The 14-store chain will remain open while its owners, an investor group led by Marvin Traub, a former Bloomingdale's chief executive, try to negotiate a rescue plan with creditors and potential retail partners under Chapter 11 bankruptcy-reorganisation law.
But they warned the stores might be closed, despite a promising recovery over the Christmas period at some outlets.
Mr Traub said yesterday the stores had encountered unexpectedly fierce competition from Ikea, the Swedish home furnishings chain that acquired Habitat's European operations at the same time he took control of 19 American stores in late 1992.
Under Ikea management, the European operations have returned to profitability, recently reopening their flagship store in the King's Road in Chelsea.
The price for the US portion of the sale was never disclosed, although Ikea is said to have paid pounds 78m for the European business. The US stores lost more than dollars 40m in the three years before their sale and Mr Traub has been unable to turn them around, although five loss-making outlets were closed.Reuse content