As one of the fasted growing categories in the furniture industry, motion furniture and recliners accounted for 47.4% of total upholstery sales in 2021, according to the FurnitureCore Industry Model, developed by Impact Consulting Services, parent company to Home Furnishings Business. Research also shows that sales of motion sofas and chairs increased by 32.6% from 2020 to 2021 and recliner sales grew by 26.1% during the same time period. Overall, the upholstery category increased by 24.6% from 2020 to 2021. Although stationary upholstery is still the majority of total upholstery sales (52.6%), motion sofas and chairs accounted for 30.4% and recliners for 17.0% in 2021, both categories increasing their shares from 2020.
The desire for furniture that incorporates both style and comfort has only increased since the pandemic. Gaining in popularity for years now, reclining sectionals provide an abundance of seating and functions to fit every need. According to Cheryl Sigmon, vice president of merchandising and product development at Bradington-Young, “Sectionals are becoming more and more important now that people are spending more time together at home with family and friends.” The company’s best-selling Raiden sectional “stands out not only for its tailored good looks, but its exceptional comfort, thanks to spring-down cushioning and the plush, two-piece back which offers great back and lumbar support.”
Bridging style with comfort has proved successful for Catnapper. As Anthony Teague points out when describing the company’s best-selling Sydney sectional, “Combining function and fashion has been the key to our growth in this category of motion furniture, as we continue to strive to get motion out of the basement and into the living room with sleek designs and tasteful fabrics.”
While more consumers are finding options in the motion and reclining category, lack of a desired style can still be a deterrent. According to a FurnitureCore, Inc., survey developed by Impact Consulting Services, parent company to Home Furnishings Business, 54.73% of consumers surveyed considered the style of reclining furniture an inhibitor to their purchase in the category but 45.27% did not see it as an inhibitor.
Not only are manufacturers striving to create a multitude of style options, but many also continue to increase technology integration into their motion furniture. Many pieces now include motorized recliners, storage spaces and USB ports. The technology keeps changing to keep up with how we live.
Consumers were asked by FurnitureCore to pick the top four items they have now or would want to have in their next reclining product. The results were heat/massage at 58.41%, followed by automated adjustable headrest and lumbar supports at 58.10%, storage drawer at 49.21%, hidden tabletop at 45.08%, docking station for telephone at 31.75%, built-in remote at 28.25%, built-in beverage cooler at 27.62%, and surround sound system at 26.98%.
However, even with all the fancy buttons and power options, many consumers still prefer the hand operated lever. In the same survey, consumers were asked which mechanism they preferred as a reclining method for reclining furniture and 51.43% chose a hand operated mechanism, followed by power operated mechanism at 30.48% and body pressure mechanism (the push back method) at 18.10%.
Regardless of whether consumers want a traditional recliner with puffy arms and a wooden lever or a chair with all the power options in a sleek, smaller design, there is something for everyone. As this category continues to grow, rest assured, we will see motion and reclining furniture front and center.
This issue of Statistically Speaking focuses on population growth between April 1, 2020 and July 1, 2021 – 15 key months of the pandemic. The majority of people that moved during the pandemic did not go far, staying within their states or just outside the “core” of the city. Mid-size markets, those with populations 250,000 to 999,000 received the greatest influx of new residents. And while the pandemic did cause a large migration out of densely populated cities, the trend diminished during the second year of the pandemic.
Meanwhile, the furniture and home furnishings industry seemed to operate in its own unique economic environment during the pandemic months – unrelated to the population migration. Once all retail reopened, a pandora’s box of demand, spurred by stimulus checks, and the consumer’s seemingly renewed love affair with their homes, created a potential bubble that has stretched throughout 2021. (See the “Retail Metrics” cover story in this issue of the magazine.) The question furniture retailers have going forward is will these population dynamics continue or can the big cities lure them back.
The slowing in the rate of population growth is an alarm bell sounding for the furniture and home furnishings industries. As shown in Table A, the rate of U.S. total population growth has been declining well before 2020, dropping each year since 2015. Between 2015 and 2020, population grew from 320.7 million to 329.5 million. During the peak of the COVID pandemic, the growth slowed to a historical rate of 0.1%.
The main components to population change are births, deaths and international immigration (Figure 2).
Prior to April 2020 and the pandemic, the number of births were falling each year since 2016. However, during the 15-month period from April 1, 2020 to July 1, 2021, a whopping 4.5 million babies were born at an increase of 19.4% (Table B).
