Daily News Archive
Brought to you by Home Furnishings Business
December 2,
2007 by in UnCategorized 
By Home Furnishings Business in on December 2007
The Sustainable Furniture Council announced Friday it won’t endorse the American Home Furnishings Alliance’s Sustainable by Design program as it now stands.
The AHFA, a member of the SFC’s Board and Standards Committee, had hoped the SFC would deem its program worthy of SFC’s Silver Exemplary level of sustainable furniture practices. But at a an AHFA environmental conference last week in Greensboro, N.C., SFC Executive Director Susan Inglis expressed concerns about Sustainable by Design, which includes a labeling program at retail. SFC is developing its own label that offers manufacturers a product tag for use by SFC members complying with “Exemplary” qualifications within its standards.
“I’m concerned about the confusion this is likely to cause ... I don’t frankly think that two labels is the way to do it,” she said. “I’m concerned that consumers have a label they can trust, a label that’s been created with the interest of all stake holders in mind.”
According to a statement released Friday, the SFC applauds the AHFA’s effort to encourage more environment-friendly practices among its membership, but cited four reasons for turning down Sustainable by Design.
The first was what SFC called a “lack of balance,” owing to AHFA’s charge to support the interests of its membership over governmental, environmental, or other concerns. “This is not a criticism, but merely a statement of their fundamental purpose,” the statement read. “The AHFA serves their manufacturer and importer membership virtually exclusively, and thereby risks a less balanced perspective that supports the status quo. As noted, the SFC has an intentionally diverse base of stakeholders inside and outside the industry.”
Second, was what SFC called a lack of transparency, noting that the SFC set of standards published for peer review in October included a consortium of seven leading conservation groups, and that SFC received no prior advance on the AHFA program’s standards, nor is SFC aware of any review by conservation or environmental organizations of Sustainable by Design.
Third, the AHFA program requires products in question to use 3 percent to 5 percent certified woods, while SFC’s Silver Exemplary level requires 15 percent to 25 percent.
Fourth, SFC cited “lack of controls” in the AHFA program, noting that SFC applicants must adhere to a rigorous vetting process, and must provide a statement that application contents are accurate, not misleading and prepared by “qualified professionals consistent with the Federal Trade Commission Environmental Marketing Guidelines. By its very nature, the Sustainable by Design tagging program is open to all who meet its less rigorous standards, few minimum requirements are specified, and the vetting process is unclear, potentially allowing applicants to be their own approvers.”
The SFC looks forward to continuing the dialogue with the AHFA and all other organizations interested in promoting the cause of sustainability in the furniture industry, with the goal of agreement to a consistent platform for standards that is utilized by all, thus enhancing and protecting the economy of the home furnishings industry.
The SFC said it wants to maintain a continuing dialog with the AHFA regarding sustainable practices and their certification.
December 2,
2007 by in UnCategorized
By Home Furnishings Business in Furniture Retailing on December 2007
Police Sunday were searching for three men who robbed employees at the Bob’s Discount Furniture store in Southington, Conn., at gunpoint Sunday morning, according to a report in the Hartford (Conn.) Courant. No one was injured.
The robbers entered the store at about 9:45 a.m. and forced employees to open a safe, police said. Police said the robbers locked the employees in a closet before making off with about $10,000.
Employees told police that one of the robbers wore a black hooded sweat shirt with black pants, another wore a gray hooded sweat shirt and the third wore a camouflage jacket.
November 30,
2007 by in UnCategorized
By Home Furnishings Business in on December 2007
Sixteen years ago, political adviser James Carville helped then-candidate Bill Clinton capture the White House by focusing him on the year’s most important issue by constantly repeating the phrase, “It’s the economy, stupid.”
Today, with another Clinton on the campaign trail, it took little prompting for furniture retailers to repeat the same economic message when Home Furnishings Business asked about top concerns heading into an election year.
For our annual State of the Industry report, we asked store owners about rising prices in Asia. We asked about added fire regulations on upholstery. We asked about high-profile bankruptcies during 2007. We asked about growth in mattress-only stores, expansion of factory stores and even “reconstituted leather” sofas.
