profitability. This, coupled with the fact that what earnings it had were less than impressive, kept investors away, according to industry observers. Fulcrum officials refused to comment at press time, but the company did issue a press release stating that it “was negotiating with several buyers who are interested in the company’s various brands.” There are no immediate plans to reopen operations.

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