Deaths were slowly increasing from 2015 to 2020 as Baby Boomers continued to age (Table C). That number skyrocketed 39.6% during the 15-month pandemic peak (April 1, 2020 to July 1, 2021) as deaths reached 4.3 million. Note that the large population cohort of Baby Boomers has been the key stimulus of furniture spending for decades and has continued well into the now-declining 65 and over age group.
Immigration has been slowing rapidly since 2016 due to major policy change during the Trump presidency (Table D).
The pandemic brought a virtual standstill in immigration, resulting in a decline of 46.2% during the peak of the pandemic (April 1, 2020 to July 1, 2021). However, with the looming repeal of U.S. Title 42 (at press time), immigration is once again heating up politically and numerically.
State Population Changes
19 states plus the District of Columbia lost population during the 15 key months of the pandemic, with highly populated states representing the bulk of the losses. New York decreased by 365,446 people, California by 300,387 and Illinois by 141, 039. Top states that gained population were Texas at 382,436 people, Florida at 242,941, Arizona at 124,814, North Carolina at 111,774 and Georgia 87,658 (Table E). Many movers flocked to warmer weather with lower cost of living. While 38% of states lost population during the height of the pandemic, many have actually been losing population slowly for years. The most notable population losses over time are West Virginia since 2013, Illinois since 2014, and New York since 2016. The pandemic merely accelerated those losses.
The majority of states, 68%, gained population during the key pandemic period, with Idaho experiencing the highest percentage growth of 3.4%, a sizable gain, and New York suffering the highest percentage population loss of 1.8% (Table F).
Market Population Change
As shown in Table G, mid-size markets with populations 250,000 to 999,000 as a group were the largest recipients of the pandemic flight from core counties within the largest markets (population over one million). These mid-size markets grew by 509,300 people during the 15-month pandemic period – April 1, 2020 to July 1, 2021, while the largest markets with populations 2.5 million and over lost 352,800 people. The 146 mid-sized markets represent 23% of the U.S. population but received 115% of the total U.S. population change during the key pandemic months.
The U.S. Department of Commerce breaks out the MSA counties into two categories – central and outlying. The larger markets, over one million in population, are further segmented into a third category called “core” that reflects the county or counties of the principal city of the large market. In April 2020 at the start of the pandemic, over 100 million people (38% of the U.S. population) lived in 68 core counties within 66 large metropolitan areas (MSAs with population 1 million and over). The core counties of these 66 largest metro areas lost almost one million in population during April 2020 to July 2021.
Big MSAs had been growing for decades. And as Millennials hit the workforce in mass over the last two decades, there was a large push in all markets, regardless of size, to move into the core of the major city. The live/ work/play lifestyle became an attractive draw, despite escalating rents, home prices and higher taxes associated with “moving in”. The trend continued, with slower growth, until the COVID pandemic hit in the first quarter of 2020. The forced remote work-at-home took the workplace by storm and many adapted quickly. People began moving out of the core counties, some to the suburbs (referred to as central counties) and some even further away to outlying market counties. But many more moved out of the big cities entirely. Even some companies moved to different cities or states.
Between April 1, 2020 and July 1, 2021, core counties in the largest markets (2.5 million population and over) declined in population by 697,700 people, while the central and outlying counties within those 23 MSAs increased by 169,000 and 176,000 respectively (Table H). In the 1 million to 2.5 population group, which holds 43 MSAs, core counties lost 203,900 people as the central counties grew by 166,800 and the outlying counties by 116,800.
The top three MSAs with the highest population loss had been losing population before COVID, but the pandemic accelerated the pace dramatically. Both New York- Jersey City-White Plains, NY-NJ and Los Angeles-Long Beach-Glendale, CA markets began losing population in 2017 and Chicago- Naperville-Evanston, IL since 2015. As shown in Table I, the New York- Jersey City-White Plains, NY-NJ market declined 372,400 in population, followed by Los Angeles-Long Beach-Glendale, CA with a 184,500 loss and Chicago-Naperville- Evanston, IL with 108,100.
Phoenix-Mesa-Chandler, AZ led as the top market that gained in population during the key pandemic months, increasing population size by 100,300 (Table J). Texas markets took the following three spots: Dallas-Plano-Irving (87,400), Houston-The Woodlands-Sugarland (84,600), Austin-Round Rock-Georgetown (69,100), while Atlanta-Sandy Springs- Alpharetta, GA rounded out the top five with a gain of 54,200 people.