In response to almost every question, furniture retailers all offered essentially the same answer: “Lack of sales has got to be your No. 1 issue,” said Wogie Badcock, president of the National Home Furnishings Association. “I think everybody is in a hunker-down mode, watching expenses and trying to pull through,” said Badcock, a senior vice president with Badcock Home Furnishings, Mulberry, Fla., which has a network of more than 300 stores.
Survival Instinct
While other issues remain important, Badcock and other retailers said sales declines will almost always be what store operators remain focused on until negative trends turn upward.
Eliot Tatelman, president of Jordan’s Furniture, Avon, Mass., sounded pretty much the same theme, saying the main questions on the minds of most retailers entering 2008 are “What manufacturers are going to (still) be here?” and “What retailers are going to be here?”
With all that uncertainty, he said furniture retailers as a group have become almost solely focused on undercutting the prices of their closest competitors.
“As retailers, we carry wonderful products and we enhance people’s lives, but the only things we talk about and promote right now are price, price, price, price and how cheap you can be,” said Tatelman. “It’s no longer about service, style and all of those thing things, which is a real shame,” he said. “That’s not how I built my business or how I’d like to see the industry go, but, right now, I think the economy and competition is forcing that.”
Tatelman expects that retailers will return to promoting attributes other than price as the economy improves, but said the industry will lose some retailers before the housing market improves. Fears about the impact of the depressed real estate market were realized in November when New York-based Levitz Furniture filed Chapter 11 bankruptcy, saying its continuing losses left it unable to make timely and complete payments to some vendors. It was the third time Levitz had filed for bankruptcy over the past 10 years. In 2005, it emerged from bankruptcy after shutting 35 stores and received an infusion of cash from investors who included Prentice Capital Management and Great American Group. According to Levitz’s filing, investors have placed nearly $200 million with the 76-store chain that is now concentrated in the Northeast and the West Coast.
In its court filings, the company has indicated that options for Levitz include a possible sale.
Separating the Men from the Boys
In Denver, American Furniture Warehouse CEO Jake Jabs said flat sales will eventually benefit furniture stores that have weathered previous downturns. Colorado, which has seen more foreclosures than all but four states, is in a “recession,” Jabs said.
“What recessions do is separate the men from the boys,” particularly in furniture, he said. “The guys who have the values and can run a tight ship and do business in a slow period are the ones who are going to be here when the recession’s over.”
Jabs said he’s weathered at least five recessions, including a much worse one when an oil industry downturn during the early 80s prompted many homeowners to flee the state.
“If you don’t have any debt, you don’t have a problem,” said Jabs, who operates 11 stores in Colorado. “If you pay cash for everything, which we do, you’ll survive.”
The real estate situation appears to be having a particularly harsh affect on states in the West. George Nader, president of the Western Home Furnishings Association, said 69 of the group’s more than 1,100 members went out of business during 2007. “That’s a little bit scary, since the people in our association tend to be pretty well-established,” he said.
At a recent board meeting, members put a lot of focus on the state of the economy, and Nader said the consensus was that it could take a year for things to turn around.
“Everybody just needs to hang on in the meantime,” he said.
Steve DeHaan, executive vice president of the National Home Furnishings Association, said it’s not unusual for the organization or affiliates like the WHFA see up to 8 percent of its membership retire or go out of business in a given year. While the economy has been tough, he said both the NHFA and WHFA have been holding steady when it comes to membership.
Pulling Back
For Tres Amigos in Tuscon, Ariz., the housing market decline—and a resulting dip in sales—forced a decision for the eight-year-old chain to shutter all five of its stores in Phoenix in November in order to focus on its home market, where it operates four stores. Keith Kramer, a co-owner, said the sinking real estate market has also sharply reduced the number of people renovating their homes. The result is a “double-whammy” that prompted Tres Amigos to focus on its healthiest stores in Tucson and on the company’s thriving Internet site.
“Ad rates in Phoenix are three times higher than in Tucson, and the rental market for locations in Phoenix are about double,” he said. “It costs us less money to stay alive in Tucson. That market is also seeing significant decreases in same-store sales, but we’re better able to adjust to that here.”
He said Tres Amigos was fortunate that its Phoenix landlords were flexible in its negations about closing locations. Kramer said it’s too early to tell whether Tres Amigos will one day return to Phoenix.
“It’s not a gloom-and-doom situation for us,” he said, adding that, “These things happen” in a down economy. “I’m going to work a little harder, roll up our sleeves a little bit higher. We’re going to ride this out, and we’ll be better when it’s over.”
