Empire Today: Floored by the Market

Welcome to the 177th Pari Passu Newsletter,

In today’s edition, we’re covering Empire Today, the largest shop-at-home flooring company in the United States, and one of the most recognizable brands in home improvement. The company, known for its iconic “800-588-2300 Empire!” jingle, was acquired by Charlesbank Capital Partners in August 2021 for approximately $1bn at the peak of the post-COVID home improvement boom. However, as the home improvement market normalized, Empire found itself in a tough liquidity position. 

In November 2024, Empire Today executed a liability management exercise that included the dropdown of Brand IP, a new money raise, and a tiered debt exchange. While the transaction was well-structured and successful in extending near-term runway, Empire retained financial advisors once again, on February 12, 2026, just 15 months later.

In this writeup, we’ll walk through Empire Today’s shop-at-home business model and 67-year corporate history, before detailing the COVID-era tailwinds that underpinned the Charlesbank buyout and the rapid reversal that followed. We’ll then break down the mechanics of the November 2024 LME, including our estimates of the exact exchange economics. Finally, we’ll analyze the company’s post-LME deterioration and explore potential outcomes for a second restructuring. 

Empire Today is the largest direct-to-consumer, shop-at-home flooring company in the United States. The company operates across 70+ major metropolitan areas, serving both residential and commercial customers [1].

Empire Today’s value proposition relies on its shop-at-home model, which emphasizes convenience and speed. Rather than requiring customers to visit retail showrooms, Empire sends consultants directly to homes and businesses with mobile showrooms containing hundreds of flooring samples. Customers can view products under their actual lighting conditions and receive on-site measurements and quotes before scheduling installation. For in-stock flooring, installation is often available the next day. This “quote-to-live-floor” cycle of approximately 48 hours is a meaningful differentiator against competitors [1]. 

The company generates revenue from the bundled sale of flooring products and installation services. Rather than producing its own flooring, Empire purchases inventory from suppliers and stores it in regional warehouses, reducing capital intensity and allowing the business to better flex capacity with demand [1]. While no official product mix is disclosed, industry estimates suggest carpet is the largest revenue contributor, although vinyl plank has been a faster-growing category in recent years. 

The business serves two primary customer types. The first is through the residential DTC channel, and represents the core of the business. Residential flooring demand is cyclical and is driven by three primary factors: new home construction, existing home sales (which trigger renovations), and remodel activity in occupied homes. The second business line is the commercial segment, branded as “Empire for Business,” which targets multi-unit housing businesses and property managers. Commercial demand tends to be less sensitive to macroeconomic conditions, as landlords must routinely update units to remain competitive. 

Empire Today competes with both national big-box retailers, such as Floor & Decor, Home Depot, and Lowe’s, and independent contractors, and its unique value proposition sets it apart from both. First, big-box retailers offer flooring and installation services, but typically rely on in-store selection and third-party installation, creating a less convenient and cohesive customer experience [1]. On the opposite end, smaller independent contractors offer personalized services, but lack the speed, brand recognition, and supplier relationships of Empire Today. 

More broadly, the flooring industry has faced significant headwinds since 2022. Sustained inflation and elevated mortgage rates have reduced existing home sales, as homeowners with low mortgage rates remain locked in place, rather than selling and buying new homes at higher rates. The magnitude of this decline is difficult to overstate. In 2022, the U.S. Pending Home Sales Index fell sharply from its 2021 peak to levels below even the depth of the 2008 financial crisis. Importantly, flooring, especially as part of an owner remodel, is viewed as very discretionary spending, as many consumers will simply defer spending money on flooring amidst tough macro conditions. As we’ll detail later, this dynamic has been especially challenging for Empire Today, which relies on remodeling activity from both home sales and occupied renovations. 

Now that we’ve broadly overviewed Empire Today’s business model, let’s move to the 67-year-old company’s corporate history. 

Empire Today traces its origins back to 1959, when Seymour Cohen founded Empire Plastic Covers as a small, family-owned business operating out of Chicago. The company initially sold plastic furniture covers, which were popular at the time. Quickly, Cohen recognized the opportunity to expand into flooring and rebranded as Empire Home Services, adding carpet to its product offerings. Throughout the 60s and 70s, the company remained a regional Chicago-area flooring provider, building a reputation for in-home sales and installation services. In 1977, the company developed its iconic jingle, “800-588-2300 Empire!”, later revised to end with “Empire Today.” This tune would become one of the most recognized advertising tunes in America. 

Empire remained a family-owned business for more than four decades until 1999, when it was acquired by Mercury Capital [2]. Under Mercury’s ownership, the company accelerated its national expansion and underwent a rebranding, adopting its current name, “Empire Today,” in December 2002. The new name reflected the company’s same-day consultation and next-day installation abilities.  

In January 2012, Empire acquired its longtime Chicago rival, Luna Carpet, for an undisclosed amount. Luna Carpet, founded in Chicago as a plastic covering company before expanding into carpet, had a nearly identical origin story to Empire’s. The acquisition brought together two of Chicago’s most recognized flooring brands. 