Smaller markets – Micro Statistical Areas – also gained population (0.2%) but not at the same rate as the mid-sized and smaller MSAs. However, some strategic Micro Areas did increase population by over 5%. Jefferson, GA grew 5.8% in population during key pandemic months, followed by Cedar City, UT at 5.6% and Sandpoint, ID at 5.1%.
The COVID pandemic was the first time in many years that Rural America, as a whole, gained in population. Although a small increase overall, almost half of 1,302 rural counties (46.7%) increased total population by 1.2%, while the remaining counties lost 0.9% of the population . Most of the population gains were in larger rural counties with access to small town amenities. Although the pandemic accelerated population shifts throughout the country, the trend to move out of city centers has slowed over the last year and experts have differing thoughts on population changes going forward. Stephen Whitaker, a policy economist at the Federal Reserve Bank of Cleveland was cited in a PEW research article as suggesting that the pandemic may have sped up a change already in the making, as Millennials reach middle age and look for more space to raise families. He also noted that commuting has become less of an issue as more employers allow remote work. Whitaker has studied pandemic moves using consumer surveys.
On the flip side, demographer William Frey, a senior fellow at the Brookings Institution’s metropolitan policy program, was quoted in the Los Angeles Times as saying he believes the growth of micro areas and decreases in the biggest metros will be temporary, taking place at the height of people moving during the pandemic when work-from-home arrangements freed up workers from having to go to their offices. “There is clearly a dispersion, but I think it’s a blip,” said Frey. According to USB Evidence Lab’s tracking of metro areas, “The outflow of residents from cities to suburbs and exurbs has slowed for permanent movers, and cities are once again growing.”
While the increase in gross profit is significant, even more significant is the impact of volume variances. As the fixed cost remained relatively flat, profit grew.
What Should a Retailer Do?
Cash Out or Double Down?
For many traditional furniture retailers faced with no succession plan, the question is how can I transition out or at least take some “chips off the table”. For retailers under $20 million in sales, the opportunity to find a buyer is a challenge. If younger family members do not want to accept the opportunity, potential buyers are limited. Even those retailers with significant market share are not attractive to larger regional chains that would prefer to build from “ground up,” not only the facility but the culture of the operation. The thought is changing the existing culture of “that is the way we have always done it” to “a new way is not attractive.” There are some exceptions, such as the acquisition of Taft Furniture in upstate New York by Raymour & Flanigan.
At the same time, the acquisition of the Old Brick from the retiring family by Bennington Furniture in Vermont, shows there are potential buyers. The common denominator in these transactions is furniture industry experience and the ability to assess value. Another alternative is an Employee Stock Option Program (ESOP), which several major retailers pursued before the pandemic such as Furniture & ApplianceMart (Boston Inc.), Steinhafels and most recently Woodstock Furniture Outlet.
Andrè Schnabl, principal and managing partner at Tenor ESOP Partners said, “The ESOP provides a very attractive exit strategy for the owners while ensuring that their employees are taken care of, and the founder’s legacy stays intact.” A transaction requires at least 20 employees and EBITDA of $1 million. There is no limit on the upside and no dictate as to how much the owners can sell in the transaction to the ESOP. Also, the structure does not preclude selling to a third party down the road if such an opportunity arises. Schnabl shared some points to consider in his comments on page 13 titled Six Reasons Why a Shareholder of a Private Company Should Consider an ESOP as a Partial or Complete Exit Strategy.
An owner’s perspective to an ESOP is provided by Joe Fonti, chief legal and compliance officer at Furniture & ApplianceMart and Ashley HomeStore. Joe says, “Establishing an ESOP in 2018 was one of the best decisions that my brothers and I have made in business.” He goes on to offer specific reasons it has worked so well for his company. See his owner’s perspective sidebar on page 14.
With these guidelines and the current level of financial performance, a retailer with an EBITDA of 5%-8% could consider an ESOP at a revenue level of $12-$20 million, a great way to take some chips off the table. A myth is that the cost to adhere to the requirement of an ESOP will prohibit profitability going forward. Not true. The cost of a trustee, an annual plan update, and third-party administration is less than $50,000, more than that offset by tax savings. The initial cost is less than $100,000, about 1%-1.5% of the transaction.