Jabs predicts “there will be a lot of furniture stores going out of business,” especially if the current slump lasts through much of next year.
Against that depressing backdrop, Nader said WHFA members are focusing on ways to help one another. One method is an e-mail exchange that allows WHFA members to post questions or business challenges and receive replies from other retailers who have experienced the same situations. Nader said member services that include credit and insurance programs with group rates can help non-members lower costs.
“I think it really helps to be a member of an association. There is definitely strength in numbers,” he said.
Added Regulations?
Of course, there are other issues retailers are facing, no matter how preoccupied they may be with the economy.
Badcock said new mattress fire resistance standards imposed by the U.S. Consumer Products Safety Commission have him concerned about the possibility of additional requirements for upholstery, which the federal agency has been considering for several years. He said mattress requirements have led to price increases, and he wants to ensure that government regulators fully consider the sales impact that additional upholstery requirements could have.
Furniture industry analyst Jerry Epperson said an even bigger issue concerning mattresses has been the growth of specialty sleep chains that have been eating into the sales of traditional furniture stores.
“Bedding specialty shops are eating the lunch of furniture stores. They’re getting bigger and better and more professional all the time, and bedding manufacturers love them,” said Epperson, managing director of Mann, Armistead & Epperson, Richmond, Va. “Bedding is the most profitable (product) in most furniture stores, and we don’t want to lose mattresses the same way (furniture stores) lost appliances, electronics and rugs. A lot of time, the biggest assortment in bedding in most towns is at the traditional furniture store, and we’ve been encouraging furniture stores to tell people that.”
Finding Furniture Bargains
Epperson also expects that private equity firms that bought a number of furniture retailers (and manufacturers) in 2007 will continue to focus on furniture in the year ahead. “If you look at the publicly held companies, their stock is on sale. You can buy (furniture manufacturers and retailers) at lows we haven’t seen for seven years or more. Would you rather buy (Furniture Brands) when it’s at $10 or $11 or at $35,” a high it neared in early 2004. “Private equity firms, by definition, are trying to find lots of assets for very little money.”
Private equity firms, of course, aren’t the only financial players in furniture. It was disclosed in October that Samson Holdings, which controls Lacquer Craft and Universal, made an unsuccessful bid in July to acquire Furniture Brands. Then, in October, Samson paid $73 million to acquire a 14.9 percent stake in St. Louis-based FBI.
Private equity firms did plenty of deals in furniture during 2007, and Sun Capital was among the most active. It acquired both Rowe and Powell in January and then acquired a controlling interest in Berkline/Benchcraft in May. Later that month, Sun Capital also purchased International Bedding Corp.
Sun Capital also sold Mattress Firm to Boston-based equity firm J.W. Childs and company management in January. Since then, Mattress Firm has acquired several regional mattress chains and grown to more than 440 locations after adding nearly 100 stores. If it continues growing quickly, Houston-based Mattress Firm could quickly unseat the 470-store Select Comfort chain as the industry’s biggest mattress retailer.
Retailers are also concerned about what’s being called bonded leather or “reconstituted” leather that consists of ground-up leather remnants combined with man-made materials.
Epperson warns that the product, which contains only 17 percent actual cowhide in some cases, could further deflate the market for leather sofas and chairs, especially when retailers don’t clearly inform shoppers about what they’re buying.
“I don’t know if we’re doing ourselves a favor as an industry by selling (reconstituted) leather,” Epperson said. “Traditionally, leather has been a step-up product. We put more value on a car with leather seats versus fabric, or shoes made of leather, instead of fabric. If leather becomes as cheap as fabric, I think that would be a real shame.”
A Handbag Or A Sofa?
Tatelman isn’t alone in worrying about the message furniture retailers—as a group—are sending in their zeal to under-cut the prices of their closest competitors. Doug Kays, president of Premiere Home Furnishings in Los Angeles, said the retailers who emerge from the current home furnishing slump will be those who find ways to compete against other categories, not just one another.
“We have to find ways to show the customer that they could buy five brand new dress shirts or one sofa. With what some people pay for a purse or a pair of shoes, they could be buying a piece of new furniture that would make a lasting difference in their home,” said Kays, who will become NHFA’s president in 2008. “We’ve made a mistake as furniture retailers in only trying to compete against one another.”
