Lifestyle Retailers Have a Tough Go, Too

November 30, 2007  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on December 2007 Retail furniture sales increase each year, albeit slowly of late, but many traditional stores find their sales flat or declining. In recent years, a lot of those sales have gone to the so-called “lifestyle stores” such as Pottery Barn, Crate & Barrel or Restoration Hardware.

They combine everything for the home, including kitchen and bath, and, of course, furniture, and rely upon inviting catalogs that drive traffic to both their stores and also their Web sites. A lot of consumers don’t consider these retailers “furniture stores,” but they’ve taken a pretty big bite out of the traditional channel.

That hasn’t been lost on manufacturers catering to furniture stores—how many times have you been in a Market showroom and heard, “This is what we’re doing to attract that Pottery Barn consumer”?

Nobody’s Immune

Fact is, the lifestyle channel is feeling the same pinch these days as furniture retailers. Bugaboos affecting retail performance, such as low consumer confidence and the economic effect of the mortgage lending crisis, don’t discriminate.

Examples of lifestyle retailers’ struggles aren’t hard to find.

In late September, a U.S. Bankruptcy Court approved the liquidation of all Bombay Company’s U.S. stores.

In November, Restoration Hardware, which lost $7.9 million in its second quarter this year, announced it was going private under its merger with equity firm Catterton Partners.

Pottery Barn had meager 0.3 percent same-store sales growth in the second quarter, while same-store sales at its Pottery Barn Kids concept fell 3.8 percent.

That’s just a sampling. There’s a general malaise for household-related retail, said Laura Richardson, senior vice president, equity research with BB&T Capital Markets.

“It’s the state of retail for anything for the home,” she said. “Take a look at Home Depot and Lowe’s. Pier One and Cost Plus are struggling. Retail in general for the home is not good.”

The lifestyle concept apparently remains attractive. The Catterton Partners’ affiliate that acquired Restoration Hardware paid around $267 million—two-and-a-half times the Corte Madera, Calif.-based retailer’s share price at the time.

“That was good news for the shareholders, because their stock had not been doing well,” Richardson noted of the Restoration Hardware transaction.

Some lifestyle retailers are rethinking their business, said Jerry Epperson, managing partner at Mann, Armistead & Epperson in Richmond, Va.

“Williams-Sonoma management has talked about redoing their Pottery Barn approach to attract a different consumer because the sales haven’t been where they’d like them,” Epperson said. “These retailers also operate in very high-ticket retail locations.”

He noted that those companies have been struggling for much longer than just the past year.

“Restoration has been in trouble for two years,” Epperson said. “Look at the Pottery Barn numbers for the past two years. Design Within Reach has had its accounting problems. Target had a tough year last year.”

A Key Product Category

Will slower business among lifestyle retailers affect product introductions that seek to offer the traditional furniture store channel a way to compete with the Pottery Barns and Crate & Barrels of the world? Don’t count on it, said Kelly Cain, vice president and product manager at Stanley Furniture.

Stanley helped bring clean, casual contemporary looks to traditional retailers with the introduction 10 years ago of Preface. That collection’s success inspired a wave of similar lifestyle collections among other vendors, and Cain said the category remains an important part of Stanley’s business.

“We’re finding the look appeals not only to 35- to 45-year-old consumers, but also a lot of the aging baby boomers,” he said. “We’ll continue to address that category. It’s a nice alternative to so much of the import product, which can be overdone.”

Stanley’s lifestyle-oriented collections introduced since Preface have met with success at retail, and Cain believes lifestyle retailers’ current business is more a reflection of the overall retail environment than consumers’ rejection of the look.

Epperson believes that vendors need to avoid cookie-cutter looks. Retailers already complain that increased importing of case goods has flooded the market with a lot of like product, and casual contemporary lifestyle introductions run the same danger of looking the same.

“Everyone looks at Pottery Barn or Crate & Barrel for something new, but there’s a general recognition that there’s too much of this same product out there,” he said. “There are so many variations (on lifestyle) at so many price points, from IKEA to Henredon.”

New lifestyle collections need some creativity if they’re to meet with much success.

“The basic look doesn’t seem to have the cachet it once did,” Epperson said. “There are some people out there that want to be Restoration Hardware, and some want to be Pottery Barn. We’re making copies of copies, and it ends up going in a circle.”