Another alternative, the more traditional exit, is the going out of business sale. While the financial results may not be as lucrative, the opportunity to sell existing inventory to the bare walls now exists. Clay Wahlquist, CEO of Wahlquist Promotions, a veteran of this alternative approach since 1992, provided his perspective. According to Walquist, “The problem I’m seeing now is, dealers that didn’t have sufficient reserves are having trouble giving deposits back. This is pushing their backs to the wall. And again, without having a reliable source for consistent inventory, there is no way to generate revenue.”
The opposite of closing is that of selling the company as an ongoing enterprise. We asked Bo Stump, partner at Stump & Company, his perspective on this opportunity. He sees several trends emerging for investment in or acquisition of smaller traditional furniture retailers under $100 million, and especially under $50 million. According to Stump, “Owners are aging out with no exit strategy. ESOPs are an alternative but have problems if senior management retires and demand returns to historical levels. The buyer pool will be tight, but if you are looking to sell a small retailer, all it takes is one!” See Stump’s perspective in the sidebar on page 15.
Now that we have discussed how to fold them,we will discuss whether you should or not. There is a lot of noise around inflation and the impact on the economy into the future. We need to remember that the furniture industry is one of the contributors to this inflation along with gasoline and food. However, a more detailed analysis is found in the Statistically Speaking article in this issue, It Took Rising Inflation to Finally See Price Growth that allows us to state – we deserve it. The article can be found on page 42.
For the furniture industry, the quantity/ price gap widened dramatically year after year coming out of the Great Recession where falling prices forced furniture retailers to sell higher quantities. The PCE price index, compiled by the U.S. Bureau of Economic Analysis, measures the relative or percentage change in the price level of a range of goods and services (inflation or deflation). Whereas, quantity index measures the change in the physical volume of product purchased. Both indexes include imports.
In 2021, the furniture industry quantity index reached 209.5 (2012=100), meaning quantities sold grew 109.5% from 2012 to 2021, compared to only a 2.3% growth in prices (102.3 price index) for the 10-year period. Last year’s furniture industry inflation rate was 13.8% (December over December), but for the whole year averaged 8%. This void between 8% price increases for one year and 2.3% for 10 years from 2012 to 2021 shows how deep a hole the industry had dug for itself. Falling prices continued from 2012 thru 2018 with only small bumps in 2019 and 2020 before jumping in 2021.
Table B shows graphically how the widening gap between the contribution of price versus quantity sold to the growth in furniture industry sales. Unfortunately, the major question is whether the demand will continue. The fact is, after recouping the pent-up demand, the demand as measured by traffic to the store returned to normal level. The graphic presentation of a national sample of retailers with a balanced sample of retailer volumes presents the statistics in Figure 3.
If demand remained the same, what was driving the increase in revenue? Simply put, it was buyer urgency. The consumer, not hampered by looking for a better deal, just purchased. The graphic from the same national sample presents the increase in close rate (Figure 4).
However, this was not the total story. The price increases driven by raw material costs, transportation and freight, with containers moving from $3,500 per 40-footer to north of $20,000, drove the revenue. The companion graphic from the FurnitureCore national sample on average monthly sales 2019 to Jan 2022 illustrates the impact (Figure 5).
Now that you have decided to stay in the game with the chips before you, will it be small bets, adding stores in your existing market? Or bold moves expanding into adjacent markets afar, such as Furniture Mall of Kansas’ expansion into Austin, Texas with Furniture Mall of Texas and Furniture Mall of Missouri? Their expansion included a 125,000 sq. ft. development in the fourth quarter of last year. It is the time to move.
The perspective of Julius Feinblum, president of one of the leading real estate brokers in the industry, is that the retailers will expand in 2022. While their backing of deals was down going into this year, they are growing. Interestingly, Feinblum shared, “It is taking longer to get a lease signed. From what was once three months is now five-to-10 months.” However, growth will continue.
Another interesting point Feinblum shared is, “The increase in inventory at retail produces a domino effect requiring additional warehousing, which in turn increases fixed cost leading to a need for additional sales, which then drives the perception of a need for additional stores.” This is a dangerous step from our perspective in that the industry profits are driven from decreased fixed costs. (See Figure 2.)