He said retailers who find ways to balance furniture against other categories—including everything from Jet-Skis and motorcycles to cruises and other vacations—will not only survive the current sales slowdown, but will become much stronger competitors when the real estate market is revived.
November 30,
2007 by in UnCategorized
By Home Furnishings Business in on December 2007
Belfort Furniture in Dulles, Va., was one of Pennsylvania House’s top five dealers in the country in recent years, but the Washington, D.C.-area retailer is winding down business with the solid wood case goods vendor after a long partnership.
Now, Belfort sells Pennsylvania House on a very limited basis, essentially filling out old customer orders. Universal recently acquired marketing rights to the Pennsylvania House name, but Belfort’s issues with the vendor go back a couple of years when Pennsylvania House shifted production overseas.
“What Pennsylvania House has gone through is the result of a chain of events that’s been going on some time, particularly after their manufacturing went overseas,” said Michael Huber, chief executive officer at Belfort. “They were changing plants, and the quality became inconsistent at best. The whole nature of Pennsylvania Hose was long-standing customers whose parents might have bought it. Consumers do recognize the difference in the product.”
Backing off of Pennsylvania House wasn’t an easy decision.
“We always kind of kept the faith—they really tried to take care of us and we hung in there on a partnership basis, and we stuck with them longer than a lot of people did,” Huber said. “But it’s cost us far more the last couple of years taking back product people weren’t happy with.”
Changing Times, Changing Relationships
Anyone watching the furniture business knows that many longtime retailer/vendor relationships are changing for good. Some suppliers are concentrating on dedicated store models, while others have moved their production overseas, particularly in case goods, resulting in new logistical and service issues for their retail customers.
At best, a lot of independent retailers encountering shifts in their vendors’ manufacturing base face new delivery cycles and quality issues on goods they commit to at furniture markets. At worst, over time they might get frozen out from longtime sources as some of those companies commit to dedicated distribution, or do more business with fewer customers.
Franchisees of some of those dedicated networks aren’t immune to uncertainty. This year, they’re watching venerable—and publicly held—names such as Furniture Brands International companies Thomasville and Drexel Heritage, and La-Z-Boy, face plenty of scrutiny from the investment community. Not surprisingly, those contacted for this article weren’t eager to discuss the effect of corporate issues on their business operations for the record.
The coming year offers plenty of uncertainty about issues that while outside the industry, have an effect on consumer attitudes toward spending—a presidential election, worries over energy prices, the Iraq war.
“Retailers that are survival-driven are playing it close to the belt, trying to stay with established resources,” said Eric Blackledge, president of Blackledge Furniture in Corvallis, Ore. “So much change is going on in the industry. It’s hard to have stable resources. Rowe had refinanced a week before the spring Market. Now they’re buying Clayton Marcus. We continue to go with Rowe. ... We’re going to unknown vendors from China, (placing) more emphasis on containers. That carries risks, too.”
There’s no one answer to dealing with a shifting vendor base.
“The answer isn’t 100-percent-container-direct from China,” Huber said. “That’s okay for some products, but for our core product lines, we need domestic support for replacement parts and fill-ins. Consumers don’t understand why they can’t get something fixed.”
Better Collaboration
How retailers will relate to vendors moving ahead was important enough to the American Home Furnishings Alliance to include a dealer panel on the topic at the organization’s annual meeting last month in Charleston, S.C.
Participating retailers included Leslie Fishbein, president of Kacey Fine Furniture in Denver; William Kimbrell, CEO of Star Furniture in Houston; Josh Tatelman, vice president of merchandising at Jordan’s Furniture, Avon, Mass.; Raj Dogra, president of Phoenix-based Razmataz; and Jayson Friedman, vice president of merchandising at Carls Furniture, Boca Raton, Fla.
With vendors and retailers alike feeling the squeeze on margins, and more product coming from far away, Kimbrell suggested that both sides look for ways to avoid duplication of effort.
“I think there needs to be more efficient alignment of effort between retailers and vendors,” he said. “Photography, advertising, logistics—we both do these, and we need to address all these aspects (of our business) in a more collaborative effort.”
One area of collaboration would be consumer research.