In November 2016, after 17 years of Mercury ownership, H.I.G. Capital, a Miami-based PE firm, acquired Empire from Mercury. While the financial terms of the deal were not disclosed, the company was reportedly generating approximately $50mm in EBITDA at the time, implying a purchase price in the mid-hundreds of millions. At the time of the acquisition, Empire already operated in 68 metropolitan markets, including the 30 largest in the United States, and had served over a million customers [3]. H.I.G. expressed intentions to expand Empire’s geographic footprint and invested in strategic initiatives throughout its ownership period, including the addition of “store-within-a-store” locations inside JCPenney retail stores. 

In August 2021, H.I.G. announced the sale of its majority stake to Charlesbank Capital Partners, a Boston and New York-based PE firm. H.I.G. retained a minority stake and board seat, signaling confidence in the company’s continued growth [4]. Sources indicated that the deal valued Empire Today at approximately $1bn, and that at the time of the deal, the company was generating ~$100mm in EBITDA, implying an approximate 10x purchase multiple. Charlesbank funded the deal with a $595mm TLB, priced at S + 5.00% and maturing in March 2028. $595mm of debt implies an LTV of 59.5% and entry leverage of ~6x, given an estimated $100mm of LTM EBITDA. 

Under Charlesbank’s ownership, Empire looked to strengthen its commercial flooring capabilities. In February 2022, the company acquired Sitton Contract Flooring, a multi-family flooring provider based in California. The acquisition helped bolster the company’s “Empire for Business” division and provided valuable exposure to the multi-family market. While the purchase price wasn’t disclosed, sources indicated the transaction added ~$20mm in revenue, a relatively small deal, making up ~2.5% of Empire’s Revenue at the time. 

At the time of the Charlesbank buyout, the deal appeared perfectly timed. The COVID-19 pandemic produced multiple tailwinds that directly benefited Empire. The first was an unprecedented spike in home improvements. As American consumers were forced to stay at home, spending that would have been purposed for vacations or other discretionary purchases was directed towards improving living spaces. The residential flooring market was a direct beneficiary of this. Secondly, as mortgage rates reached unprecedented lows, home sales spiked, driving further home improvements.

Empire’s financials reflected this favorable environment. Revenue climbed from an estimated $740mm in 2019 to $860mm in 2021, a 16% increase. More importantly, over the same period, we estimate that adj. EBITDA increased from $60mm to $100mm, a 67% increase. This outsized EBITDA growth is likely attributable to two factors. The first is operating leverage, spreading Empire’s fixed costs (warehousing, overhead, etc.) across more sales. The second is reduced ad spend due to very strong demand in the flooring industry. 

While it was clear this demand wouldn’t last forever, it normalized much quicker than anticipated, as in March 2022, the Fed launched an aggressive series of rate hikes to combat post-pandemic inflation, eventually pushing the fed funds rate to its highest level in over two decades. Mortgage rates, which had hovered around 3% during the pandemic, surged to 7% by late 2022 and remained elevated. As a result, fewer homeowners were willing to sell and give up their low mortgage rates, creating the “lock-in” effect. Additionally, post-COVID inflation finally took its toll on consumer spending, and American consumers began deferring discretionary purchases as the cost of essential goods rose. 

As the flooring and broader home improvement market stagnated, 2023 revenue declined roughly 2% to an estimated $860mm. However, sources indicated that adj. EBITDA fell much harder, from approximately $100mm to $60mm. As revenue declined, Empire was forced to spend more on advertising just to maintain its market share. Advertising spend jumped from 10% of revenue in 2022 ($88mm / $880mm) to 14% in 2023 ($120mm / $860mm), an increase of approximately $32mm, which nearly matches the company’s ~$35mm decrease in EBITDA over the same period [6]. In a declining market, this ad spend represented throwing good money after the bad, as it cost more and more to acquire new customers who were going to be more price sensitive. 

By June 2024, Empire Today found itself in a tough financial position. LTM revenue fell to just $820mm, as consumers continued to defer discretionary home improvement spending [6]. At the same time, Empire’s leverage rose to 13.6x, implying approximately $45mm of LTM adjusted EBITDA. 

Beyond its effect on home sales, the Fed’s rate-hiking campaign also perpetuated Empire Today’s debt burden. On Empire’s $595mm TLB, which was priced at S + 5.00%, interest expense hovered around $30mm post-LBO, when rates were near zero. However, by 2024, SOFR had risen above 5.00%, more than doubling LTM cash interest to $60mm+, a massive 133% of adjusted EBITDA. 

Empire’s operational issues, combined with an unsustainable capital structure, put the company in a tough liquidity position by June 2024. Over the previous 12 months, Empire had burned $30mm of cash, and as of June 2024, it had drawn $23mm of its $60mm revolver and had less than $1mm of cash on hand. At face value, given an annualized cash burn rate of $30mm, it appeared that Empire still had well over a year of cash runway. However, Empire’s RCF credit agreement included a springing covenant that capped RCF availability at 40% of the committed $60mm ($24mm) [7]. Given leverage was at 13.6x in June 2024, Empire had certainly triggered this covenant, meaning its true liquidity was likely under $2mm, as it had already drawn $23mm of its $24mm RCF cap and had less than $1mm of cash on hand. 

The table below details our complete estimates for Empire’s financials over this period. As a reminder, our assumptions are in italics.