Ben Haverty, vice president retail service group at Colliers, also offers his perspective on the current real estate market. According to Haverty, “With most furniture retailers hitting record sales and profits in 2021, owners have energy and resources to expand in 2022. However, there are new real estate realities that will temper that passion to expand. The two speedbumps slowing retail furniture expansion are availability and affordability.
Availability: What drove much of the retail furniture growth for the last three years was the abundance of available and affordable big box retail locations that came to market due to the bankruptcy of national retailers like Toy R Us and Steinmart and the downsizing of retailers like Bed Bath & Beyond. Physical retailers of all stripes took advantage of this availability and affordability to grow and expand.
However, the retail real estate market is starting to turn. The national retail vacancy rate dropped 10 basis points during the last quarter from the previous quarter and stood at 4.6% at the end of 2021. Colliers' retail research team forecasts that store openings for 2022 will surpass store closings for the first time since 2016.
Affordability: As availability goes down rents go up. Positive trends in leasing and apportion drove the average retail asking rents to $22.51 per sq. ft. Furniture retailers with expansion plans for 2022 will quickly run into the hard real estate reality of less big box availability and affordability.
Despite the issues of available and affordability outlined by Haverty, it is obvious that the major regional chains are bullish on the industry’s future with the announcements summarized in Figure 6. The industry should be careful with the potential impact of store expansion within the markets. Adding stores does not necessarily increase sales proportionately. Consider the following public data comparing Chick-fil-A and McDonald’s. McDonald’s has five-times more stores than Chick-fil-A, 20-times the advertising expenditures, and about $1 billion less in sales. That means the average Chick-fil-A location is averaging fivetimes the sales of one McDonald’s (Figure 7).
The difference is that Chick-fil-A customer’s visit four-times more frequently than McDonald’s customers. Like furniture retailers, both Chick-fil-A and McDonald’s have many competitors, but Chick-fil-A has created a highly loyal customer base. Furniture retailers do a great job of selling new customers. In fact, according to FurnitureCore, a sister company to Home Furnishings Business, the average percentage of new customers (not purchased within 10 years) was 46% last year for traditional furniture retailers with sales greater than $50 million annually. This statistic can be compared to the elapsed time by the consumer between purchases of 28 months. The challenge for a traditional furniture retailer is to execute a strategy like Chick-filA’s “Raving Fans” that would increase revenue by 30% if maintaining existing customers while still attracting new ones. While expansion is an obvious strategy, other retail sectors have overexpanded and then suffered the pains of contracting. There are other alternatives besides brick and mortar. Omnichannel will happen.
There are many reasons why a shareholder of a private company should consider an ESOP. The following lists a few of them.
1. Any Portion. The shareholder can sell any portion of the company. No third party will dictate the percentage sold. Point three below requires the ESOP to own at least 30% after closing.
2. Fair Market Value. For whatever interest the shareholder decides to sell, the shareholder will get fair market value for it. Typically, this means 15% or more in excess of what a private equity buyer will pay and within 5-10% of a strategic buyer.
3. Capital Gains Deferral. If properly structured and the shareholder timely and properly elects, the shareholder can defer his capital gains taxes, possibly permanently.
4. Control. No matter how much the shareholder sells to the ESOP even if the sale is 100% of the voting shares, the shareholder can stay in control of the company post-closing.
5. Pre-Tax Financing. The funds borrowed from the bank and/or seller are repaid by the company on a pre-tax basis (i.e., the interest and principal of the loan are both deductible). Further, if properly structured, the company can become what is essentially a for-profit, tax-exempt entity.
6. Second Bite. If the shareholder provides seller financing and/or agrees to run the company for some period following the closing of the ESOP transaction, the shareholder will be entitled to receive a significant “second bite of the apple” or transition such value to second generation family members or the company’s management team.
As one of the owners of Furniture & ApplianceMart and an Ashley HomeStore licensee, with 15 stores in Wisconsin, I believe establishing an ESOP in 2018 was one of the best decisions that my brothers made in business. Our employees own 40% of the company and my brothers and I own the remainder of the company.
Why have an ESOP? An ESOP can be the solution to several employer concerns.
• An ESOP can provide a means for business perpetuation when there is no buyer for a departing owner. Even when there are potential buyers, an ESOP results in keeping ownership local and ensures that a business stays in the communities that have supported the business.