“We’re selling larger pieces of furniture with more assembly involved and that creates back-end issues,” Kimbrell noted. “We need to find out how that’s affecting consumers.”
Fishbein said that while selling furniture is a tangible project, retailers and vendors need to focus on the intangible result of consumers’ desire to create a beautiful home. “If I go into Home Depot, I don’t say ‘I’m buying a house,’” she pointed out. “I’m buying a drill, but I would like to get the ‘result’ of a better house. There’s a durability and sustainability issue that’s coming on stronger than you think. Consumers are confused, and we have to help them sort through that.”
Import Versus Domestic
After years of watching manufacturing shift overseas, a lot of retailers are rethinking their business mix of import and domestic product. Delivery issues and recourse for spare parts and replacements have dealers looking for service as much as product. And many are finding that cutting their own deals with overseas factories doesn’t work for their operation.
“As far as retailers going direct, I believe very few have been successful, and those that were had to work through a lot of issues to get to that point,” said Friedman of Carls. “Going direct means minimum orders, sometimes a full cutting, no reps, and you give something up on payment terms and logistics.”
Friedman cited Fine Furniture, Universal and Legacy Classic as offshore sources with strong stateside support.
“You can mix orders, and you have sales training, marketing support and service backup. The one liability about some of those kinds of companies is there’s only so much one factory can do,” he said. Marketing companies sourcing from multiple factories “offer a good product mix, but one downfall can be supply chain management. Whichever we choose, we have to execute it properly.”
Tatelman said that timing, low risk, and options are what he looks for in a domestic vendor.
“The first thing for a salesperson is that they get the product to the consumer’s home as soon as possible, since we don’t pay commission until delivery,” he said. “I can try something with very little risk since the (order) quantities and inventory commitment are lower. Buying domestically also allows the customer a lot of customization options, and programs from the domestic vendors often seem to be offering more options.”
Tatelman added that he sees domestic suppliers doing more with POP materials.
“POP is critical on the sales floor, and meaningful to consumers when it’s done right,” he said.
Fishbein doesn’t believe a lot of retailers pay attention to the cost of their import programs beyond sticker price, failing to account for parts, lead time and cost of inventory. “There’s so much sameness in that product, particularly in case goods,” she pointed out. “That’s why it’s difficult to differentiate with branding, and manufacturing brands aren’t as meaningful now.”
Developing Product, POP
Unless it’s for a private label or factory direct program, retailers don’t seem to have a lot of interest in developing product with manufacturers. They’ll provide feedback, for sure, but most prefer to let the vendors do their job.
Razmataz, for example, buys mostly imported goods, both through manufacturer/distributors and factory direct. Dogra said distributors will sit down and ask what his customers are looking for and use that input for product development, while factory-direct vendors will make up a sample to send before taking an order.
Kimbrell at Star Furniture is bigger on consumer research than helping develop product, but noted that shopper information can be of assistance to vendors.
“We aren’t furniture designers, but we need to understand our customers, and (vendors) need to understand our floors,” he said. “It’s an ongoing relationship.”
Point-of-purchase (POP) materials and Web site development are areas where retailers say manufacturers can provide more support for their dealers. With the same looks at a lot of prices, retail salespeople find themselves having to do a lot of explaining
“It’s confusing for our salespeople, as well,” Tatelman said. “Sales tools for our salespeople are a critical component that sometimes gets passed by.”
Kimbrell and Friedman offered examples of strong POP materials.
“The POP on the Better Homes & Gardens collection (from Universal) was telling a story the customer could relate to,” Kimbrell sad. “It wasn’t just product attributes, but telling which consumer it approaches.”
“Bernhardt did a great job on the Smithsonian collection, with stories on where each piece came from,” Friedman said.
Tatelman hopes manufacturers can provide higher-quality photography for use on Jordan’s Web site, which the retailer uses for information only.
“Our biggest struggle right now with the Web site is photography,” he said. “What’s available is inconsistent, and we aren’t in the photography business ourselves. It would be great if (vendors) provided the same consistency of images.”
That kind of vendor support can help retailers approach an important issue facing vendors and their customers alike.
“Our big issue is that the priority for home furnishings is so far down the consumers’ list,” Tatelman said. “They spend more going out to eat than they do on furniture. Creating appetite—that’s what we need to put our heads together (with vendors) to do.”
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.”