• ESOPs offer greater flexibility for a business owner in transition from the business compared to selling to another company. You can build your own exit. For many business owners, the company is their baby/life’s work, and they want to remain in charge or involved in some capacity (such as the chairman of the board or a consultant) for a few years, or for some, the rest of their lives. You can separate the financial transaction with the company from the management succession of the company. Likewise, you can continue to be in charge if you want, or transition to your next leaders as quickly as you like.
• An ESOP can give a business a competitive advantage because of the tax benefits of an ESOP company.
• A business will be better able to withstand an economic downturn with an ESOP, compared to other businesses. ESOP companies outperform their peers during an economic downturn. Employee owners with a stake in the outcome look for opportunities to improve the company.
• Owners have the ability to diversify their investments with an ESOP. Most furniture owners have most of their net worth tied to their furniture business. Putting your eggs in one basket is not normally the best investment strategy.
• An ESOP provides customers with the opportunity to interact with an employee owner every time they interact with the business.
• ESOPs give a business a unique competitive advantage in recruiting talent. This is especially important during these challenging times to hire employees.
• Employees gain a sense of pride when they are an employee owner. Please google ESOP-Why We Go to Work-YouTube and look for the video about Greenery. You feel the passion of the employee owners at the Greenery and what an ESOP could mean to your business.
• An ESOP provides job security to your employees that have played a huge role in the success of your business.
• ESOP employee ownership provides a legacy for the business owners. This is an important feel-good benefit of an ESOP. • An ESOP provides a business with the ability to market to the community that we are an employee-owned company.
What is the opportunity for acquisition for traditional furniture retailers under $100m especially under $50m? We think furniture retail is heading into a period of consolidation. It has become harder to run a retail furniture business. And, for smaller retailers who lack large purchasing power with suppliers and logistics partners and face increasing burdens of HR compliance and IT capital investments, the challenge has become Herculean.
We think this space is ripe for private equity investment. There remains over a trillion dollars in private equity dry powder (a historic high), and furniture retail has tended to trade at fairly inexpensive multiples relative to global averages, which could entice new private equity entrants to the table looking for a deal. We think private equity players are likely to see the low hanging fruit of quickly improving top and bottom-line performance through e-commerce and consolidating and enhancing back-end logistics across locations.
The challenge will come in that the pool of prospective private equity buyers for companies delivering less than $5 million of EBITDA will be relatively small based on historic purchase patterns and our knowledge of the market. So, given that furniture retailers deliver an average EBITDA margin of less than 10%, this will create a challenge for companies under $50 million in revenue.
We see several trends emerging for investment in or acquisition of smaller traditional furniture retailers.
Trend #1: EBITDA is two-to-three-times historical performance. Owners are aging out with no exit strategy.
The generational shift as the baby boomers age will be felt dramatically in furniture retail. Many do not have succession plans in place and are exhausted from the demand boom of the last 24 months. We have seen some owners seek out a professional president to run the business, while they retain ownership, but this presents challenges. There is an approximate period of one-to-one-and-a-half years before you really know how good the hired gun is and if they damage the business then you have both a turnaround problem and an exit strategy problem. This can create a distress sale situation versus a sale from a position of strength, and there is no doubt which creates better value in a sale process.
Trend #2: ESOPs are an alternative, but have problems if senior management retires and demand returns to historical levels
We agree, recent ESOP success stories include Norwalk and Valdese Weavers. And when they work, they are great and can create compelling opportunity for employees to take greater ownership of the company. For the seller, there are attractive tax benefits. However, on the flip side there are issues that can arise with ESOPs. They carry meaningful legal and administrative costs to ensure compliance. So, if the business goes through a difficult time in terms of bottom-line performance this can be a significant drain on company resources. Timing can also be an issue, if a senior manager wants to retire and capture their returns during a period of historically high performance this can create large cash draws from the company as they return their awarded stock, and create a mismatch of employee incentives.
Trend #3: Large retailers, with some exceptions, have no appetite for acquisitions.
Large retailers such as Rooms to Go, Havertys, and with the exception of Raymour, have no appetite for acquisition with the memory of what happened to Heilig Myers. There is also the perception that they don’t want to change acquired retailers’ culture. And overall, we see trends of the strong getting stronger. We anticipate seeing some well capitalized regional and national strategic retailers jump at the opportunity to eliminate a competitor and expand their customer base. But overall, we believe the larger retailers are focused on their own brands, distribution, and vertical integration opportunities. The buyer pool will be tight, but if you are looking to sell a small retailer, all it takes is one!